Singapore Airlines (SIA) C6L has posted record half-yearly net profit of $1.44 billion in 1HFY2024 ended Sept 30, up 26.9% y-o-y, with robust demand for air travel continuing into the Summer travel season, led by the rebound in passenger traffic to North Asia with the full reopening of China, Hong Kong SAR, Japan and Taiwan.
For the period, group passenger load factor (PLF) improved by 5.8 percentage points to 88.8%, the highest ever half-yearly PLF recorded by SIA.
SIA and Scoot carried 17.4 million passengers in the first six months of FY2024, 52.3% higher than a year before while passenger traffic grew 38.0% compared to 1HFY2023, outpacing the capacity expansion of 29.0%.
Passenger traffic and load factors improved across all markets, with the y-o-y traffic growth of 49.0% outpacing the capacity expansion.
However, demand for air freight remained soft due to inventory overhang, as well as geopolitical and macroeconomic headwinds, says SIA.
The cargo load factor fell 8.4 percentage points y-o-y to 52.7% as cargo loads dipped 6.0%, while capacity grew 8.9% mainly due to increased passenger aircraft bellyhold space. Increased competition and softer demand also contributed to the downward pressure on cargo yields, which fell by 46.2% from a year before.
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Nevertheless, at 41.8 cents per load tonne-kilometre, cargo yields remained 37.0% above pre-pandemic levels.
As a result, Group revenue rose $745 million or 8.9% y-o-y to $9.16 billion, with the $1.57 billion or 26.3% increase in passenger flown revenue to $7.55 million partially offset by a $1.04 billion or 49.5% decline in cargo flown revenue to $1.06 billion.
On costs, expenditure increased $427 million, up 5.9% y-o-y to $7.61 billion, with the rise in non-fuel expenditure of $840 million, up 18.7% y-o-y, partly offset by a $413 million decrease in net fuel cost, down 15.3% y-o-y.
Net fuel cost fell to $2.28 billion, mainly due to a 29.1% decrease in fuel prices, despite higher volumes uplifted and lower fuel hedging gains.
The 18.7% increase in non-fuel expenditure was within the 19.9% increase in passenger capacity.
Consequently, the group recorded an operating profit of $1.55 billion, $320 million higher than a year before.
For the half-year ended Sept 30, SIA has declared an interim dividend of 10 cents per share, amounting to $297 million. The interim dividend will be paid on December 22 for shareholders as at December 7.
Looking ahead, while the demand for air travel is expected to remain healthy leading up to the end of the financial year, significant capacity restoration across the industry, especially in the Asia-Pacific region, could put pressure on passenger yields, says SIA.
Demand for air freight is expected to remain soft in the traditional peak third quarter of FY2024, dampened by excess inventories, geopolitical tensions and macroeconomic headwinds, the group adds. “Bellyhold cargo capacity will increase with the resumption of more passenger flights, putting downward pressure on cargo yields.”
Meanwhile, heightened geopolitical risks and macroeconomic uncertainties continue to pose challenges for the airline industry. High fuel prices due to supply risks in the oil market, and inflationary pressures on non-fuel costs are key concerns.
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“The group has built strong foundations through its two transformation programmes. It will continue to leverage the strength of its portfolio of airlines, and deploy the right vehicles to the right markets, with growing connectivity between the SIA and Scoot networks,” says SIA. “The group will also continue to invest in industry-leading products and services and seize revenue and growth opportunities, while maintaining cost discipline.”
Multi-hub strategy
The proposed merger of Air India and Vistara remains on course, with the Competition Commission of India approving the transaction in September 2023.
It remains subject to foreign direct investment approval, as well as approvals from other regulators and competition authorities in several jurisdictions including those from India’s Directorate General of Civil Aviation, Ministry of Civil Aviation and National Company Law Tribunal, and the Competition and Consumer Commission of Singapore.
When completed, it will give SIA a 25.1% stake in an enlarged Air India Group with a significant presence in all key Indian airline market segments.
Fleet and network development
SIA added three aircraft to its operating fleet in the second quarter, comprising one Airbus A350-900 delivered in July and two Boeing 787-10s delivered in August and September.
This brings the total number of aircraft in the group’s operating fleet to 202, comprising 195 passenger aircraft and seven freighters. SIA’s operating fleet comprises 140 passenger aircraft and seven freighters, while Scoot has 55 passenger aircraft.
The group has 96 aircraft on order.
With an average age of seven years and one month, SIA operates one of the youngest and most fuel-efficient fleets in the airline industry.
In 2QFY2024, SIA reinstated services to Busan while Scoot resumed flights to Jinan, Nanchang, and Shenzhen. As of Sept 30, the group’s passenger network covered 119 destinations in 36 countries and territories. SIA served 75 destinations while Scoot served 67 destinations.
SIA’s cargo network comprised 124 destinations in 38 countries and territories.
In the Winter operating season from end-October to end-March next year, SIA will re-introduce services to Chongqing, Chengdu and Xiamen. As part of the regular review of the Group’s network, SIA will operate to Shenzhen in lieu of Scoot with the reinstatement of the full-service carrier’s flights from November.
SIA will also ramp up frequencies to Guangzhou from November from daily to double daily. Scoot will resume operations to Kunming and Changsha from November.
With these reinstatements, SIA and Scoot will serve 23 destinations in China compared to 25 points pre-pandemic.
In addition to the expansion in mainland China, Scoot will deploy supplementary services to Hong Kong SAR, Melbourne and Sydney from December to February next year to cater to the year-end holiday demand.
The group’s capacity is expected to reach an average of around 92% of pre-pandemic levels in December, and expects to return to pre-Covid capacity levels within FY2025 with the progressive ramp-up of services across the network.
Shares in SIA closed 9 cents or 1.42% down at $6.24 on Nov 7.
