Singapore Airlines (SIA) C6L has posted record quarterly net profit of $734 million in 1QFY2024, up 98.4% y-o-y, amid robust demand for air travel through the mid-year school holidays and the start of the summer travel season.
Group passenger capacity expanded 32.4% y-o-y as restrictions on international air travel eased globally, reports the airline on July 27.
SIA and Scoot carried 8.4 million passengers during the quarter, 65.5% higher than a year before, with strong demand across all route regions and market segments. Passenger traffic and load factors improved across all markets, with the y-o-y traffic growth of 49.0% outpacing the capacity expansion.
The Group achieved a record quarterly passenger load factor (PLF) of 88.9%, with SIA’s PLF at a record 88.1% and Scoot’s at a record 91.7%.
That said, SIA’s cargo segment declined y-o-y “as the demand for air freight continued to soften”.
Cargo loads dipped 11.3% y-o-y, while capacity grew 12.1%, primarily from the increase in bellyhold capacity as more passenger flights returned to service. Cargo load factor fell by 13.7 percentage points (ppts) to 51.8%, and cargo yields fell 44.3% compared to last year.
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Nevertheless, cargo yields at 44.6 cents per load tonne-kilometre remained 50% above the pre-Covid-19 level of 29.7 cents per load tonne-kilometre in 1QFY2020).
As a result, Group revenue rose $551 million, up 14.0% y-o-y, to $4,479 million, with the higher passenger flown revenue of $1,001 million, up 37.4% y-o-y, partially offset by a $555 million decline in cargo flown revenue.
On costs, expenditure increased $353 million, up 10.5% y-o-y to $3,725 million, with the rise in non-fuel expenditure of $572 million, up 27.3% y-o-y partly offset by a $220 million decrease in net fuel cost, down 17.3% y-o-y.
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Net fuel cost fell to $1,053 million, mainly due to a 33.4% decrease in fuel prices, despite higher volumes uplifted and lower fuel hedging gains.
The 27.3% increase in non-fuel expenditure was within the 32.4% increase in passenger capacity.
Thus, the Group posted an operating profit of $755 million, 35.8% higher y-o-y.. SIA generated a record operating profit of $738 million, an improvement of $113 million. Operating profit for Scoot was $24 million, up $76 million compared to the prior year.
Demand for air travel is expected to remain robust for all route regions through the summer peak, with forward passenger bookings closely tracking capacity injection across most markets over the next three months, says SIA.
“The SIA Group is well-positioned in this operating environment, even as competition is expected to intensify in the coming months as more capacity is injected into international routes.”
As more airlines add passenger services, bellyhold capacity will continue to increase globally, adds the airline. “Inventory overhang and the easing of supply chain constraints have also resulted in a modal shift towards sea freight. Higher competition, as well as softer cargo demand, may continue to exert downward pressure on cargo yields, particularly on key trade lanes.”
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Air India stake and other initiatives
Work continues on the proposed merger of Air India and Vistara, says SIA, which will result in the Group taking a 25.1% stake in the enlarged Air India Group when the transaction has been completed.
SIA says this will bolster its presence in India, strengthen its multi-hub strategy and allow it to continue participating directly in this “large and fast-growing aviation market”.
In May, Garuda Indonesia and SIA agreed on plans for a route joint venture arrangement that would deepen the cooperation between the two carriers.
The proposed route joint venture, subject to regulatory approvals, would potentially allow the coordination of schedules between Singapore and Indonesia, and explore new initiatives such as joint fare products and cross participation of frequent flyer programmes.
Fleet improvements
SIA added four aircraft to its operating fleet in the first quarter, including one Airbus A350-900, two Boeing 787-10s, and one 737-8 (delivered in February 2022) after its cabin retrofit.
This brings the total number of aircrafts in the Group’s operating fleet to 199, comprising 192 passenger aircrafts and seven freighters. SIA’s operating fleet comprised 137 passenger aircrafts and seven freighters, while Scoot had 55 passenger aircrafts.
The Group has 99 aircrafts in its order book.
The average age of its aircraft is six years and 11 months, making it one of the youngest and most fuel-efficient fleets in the airline industry.
As of 1QFY2024, the Group’s passenger network covered 116 destinations in 36 countries and territories. SIA served 74 destinations while Scoot served 65 destinations. The cargo network comprised 121 destinations in 38 countries and territories.
Scoot also resumed services to seven destinations in China including Changsha, Haikou, Nanning, Ningbo, Shenyang, Wuhan and Xi’an. With these additions, SIA and Scoot collectively serve 17 destinations in China.
Meanwhile, SIA will resume four-times weekly services to Busan from Aug 28, and increase its frequencies to Hong Kong, Japan and Thailand during the Northern Winter operating season of Oct 29 to March 30, 2024. It will also operate supplementary services to six Australian cities from Nov 22.
The group also has plans to increase flight frequencies with Scoot to Chiang Mai, Davao and Jeddah, and increase its services between Singapore and Chennai under SIA from 17 times to 21 times weekly.
The group’s capacity remains on track to reach an average of around 90% of pre-Covid-19 levels by March 2024.
Shares in Singapore Airlines closed 1 cent lower, or 0.13% down, at $7.52 on July 27.
