The combination of the global economic downturn,
the outbreak of, and concerns over, Swine Flu (Influenza A H1N1)
and fuel hedging resulted in a loss at Singapore Airlines of $307
million for the first quarter ended June 2009. This is the
airline's first quarterly loss since the SARS crisis in 2003.
Group revenue fell 30% from April – June 2008,
down by $1,260 million, as carriage and both passenger and cargo
yields declined, the former reflecting increased competition and
promotional fare activities.
Group expenditure at $3,191 million was $598
million (-15.8%) lower than the same quarter in the preceding
financial year. The drop in the price of jet fuel provided relief
of $1,140 million, partially offset by fuel hedging losses of $287
million (compared to hedging gains of $349 million last year).
The group recorded an operating loss of $319
million for the first quarter, against an operating profit of $343
million last year.
The operating results of the main companies in
the group are:
• Singapore Airlines loss of $ 271 million
(profit of $265 million previously)
• SATS Group profit of $44
• SIA Engineering profit of $ 12 million
• SilkAir loss of $3 million (profit of $10 million
• SIA Cargo loss of $104 million (profit of $5
Several steps have been taken by the company to
contain costs, including a freeze on hiring,
unpaid leave, wage
cuts and deferment of non-essential projects.
Consequent to the first quarter results, the
monthly variable component of employees’ salaries will be cut in
accordance with the Collective Agreements signed with the
Together, these measures to trim staff costs
will provide estimated savings of $60 million for the current
In addition, the company is continuing its
efforts to eliminate wastage and duplication and to negotiate with
vendors to reduce rates.
During the quarter, Singapore Airlines took
delivery of two Airbus A380-800s and four Airbus A330-300s, and
decommissioned three Boeing 747- 400s.
As of 30 June 2009, the operating fleet
comprised 107 passenger aircraft – nine Boeing 747-400s, 77 777s,
eight A380-800s, eight A330-300s and five A340-500s – with an
average age of 5 years and 11 months.
The company has adjusted capacity on numerous
routes to better match demand. Services to Vancouver via Seoul
were suspended from April 2009, while three-times-weekly flights
to Moscow via Dubai were withdrawn from July 2009. From August
2009, services to Tokyo via Bangkok will be discontinued.
Frequencies to Manchester, Rome, Zurich,
Beijing, Guangzhou, Fukuoka, Colombo, Dhaka, Male, Mumbai and New
Delhi were also reduced during the quarter. Conversely, a fourth
daily frequency was recently added to Manila and the larger
A380-800 is now being deployed to Hong Kong.
The price of jet fuel is at less than half what
it peaked at last year, but remains volatile. Losses from hedges,
which were contracted when fuel prices were at historical highs,
are expected but will taper off over the course of the financial
year as these hedges are settled.
Air cargo carriage has stabilized in the last
few months, and industry indicators have shown some improvement.
Still, the outlook for air cargo remains challenging, with yields
expected to remain under pressure from excess capacity in the
The group’s first quarter performance reflected
the adverse business conditions for airlines. If these conditions
continue, the group has said it expects to make a loss for the
Revenues from the airline operations
exceeded cash expenditure, although not enough to cover
depreciation charges. Net operating cash flow is expected to
remain positive for the rest of the financial year. The group’s
cash balance remains strong and the company has said it does not
foresee any necessity to raise capital.
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