Despite drawbacks due to the global pandemic, SIA is ready to navigate a bumpy sky with total fresh liquidity of $15.4 billion and additional $2.1 billion of undrawn committed lines of credit and to be competitive even in a volatile business environment. It will play its roles as a premier airline of the Commonwealth.
Performance at a glance;
- Passenger traffic down 97.9% due to global restrictions on international travel.
- Strong cargo revenues cushioned plunge in passenger contributions.
- $2.0 billion non-cash impairment charge largely on removal of 45 older aircraft.
- Proposed issuance of additional mandatory convertible bonds to strengthen Group’s liquidity position in order to navigate crisis and secure future growth.
- Transformation programme reinforces foundation for SIA Group to emerge stronger.
Due to the global pandemic, the Singapore Airlines (SIA) Group’s passenger traffic (measured in revenue passenger-kilometres) dropped 97.9% in the financial year ended 31 March 2021 from a year before.
The Group revenue down by $12,160 million (-76.1%) year-on-year to $3,816 million due to the plunge in passenger flown revenue across Singapore Airlines, SilkAir and Scoot, the three passenger airlines within the Group.
This was partially compensated by higher cargo flown revenue, which increased by $758 million (+38.8%) year-on-year to $2,709 million. Improvements in freighter utilisation, deployment of passenger aircraft for cargo-only flights, and removing seats from passenger cabins to create additional volume for cargo partially mitigated the loss of passenger aircraft bellyhold capacity during the pandemic. Strong air cargo demand, particularly in key segments such as e-commerce, pharmaceuticals and electronics, given a strong support for cargo load factors as well as yields in the context of tight industry cargo capacity.
Expenditure
Group expenditure was $6,329 million, a decline of $9,588 million (-60.2%). Net fuel cost down $3,620 million (-78.1%) to $1,016 million due to capacity reduction and lower fuel prices in the first half of the year. Non-fuel expenditure was also reduced by $5,472 million (-51.8%) to $5,099 million due to series of measures including capacity cuts, cost-saving initiatives, staff-related measures, and government support schemes.
Mark-to-market losses of $497 million were due to ineffective fuel hedges, after downward adjustments to the expected rate of capacity recovery and the corresponding fuel consumption. This was partially mitigated by a $283 million fair value gain on fuel hedges following a rise in fuel prices in the second half of the year. However, the Group has paused fuel hedging activity since March 2020.
The Group plunged into an operating loss of $2,513 million in FY2020/21, an opposite of $2,572 million gained from the $59 million operating profit recorded last year.
For the financial year ended 31 March 2021, the Group recorded a net loss of $4,271 million, a decline of $4,059 million against last year. This was spearheaded by the weaker operating performance as well as non-cash impairment charges, partially compensated by a $623 million up in tax credit due to the higher net loss recorded by the Group.
As at 31 March 2021, the Group’s shareholders’ equity was $15.9 billion, an increase of $6.6 billion as compared to previous year, 31 March 2020. Cash and bank balances recorded an increase of $5.1 billion, rising to $7.8 billion, although the total debt balances increased by $2.6 billion to $14.3 billion due to the taking on of new debt facilities. As a result, the Group’s debt-equity ratio down from 1.27 times to 0.90 times.
During the fourth quarter, SIA issued its first USD-denominated bond in January 2021, raising a capital of US$500 million (S$668 million equivalent3). A further $1.2 billion was raised through aircraft sale-and-leaseback transactions. In FY2020/21, SIA raised capital was approximately $14.6 billion.
| $ billion | |
| Rights Issue (completed in June 2020) | 8.8 |
| Secured financing on A350-900 and 787-10 aircraft | 2.1 |
| Convertible Bond and Notes issues | 2.0 |
| Aircraft sale-and-leaseback transactions | 1.2 |
| New committed lines of credit and short-term unsecured loan | 0.5 |
Furthermore, SIA raised a further $0.8 billion in April 2021 through the completion of aircraft sale-and-leaseback transactions, increasing total fresh liquidity to $15.4 billion since the beginning of FY2020/21.
In addition to above facilities, the Group continues to retain access to $2.1 billion of committed lines of credit, all of which remain undrawn at present.
Capacity of the group
The Group’s operating fleet currently consists of 162 passenger aircraft and seven freighters. This excludes 41 aircraft which are deemed surplus to the Group’s requirements, six Boeing 737 MAX 8s that have been temporarily withdrawn from service, and two aircraft (one Airbus A330 and one Airbus A320) that left the operating fleet in preparation for lease returns.
At 31 March 2021, SIA served 47 destinations including Singapore, up from 38 at the end of December 2020. SilkAir served five destinations, down from eight, while Scoot’s network increased by one to 18 destinations. By the end of the financial year, the Group’s passenger network covered 60 destinations including Singapore, compared to 54 three months earlier. The Group’s cargo network comprised 72 destinations including Singapore, up from 66 as at 31 December 2020.
The Group expects the passenger capacity to be around 28% of pre-Covid levels by June 2021. By July 2021, the Group capacity is expected to reach around 32% of pre-Covid levels, and to serve around 49% of the points that were flown before the crisis.
Fortifying our financial position
It is, therefore, crucial for the Group to have sufficient liquidity to weather the current challenges.
Accordingly, the Group will undertake a further issuance of additional mandatory convertible bonds (Rights 2021 MCBs) to raise gross proceeds of approximately $6.2 billion.
Positive outlook
SIA is also actively pursuing new engines of revenue growth, as well as initiatives to achieve a more competitive cost base to secure its future financial sustainability. The Group will continue to exercise discipline on costs and cash management.
The Group is grateful to have received strong support from its shareholders, lenders, investors, and the Singapore government, to raise capital, provide liquidity and to manage costs. The Group is committed to work closely with key stakeholders within the aviation ecosystem to navigate through the ongoing crisis and emerge stronger.
With strong fundamentals backed by a realistic vision and handsome liquidity, SIA is poised to regain its position as a premier airline of the Commonwealth, net working the block with Singapore, an economic powerhouse in the region.
