Aviation companies slash prices, waive fees as virus outbreak persists
SATS announces pay cuts for senior staffers; some aviation-related counters have taken a beating in the market
Singapore
SINGAPORE'S aviation industry is bracing for the Covid-19 outbreak disruption to persist, with companies in the sector implementing pay cuts and slashing flight prices and change fees.
And while analysts have so far viewed the outbreak as a temporary setback for the sector, aviation-related counters such as Singapore Airlines (SIA), SATS and SIA Engineering have taken a beating since the situation escalated in early February.
On Monday, airport and food services provider SATS announced a 15 per cent pay cut for its president and chief executive Alex Hungate amid a series of further cuts which took effect from March 1. Non-executive directors' fees were also reduced by 15 per cent, executive vice-presidents and senior vice-presidents saw a 12 per cent pay cut, while vice-presidents took a 10 per cent cut.
Meanwhile, managers to assistant vice-presidents will take a 5 per cent pay cut starting April 1.
On Saturday, Singapore Airlines (SIA) said it will waive change fees for all SIA and SilkAir tickets issued between March 6 and March 31, for travel to and from all destinations.
New travel dates must commence before March 31, 2021, and customers will need to top up fare differences between the old and new itineraries.
SIA is also offering at least 20 per cent discounts on fares to more than 70 destinations worldwide, for flights booked between March 5 to 19 for selected periods between now and May 31.
Emirates said on Monday that it would waive change and reissuance fees for all booked tickets issued on or from March 9 until March 31, 2020, for all existing destinations in the Emirates network. Customers can change their booking to any date within an 11-month date range in the same booking class without incurring change penalties.
Before the local market's rout on Monday, SIA Engineering and SATS had lost 17.7 and 20.4 per cent year-to-date respectively, and SIA was down 11.8 per cent. They all fell further on Monday, recording losses of 4.3 to 6.2 per cent.
ST Engineering bucked the trend with a nearly 7 per cent rise since the start of the year, though that was trimmed to 2.28 per cent by Monday's rout.
Commenting on the waivers being offered by SIA and Emirates, aviation analyst Shukor Yusof of Endau Analytics said that the policy changes are a response to the ongoing outbreak and the uncertainty over when normalcy will return. He noted that the measures airlines have taken, and will likely continue to improvise, reflect the severe impact to demand that the outbreak has brought about, and said: "Things will likely get worse before they get better."
In a Feb 18 report on the counter, OCBC analyst Chu Peng said weaker travel demand due to the virus outbreak will weigh on SIA's operating performance, noting that revenue fell 35 per cent and it suffered a net loss of S$312 million in Q1 2003, when the Sars outbreak was at its worst.
However, SIA's performance quickly rebounded in the following quarter when the outbreak was under control, and Ms Chu sees the current difficulties as temporary setbacks that can be overcome with the help of compensation or supportive policies from the government.
DBS analyst Paul Yong said in a report on Feb 18: "Like Sars and H1N1, we believe Covid-19 will eventually blow over and the success of SIA's transformation programme will allow it to post sustained higher profitability in the longer term."
In its latest announcement, SATS warned that the novel coronavirus situation is expected to "substantially and adversely" affect profitability for its fourth quarter and full-year ending March 31, 2020, when compared with a year ago.
Despite a negative hit to its short-term earnings from the Covid-19 virus outbreak, SATS said it is in a strong position to weather the disruptions. It added that it is "looking out for opportunities" in this crisis.
SATS shares closed S$0.25 or 6.2 per cent lower at S$3.78 on Monday.
Other aviation-linked counters have been affected too, with China Aviation Oil falling by 9.3 per cent on Monday to close at S$0.98, and JEP Holdings falling nearly 7 per cent to close at S$0.20. The former trades and supplies jet fuel, and the latter provides precision machining and engineering services to the aerospace industry.
A-Sonic Aerospace, which provides aerospace engineering and logistics solutions, lost 1.47 per cent to S$0.335.
