Plunging oil prices add to headwinds for SIA

AS COUNTRIES tighten their borders, travellers hunker down and oil prices tumble, Singapore Airlines (SIA) is flying into something of a perfect storm.

While cheaper fuel normally spells relief, depressed oil prices represents a double whammy for the airline group, which has already been forced to temporarily cut over 15 per cent of capacity as demand evaporates in the wake of the Covid-19 outbreak.

For the financial quarter ending March 31, 2020, it has hedged 79 per cent of its fuel needs in MOPS at US$76 per barrel (/bbl), suggesting that a fuel hedging loss is likely for this quarter as long as oil prices remain low. Oil prices plunged last week as a breakdown in talks between the Organization of the Petroleum Exporting Countries (Opec) and Russia led to Saudi Arabia slashing prices and ramping up production, inciting a price war. Since the beginning of the year, jet fuel prices have dropped sharply from US$81/bbl to US$46/bbl at the time of writing.