SIA cuts Q2 loss to S$428m as VTLs help double revenue to S$1.5b; H1 cash burn down to just $106m

FLAG carrier C6L has reported a smaller net loss of S$427.6 million for the second quarter to September, as passenger traffic rose amid Singapore's launch of vaccinated travel lanes (VTLs).

Its cash burn rate also has narrowed to S$18 million per month or S$106 million in the first half of FY 2022 as operating performance improved, down from S$1.7 billion in H1 FY2021.

SIA's fuel hedging trades also have made gains as fuel prices climbed, according to the group's financial results filed to the Singapore Exchange on Nov 11.

It cut Q2 deficit from S$2.3 billion for the corresponding quarter last year, while revenue almost doubled to S$1.5 billion from S$783.8 million. Results improved as the 43.4 per cent quarter-on-quarter increase in passenger traffic during the recent three-month period outstripped the 21.5 per cent increase in capacity.

Passenger load factor improved 2.6 percentage points quarter-on-quarter to 17.4 per cent for the three months ended September. Passenger load factor measures the percentage of available seating capacity filled by paying passengers.

SIA noted the VTLs with Germany and Brunei that began in September have helped lift passenger traffic, particularly the European country.

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Cargo revenue also ticked up as yields and loads carried were supported by intensified supply chain disruptions.

Group revenue doubled to S$1.5 billion from S$783.8 million the year-ago period, but expenditures rose in tandem with higher passenger traffic.

Loss per share for the quarter stood at 6.6 Singapore cents, down from 48.7 cents last year. Net asset value per share was S$7.40 as at end-September, higher than S$5.36 as at end-March.

Net loss for the half year also has shrunk drastically to S$836.8 million from about S$3.5 billion for the corresponding period last year.

SIA's revenue for the half year jumped 73 per cent to S$2.8 billion from S$1.6 billion last year, as passenger traffic surged nearly 400 per cent year-on-year and cargo revenue hit record-high at S$1.9 billion.

Cargo capacity and loads flown increased over 50 per cent with the resumption of more passenger flights. SIA stated: "The strong cargo performance reflects the capacity crunch in both air freight and ocean freight, and ongoing supply chain disruptions driving air freight demand."

Fuel hedging trading losses that partly led the carrier to report huge deficits last year were absent this time around - thanks to much higher oil prices - and helped to improve SIA's bottom line for the half year.

Its controversial hedging trades posted fair value gains, although higher fuel costs on higher fuel prices and consumption had somewhat offset the gains in the latest reported results.

Currently, SIA is hedged in Brent at about 30 per cent of forecast consumption for the second half of FY2022, at an average price of US$57 per barrel. For the period between the first quarter of FY2023 and the first quarter of FY2024, the group has hedged about 40 per cent of expected consumption at an average price of US$60 per barrel.

Hedge positions beyond the first quarter of FY2024 have been closed out. The close-out trades, taken in a period of rising oil prices, have locked in gains of US$352 million, of which US$120 million has already been recognised under fair value gains in prior periods.

The remaining gains from these close-out trades would amount to US$24 million for the second half of FY2022 and US$208 million for the periods beyond.

Non-cash impairments of S$1.6 billion that were recorded last year were also not in this year's financial results.

As at end September, the group including its budget arm Scoot had an operating fleet of 171 passenger aircraft and seven freighters, serving including Singapore a total of 65 destinations on its passenger network and 78 destinations on its cargo network.

Currently, it has 14 countries and 21 cities on its VTL network. It sees passenger capacity to reach 43 per cent of pre-pandemic levels by December, and serve slightly over half of the pre-pandemic destinations.

SIA sees the traditional year-end peak period to drive strong freight demand, supported in part by retail inventory restocking before the peak shopping season. "This comes amid an ongoing industry capacity crunch for both air freight and ocean freight," SIA noted.

It stated that it will continue to maximise freighter utilisation to meet demand, given that bellyhold capacity will increase in tandem with the resumption of passenger flights, as well as the continued deployment of passenger aircraft for cargo-only flights as required.

SIA will not pay an interim dividend in view of the significant losses and the need to conserve cash.

The counter was 3 cents higher at S$5.45 when market closed on Thursday, before the financial results went public.