SIA posts S$732.4m in Q4 net loss as bad hedges worsen virus woes

SINGAPORE Airlines (SIA) has posted a net loss of S$732.4 million in the fourth quarter, reversing from a net profit of S$202.6 million in the corresponding quarter a year ago.

This included S$198 million in fuel-hedging losses as fuel prices plunged towards the end of the quarter. SIA also booked S$710 million in mark-to-market losses from surplus hedges that arose because capacity cuts resulting from Covid-19 have meant that the carrier's fuel consumption needs in the next fiscal year will be lower than previously anticipated.

SIA also warned of further fuel-hedging losses ahead, noting that "fuel prices are likely to remain weak in the near term".

Revenue in the three months to March 31 fell 21.9 per cent to S$3.18 billion, owing to a steep drop in passenger traffic.

This swung SIA into an operating loss of S$803 million in the fourth quarter, a reversal from its profit of S$253 million last year.

Passenger revenue fell 27.4 per cent due to the Covid-19 pandemic; cargo revenue was down slightly by 4 per cent as the sharp drop in bellyhold capacity arising from the significant reduction in passenger flights was only partially mitigated by the increased utilisation of freighter aircraft and the operation of cargo-only flights using passenger aircraft.

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Parent airline SIA made a S$583 million operating loss in the fourth quarter, reversing from an operating profit of S$204 million in the same period a year earlier.

SilkAir made a S$100 million operating loss, reversing from an operating profit of S$11 million. Scoot reported an operating deficit of S$125 million, deepening from a loss of S$6 million in the fourth quarter last year.

Fourth-quarter loss per share was 61.8 Singapore cents, against earnings of 17.1 Singapore cents per share in the fourth quarter last year.

Full-year loss per share was 17.9 Singapore cents, against earnings of 57.7 Singapore cents per share last year.

No final dividend was declared. In the prior year, a final dividend of 22 Singapore cents was declared. An interim dividend of eight Singapore cents per share was declared in both this fiscal year and the last.

For the 12 months ended March 31, SIA posted a net loss of S$212 million, reversing from a net profit of S$683 million in the same period a year earlier.

Operating profit was S$59 million, down 94.5 per cent from S$1.07 billion last year as the deterioration in operating performance from January to March eroded the improvements made in the first nine months of the year, SIA said.

On March 26, SIA announced a right issue to raise gross proceeds of S$8.8 billion through the sale of rights shares and rights mandatory convertible bonds (MCBs). SIA also has the option of issuing up to an additional S$6.2 billion through additional MCBs.

SIA said in its results filing on on Thursday: "This is intended to provide the group with additional liquidity if the crisis prolongs, and would only be tapped if necessary. We are currently exploring other sources of funding, including secured financing and sale-and-leaseback transactions."

It added: "The prospects for a recovery in international air travel in the months ahead depend upon when border controls and travel restrictions ease. There is no visibility on the timing or trajectory of the recovery at this point, however, as there are few signs of an abatement in the Covid-19 pandemic."

The group said it will maintain a minimum-flight connectivity within its network during this period, while ensuring the flexibility to scale up capacity if there is an uptick in demand.

"In the meantime, the demand for essential goods such as medical supplies, pharmaceuticals and fresh foods still exceeds air freight capacity on many key lanes due to the sharp reduction in bellyhold capacity. This is expected to sustain cargo revenues for the near term. We will also continue to pursue charter opportunities, while closely monitoring for changes in demand," it said.

Net asset value per share was S$7.86 as at March 31, down from S$11.22 as at March 31, 2019.

SIA shares fell 19 Singapore cents or 4.75 per cent to S$3.81 on Thursday before the results were announced.