SIA reports strong business travel demand on VTL flights
FLAG carrier Singapore Airlines (SIA) has witnessed strong demand in the premium cabin on the vaccinated travel lane (VTL) flights, including that from business travel.
SIA stated the quarantine-free travel arrangement that Singapore has launched for a growing list of countries since September has triggered strong booking demand, especially in premium cabins.
Lee Lik Hsin, executive vice-president of the airline's commercial division, elaborated during a financial results briefing on Friday (Nov 12) that the strong demand came from all segments: business, leisure and family travel.
Market watchers have pointed out that executives that have taken to videoconferencing will continue to leverage the virtual meeting mode after the pandemic has eased, and this will have a significant impact on business travel.
Lee sees the recent removal, by the Council of the European Union (EU), of Singapore from a list of countries for which travel restrictions should be relaxed, as not having a clear impact on SIA for now.
He stated: "The EU classification is something that is in a state of flux in regard to how it will impact us... I think it is not absolutely clear... I wouldn't describe it... (as) looming border restriction.
"Because it is a guidance and the EU countries have their capability to make their own call on what new rules they want to put in place. Some may, for example, choose to put in place testing if there was no testing previously, and that doesn't really impact the demand."
Despite EU recommendations, the member nations are free to decide on travel curbs.
However, Denmark, hot on the heels of the EU recommendations, has now reclassified Singapore as a nation with a high risk of Covid infections and requires travellers from the city-state to serve a self-isolation period of up to 10 days upon arrival in the European country.
Currently, SIA has 21 cities on the VTL network, and it has seen a 7-time increase in bookings for VTL flights since the announcements of the VTLs with various countries were made.
SIA stated that new VTL ticket bookings for the next 3 departure months have hit about 140,000.
Goh Choon Phong, chief executive of the airline group, added that border restrictions are outside the airline's control, but SIA is "agile and nimble" enough to respond at very short notice.
SIA saw 79 per cent of the passenger fleet being deployed, and 92 per cent of pilots and 86 per cent of cabin crew activated as it geared up for a quick ramp up in capacity.
However, Goh said there is no definite timeline at the moment to re-activate the remaining staff.
Tan Kai Ping, SIA's executive vice-president of finance and strategy, clarified that the purpose of the airline hedging its fuel costs is to manage volatility as fuel is a major cost item, when asked why it closed out some of its hedging positions when oil prices are climbing.
"So we don't take the speculative position when we do hedging," Tan stated.
SIA came under fire last year when there were huge fuel hedging losses incurred as the oil price plunged in March amid global economies and international borders shutting down to curb the pandemic. It resulted in the airline group being in an over-hedged position at levels way above the spot price.
However, it now posted hedging gains.
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.
Beyond the first quarter of FY2024, the hedging positions have been closed out and it has locked in gains of US$352 million.
SIA saw its shares trading at S$5.34, or 11 cents lower at 1.30 pm on Friday.
