The rolling good times are back for Singapore Airlines.
A week after announcing it would be redeeming half of its outstanding mandatory convertible bonds (MCBs) and a day after posting strong monthly passenger numbers, the airline unveiled record revenue and profit numbers for the 2022/23 financial year.
The company posted net profit of $2.16 billion for the year ended March 31, rebounding from a loss of $962 million a year earlier. This came on the back of record revenue of $17.78 billion, a 133 per cent surge from March 2022’s $7.62 billion.
Operating profit soared 2.69 billion, erasing a loss of $610 million a year earlier.
Expenditure rose 83.4 per cent to $15.08 billion, primarily due to a 138 per cent increase in net fuel costs, a 61.5 per cent increase in non-fuel expenditure, and an increase in the year-on-year impact of fair value changes on fuel derivatives.
The rise in net fuel cost of $3.02 billion was underpinned by an almost 50 per cent increase in fuel prices. But this was partially offset by higher fuel hedging gains.
Group shareholders’ equity was $19.9 billion as of March 31, a reduction of $2.5 billion from a year ago following the redemption in December 2022 of the MCBs that were issued in June 2020.
Total debt balances decreased by $400 million to $15.3 billion, mainly due to the repayment of borrowings. This was partially offset by an increase in lease liabilities as a result of sale-and-leaseback activities. Consequently, the group’s debt- to-equity ratio rose from 0.7 times to 0.77 times.
Cash and bank balances saw an increase of $2.5 billion year-on-year to $16.3 billion. Net cash generated from operations, including proceeds from forward sales, contributed $9.1 billion, while the group paid $3.9 billion for the redemption of the 2020 MCBs.
In addition to the cash on hand, the group retains access to $2.2 billion of committed lines of credit, all of which remain undrawn.
Singapore Airlines is planning to pay a final dividend of 28 cents per share for FY2022/23. Including the interim dividend of 10 cents per share paid in December 2022, the total dividend for FY2022/23 will be 38 cents per share.
The results came on the back of a robust pickup in traffic following border openings early last year.
Singapore Airlines and its low cost carrier, Scoot, carried 26.5 million passengers during the past year, a six-fold increase from a year before. The group’s passenger load factor (PLF) jumped 55.3 percentage points to 85.4 per cent, the highest in its history.
PLF represents the percentage of available seats on a flight that are filled by passengers.
Individually, Singapore Airlines achieved a record PLF of 85.8 per cent, while Scoot delivered a PLF of 83.9 per cent.
The group’s passenger capacity reached 79 per cent of pre-Covid levels in March, higher than the average of 58 per cent in the Asia-Pacific region. It is projected to reach an average of around 83 per cent of pre-Covid levels in the first half of FY2023/24.
The group’s passenger network covered 109 destinations in 36 countries and territories including Singapore, compared with 137 destinations in 37 countries and territories pre-Covid. Singapore Airlines served 74 destinations while Scoot served 58 destinations.
While passenger numbers remained robust, there has been a softening on the cargo side.
As of March 31, the group’s cargo yields fell year-on-year as industry bellyhold capacity increased with the progressive restoration of passenger flights. Still, cargo revenue was 83 per cent above the pre-Covid level registered in calendar year 2019.
Singapore Airline’s cargo network covered 118 destinations in 38 countries and territories with a fleet of seven Boeing 747-400F freighters, as well as the bellyholds of Singapore Airlines and Scoot passenger aircraft.
The group said that it was benefitting hugely from post-Covid travel recovery and was also reaping the results of a multi-year transformation plan.
A week ago, the company announced plans to redeem half of its MCBs that were issued in June 2021. This came barely six months after the airline group announced the full redemption of its 2020 MCBs. These bonds were issued to raise funds to support the company’s balance sheet amid an almost total shutdown of air travel during the pandemic.
Looking forward, Singapore Airlines said it expects air travel to remain robust in the first quarter of the current financial year FY2023/24, supported by a recovery in air travel in East Asia.
The company revealed that forward sales remain healthy across all cabin classes, led by a strong pick up in bookings to China, Japan, and South Korea.
But it added that near term cargo demand would remain soft as the industry navigates headwinds from the macro-economic environment, and as overall inventory levels recalibrate to post-Covid conditions.
“Geopolitical and macroeconomic uncertainties, as well as high cost inflation, could pose challenges for the airline industry in the months ahead,” it added. “Even though fuel prices have moderated in recent months, they remain at elevated levels.”
It added that as competition is expected to increase with more capacity being injected on international routes.
Meanwhile, the company is pushing ahead with its various strategic initiatives, which includes building partnerships and alliances with other carriers, building on its multi-hub strategy through its acquisition of a 25.1 per cent stake in Air India, and upgrading and investing in new products such as better lounges and cabin retrofits.
As of March 31, Singapore Airlines had 33 codeshare partners, providing customers connections to 230 destinations outside its network.
Under its transformation plan, which first kicked off in FY2017/18, the group said it has undertaken over 250 initiatives to build stronger revenue generating capabilities, enhance cost competitiveness, increase operational efficiencies, and drive higher productivity and organisational effectiveness.
These include ensuring cost-effective aircraft maintenance costs, review of policies to reduce waste, a greater focus on the customer experience, and integrating operational services to deliver consistent and high-quality service, among others.
In November 2022, Singapore Airlines and Indian conglomerate Tata Sons agreed to merge airlines Air India and Vistara, with Singapore Airlines also investing S$360 million for a 25.1 per cent stake in an enlarged Air India group. The merger is expected to be complete by March 2024, subject to regulatory approvals.
Singapore Airlines said the merger is part of its multi-hub strategy, “allowing it to directly participate in the growth of one of the largest aviation markets in the world that complements our strong Singapore hub”.
As of end-March, the group operated a fleet comprising 188 passenger aircraft and seven freighters. The group has 100 new generation aircraft in its order book, including nine new 112-seater Embraer E190-E2 aircraft to Scoot’s fleet from 2024, complementing the budget carrier’s larger Airbus A320 Family and Boeing 787 aircraft.
The stock closed up 2 cents $5.92 on Tuesday.