SIA retiring 777-200s and A330s, both types unlikely to fly again

Earlier this month Singapore Airlines announced its full-year financial results, recording its first ever net annual loss of S$212 million, stemming largely from a significant net loss of S$732 million in the fourth quarter (Jan-Mar 2020) period, as the COVID-19 situation began to wipe out travel demand.

One of the usual updates we eagerly anticipate at both the full-year and half-year results announcements is the fleet development plan, outlining the group’s intentions for new aircraft deliveries and retirements through to the end of the financial calendar on 31st March each year.

This year – no update

Unsurprisingly, SIA has not provided its usual fleet development plan guidance for the 2020/21 financial year.

In this deeply uncertain time with capacity still cut by 96% and no clear estimate for the timing or scale of any recovery, it’s not realistic for SIA to accurately state what will be happening with the fleet between now and the end of March 2021.

Boeing 777-200s and -200ERs are gone

In its analyst and media briefing following the results announcement, the airline confirmed that the retirement of its Boeing 777-200 and Boeing 777-200ER aircraft will be accelerated.

Remember of course that saying “leave the fleet” isn’t the same as saying “remain actively flying until…”. Here the airline is talking more about its financial obligations and asset disposals, rather than operational use of an aircraft type.

With only one Boeing 777-200 (9V-SQN) and one Boeing 777-200ER (9V-SVM) stored at Changi, and the remaining three Boeing 777-200ERs stored in Alice Springs, it seems likely that while the aircraft may not be officially deregistered from the fleet at this stage, they will not be operating any further passenger services for Singapore Airlines.

Interesting fact: Both aircraft types have also recently been removed from the airline’s online fleet page and GDS timetables show no further Boeing 777-200 or Boeing 777-200ER flights planned.

Here are the remaining Boeing 777-200 and -200ER aircraft in the Singapore Airlines fleet, including details of their most recent passenger flight.

Reg.		Delivered	Last flew
	SQN	13 Aug 2004 (age 15.8 yrs)	20 Mar 2020 (66 days ago)
	SVB	26 Jul 2001 (age 18.8 yrs)	17 Mar 2020 (69 days ago)
	SVC	16 Aug 2001 (age 18.8 yrs)	19 Mar 2020 (67 days ago)
	SVE	20 Nov 2001 (age 18.5 yrs)	21 Mar 2020 (65 days ago)
	SVM	7 Mar 2003 (age 17.2 yrs)	29 Feb 2020 (86 days ago)

9V-SQN conducted a two-hour test flight on 14th May 2020, and appears to be being prepared for disposal.

This news means the older Airbus A380 Version 1 and Version 2 aircraft are now the only types with the super-wide 2006 long-haul Business Class seats still technically in service, though all of those aircraft remain stored at Changi, with four of the newer Version 3 superjumbos relocated to storage in Alice Springs.

It could therefore be some time before these seats are seen in the active fleet again, given the real possibility that Singapore Airlines may not return all 19 of its Airbus A380s to active service.

Airbus A330s are leaving

We already knew that the airline’s fleet of Airbus A330s, all of which are on operating leases, were likely to have left the fleet by sometime in 2021.

This was confirmed at the media briefing.

All the airline’s eight available A330 aircraft remain stored in Singapore. None have flown passenger services for well over a month.

Reg.		Delivered	Last flew
	STC	24 Feb 2009 (age 11.3 yrs)	2 Apr 2020 (53 days ago)
	SSC	25 Jul 2014 (age 5.8 yrs)	27 Mar 2020 (59 days ago)
	SSD	19 Sep 2014 (age 5.7 yrs)	31 Mar 2020 (55 days ago)
	SSE	29 Jan 2015 (age 5.3 yrs)	27 Mar 2020 (59 days ago)
	SSF	31 Mar 2015 (age 5.2 yrs)	13 Mar 2020 (73 days ago)
	SSG	23 Jun 2015 (age 4.9 yrs)	23 Mar 2020 (63 days ago)
	SSH	22 Aug 2015 (age 4.8 yrs)	28 Mar 2020 (58 days ago)
	SSI	30 Sep 2015 (age 4.7 yrs)	25 Nov 2019 (182 days ago)

9V-SSI has not flown a passenger service since sustaining tail damage during a landing accident in November 2019.

With poor cargo capacity compared to other aircraft types in the fleet, including the fuel-efficient Airbus A350-900s (9% more cargo) and Boeing 787-10s (21% more cargo), COVID-19 looks likely to be the end of the road for the Airbus A330s.

Cargo is currently a significant revenue generator for the airline, with payment rates at all-time highs due to supply constraints caused by the significant decline in available cargo space on routine passenger flights. Over 110 SIA flights per week are being operated by the passenger fleet with only cargo on board, however the A330 is notably not being used for this purpose.

Retirement of the A330s, which now look unlikely to operate passenger flights again, means an almost complete withdrawal of the 2009 Regional Business Class seats from the fleet.

These are still installed on the airline’s five Boeing 777-300 (non-ER) models, though under normal schedules those aircraft are easily avoided, as they tend to gravitate to the Jakarta and Manila routes, both of which offer alternative options.

Delivery postponements

Additionally in the recent financial update, SIA has confirmed that it is in negotiations with Airbus and Boeing to postpone new aircraft deliveries this financial year.

Here’s a summary of the aircraft the SIA Group still has on firm order as of 30th April 2020.

Note: Scoot has an additional 10 Airbus A321neo aircraft on order through leasing companies SMBC Aviation (6) and BOC Aviation (4), for delivery between late 2020 and 2021.

At our last update, we knew of at least 12 Airbus A350s and 3 Boeing 787-10s due for delivery between now and March 2021, so it will be interesting to see what revised levels the group can negotiate these totals down to in order to reduce capital expenditure during the period.

The group has already cut projected spending on aircraft by S$600m this year, roughly equivalent to two or three new wide-body aircraft deliveries given the 50% discounts on the list price airlines like SIA usually manage to negotiate as part of their large orders.

Financial Year 2020/21

	Guidance at:		Change
	Nov ’19	May ’20
Aircraft Capital Spend	S$5,600m	S$5,000m		S$600m

However this reduction is more likely the result of reduced maintenance costs than any deferred deliveries at this stage, a side benefit of flying their aircraft less regularly.

The airline has also confirmed that the results of negotiation with Airbus and Boeing will reduce capital expenditure costs further over and above this ‘guaranteed’ S$600m saving.

SIA has stated that it will announce the additional capital expenditure savings once the deals have been concluded, hopefully then also confirming which deliveries have been deferred and outlining some form of fleet development plan for us to digest.

Additional methods the airline is using to raise liquidity include sale-and-leaseback of some of its owned aircraft.

In March 2020 the Qantas Group secured debt totalling AU$1.05bn (around S$980m) against seven of its fully owned Boeing 787-9s, raising another AU$550m (around S$514m) against three more such aircraft earlier this month.

With an owned fleet totalling 115 wide-body aircraft at 31st March 2019*, including valuable Airbus A350s and Boeing 787s, there is significant potential for SIA to replicate similar deals with its own fleet to raise liquidity if required.

* The number of owned aircraft at 31st March 2020 will not be known until SIA releases its 2019/20 Annual Report in late June 2020.

Some of the airline’s Boeing 777-300ERs and Boeing 787-10s are believed to have been included in sale-and-leaseback transactions already in recent months.

SIA “will not need the same fleet” after COVID-19

In response to media questions, SIA’s SVP Finance Stephen Barnes confirmed that the airline is likely to feel the effects of the COVID-19 outbreak for at least the next 12 to 18 months.

Given that at least 15 brand new aircraft were supposed to arrive in SIA alone this year to replace the retired and de-leased ones, we can potentially foresee a shrinkage of the fleet once the brakes are put on new deliveries.

Several aircraft have also been placed in long-term storage, with more set to follow in the weeks ahead according to sources familiar with the matter.

Summary

No major surprises with the announcement that two of SIA’s aircraft types are leaving the fleet in the next 12 to 14 months.

It’s almost certain that the Boeing 777-200s will never operate passenger services again, while we suspect the eight remaining Airbus A330s are also unlikely to return to service given that the airline has scores of more modern, fuel-efficient aircraft at its disposal.

Singapore Airlines is already reducing its aircraft capital expenditure this financial year, with maintenance cost reductions already confirmed, but the results of a delivery deferral negotiation with both Airbus and Boeing are still to be announced.

This has the potential to save several billion in additional outlay this year, as scheduled payments for new aircraft can be pushed back into subsequent periods, and combined with fleet retirements will almost inevitably result in a smaller SIA a year from now than we’ve been used to.

Other fleet types we expect will suffer accelerated retirements over the coming months and years may also include the airline’s Boeing 777-300s, now 15 to 18 years old, plus potentially some Boeing 777-300ERs, some of which are over 13 years old.

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