News Scoot SilkAir Singapore Airlines

Singapore Airlines posts record quarterly loss of S$1.1 billion

Singapore Airlines has posted a record S$1.1 billion net loss for the April - June 2020 period, with revenues down 80% against a 96% capacity cut

SQ A380 3

Singapore Airlines has reported the worst quarterly loss in its history today, with the carrier ending the April to June 2020 (Q1) period S$1.1 billion in the red. Operating loss was just over S$1 billion during the period, with international travel almost completely halted due to the COVID-19 pandemic.

The airline group reduced its passenger services to just 4.1% percent of activity compared to the same period in 2019, with overall revenue down by an eye-watering 80%, an almost complete collapse in sales.

As with the January – March 2020 period, fuel hedging losses in Q1 were significant at S$535m, with the group’s unused hedges ‘marked-to-market’ at the 30th June 2020 spot price, in accordance with accounting practice.

The airline also took a S$127 million hit in Q1 from fleet write down and liquidation costs arising from its 49% stake in NokScoot, which collapsed in June 2020.

The news was not unexpected, with the airline highlighting in a recent trading update that it would likely “report a material operating loss for the first quarter of FY20/21”.

Yesterday, airline trade association IATA reported that air travel demand will return to 2019 levels only in 2024, a year later than previously forecast, noting that “International markets remain largely closed”.

Unlike most other airlines, the SIA Group is heavily reliant on international flights, with no domestic market to serve.


SIA Group

The group announced a record quarterly net loss of S$1,123 million in the first fiscal quarter of 2020 (April – June), following its S$732 million loss in the previous quarter (January – March).

This compares to a net profit of S$111 million in the same quarter the previous year (April – June 2019).

“The Group entered the first quarter at a time when market conditions were deteriorating rapidly due to the spread of Covid-19 globally. Demand for air travel evaporated as travel restrictions and border controls were imposed around the world to contain the spread of the virus. Consequently, passenger carriage (measured in revenue passenger-kilometres) fell by 99.4% year-on-year for Singapore Airlines, 99.8% for SilkAir and 99.9% for Scoot, resulting in a 99.5% decline for the Group.”

Singapore Airlines

Here are the headline financial operating results for the SIA Group during Q1, compared with the same period last year.

Q1 19/20
Q1 20/21
Revenue 4,102 851 -79.3%
Expenditure 3,902 1,888 -51.6%
– Fuel 1,173 619 -47.2%
– Non-fuel 2,729 1,269 -53.5%
Operating Profit 200 – 1,037 nm
Net Profit 111 – 1,123 nm

Revenue was “dominated by cargo contribution on the back of strong demand for airfreight”, according to the airline.

SQ A380s ASP (Steve Strike)
Several of the group’s aircraft, including Airbus A380s and Boeing 777s, are now in long-term storage at Alice Springs in Australia. (Photo: Steve Strike)

“For the quarter ended 30 June 2020, the Group reported a net loss of $1,123 million, a deterioration of $1,234 million against last year. This was primarily driven by the weaker operating performance as well as the financial impact of $127 million from the liquidation of NokScoot, comprising mainly the non-cash impairment of seven Boeing 777 aircraft which had been leased to NokScoot and the Group’s share of related costs. A swing from tax expense to tax credit partly offset the losses.”

Singapore Airlines

Segment results

Here are the operating profits of each group division in Q1 20/21, compared to the same quarter in previous financial year.

Q1 19/20
Q1 20/21
SQtrans small 232 -667 -899
MI logo -16 -102 -86
TZtrans -37 -259 -222
SIAEC trans 18 -9 -27
3 0 -3
200 -1,037 -1,237

nm – not measurable

Operating loss for the first quarter stood at S$1,037 million, compared to an operating profit of S$200 million during the same period the previous year.

Here’s how each division fared in terms of operating statistics during the first quarter.


Singapore Airlines

SQtrans small

The mainline carrier recorded the following operating statistics during the first quarter of the financial year, compared with the same period in 2019.

Q1 19/20 Q1 20/21
Passengers Carried
(x 1,000)
5,475 32
Load Factor
83.2% 10.6%

Only 10% of SIA’s mainline passenger capacity was filled during the first quarter of the new financial year. 32,000 passengers travelled with the carrier over a three-month period in which nearly 5.5 million customers would be expected.



Q1 19/20 Q1 20/21
Passengers Carried
(x 1,000)
2,688 4
Load Factor
86.1% 5.4%

Scoot flights were practically empty during Q1 of the new financial year, with only 4,000 passengers carried between April and June 2020.

During the same period in 2019, Scoot carried 2,688,000 passengers, with 86.1% of seats filled.

TR 789 Landing (Suparat_C SS)
(Photo: Suparat_C / Shutterstock)

The low-cost subsidiary is flying a limited network to 12 cities in August 2020, only a very limited increase in capacity compared to recent months.



MI logo

Q1 19/20 Q1 20/21
Passengers Carried
(x 1,000)
1,195 2
Load Factor
78.1% 34.6%

Despite only carrying 2,000 passengers in the first quarter of the financial year, SilkAir recorded the highest load factor across the group at 34.6%.

SIA also announced today that the merger between Singapore Airlines and SilkAir remains on track.

“The integration of SilkAir into SIA remains on track. Customers will benefit from a step up to the Singapore Airlines inflight experience as we transition the SilkAir narrowbody operations to SIA, starting with the 737-800 aircraft, in Q4 FY20/21. The integration of SilkAir into SIA will also deliver greater economies of scale for the Group, and allow it to deploy the right aircraft to meet the demand for air travel as it returns.”

Singapore Airlines

This strongly suggests the anticipated flat-bed seats will make their way onto the carrier’s Boeing 737-800s starting next year as they move across to the mainline operation. The group first announced its intention to fit these new Business Class seats on Boeing 737-800s, rather than the grounded MAX jets, in November 2019.

The SIA Group also pointed towards the cessation of SilkAir’s Koh Samui route, which can only be operated using Airbus A319s (or smaller aircraft).

“SilkAir temporarily ceased operations across the network except for flights to Chongqing, and has taken the decision to indefinitely suspend operations to Koh Samui.”

Singapore Airlines

No other SilkAir routes were mentioned, despite many also being temporarily suspended, suggesting this route is unlikely to reappear in future. That’s especially true given the airline’s intention to become an all-Boeing 737-800 / MAX 8 operator, before transferring those types to SIA.

These aircraft can easily land in Koh Samui, but are prevented from doing so by the airport owner Bangkok Airways to artificially stifle competition from low-cost carriers.

MI 38M (Anna Zvereva)
(Photo: Anna Zvereva)

Six of the SilkAir’s brand new Boeing 737 MAX 8 aircraft remain in long-term storage at Alice Springs Airport in Australia. There was no update regarding the fate of these aircraft in this latest financial update. They remain grounded for regulatory reasons.


SIA Engineering Company

SIAEC trans

Q1 19/20 Q1 20/21
Operating Profit
S$18m -S$9m

The SIA Engineering Company (SIAEC) got through Q4 of the 2019/20 financial year relatively unscathed compared to the rest of the group, recording a S$14 million profit while the other airline divisions fell into heavy losses.

That was similar to the S$18 million profit posted for Q1 2019, however this part of the business has begun to suffer the effects of COVID-19, with a loss of S$9 million posted for the first fiscal quarter.

(Photo: Singapore Airlines)

Fuel hedging losses

Singapore Airlines forewarned the market in April 2020 that its fourth quarter and financial year 2019/20 would be impacted by “substantial” fuel hedging losses. A similar warning was given for the first quarter of this financial year in a recent trading update.

SQ A359 Refuelling (Singapore Airlines)
SIA continues to find itself in a massively over-hedged position with respect to both its fuel consumption and average hedged rates as a result of COVID-19. (Photo: Singapore Airlines)

Continued relatively low fuel costs and very low fuel consumption rates are continuing to have a quarterly financial impact for the airline.

“Mark-to-market losses of $464 million on ineffective fuel hedges have been recognised this quarter.”

Singapore Airlines

This needs to be added to the ‘regular’ fuel hedging loss of S$71 million during the quarter. That’s a total of S$535 million loss attributable to fuel hedging in the first three months of the fiscal year.

What is fuel hedging? Fuel hedging, common practice in the airline industry, is a way of providing protection against fuel price variations by locking in prices for the longer term. That’s vital because fuel makes up so much of an airline’s costs – around 30% of total annual expenditure in the case of the SIA Group, so there must be certainty about what that cost will be.

Airlines are effectively giving up some profits (when actual fuel costs over the period of a hedge are lower than the hedge rate) in order to provide certainty, with the flip side being that a fuel hedge gain can also happen when the price of fuel increases during the hedge.

Unfortunately for SIA the ‘double whammy’ of collapsing global oil prices and a significant fall in fuel consumption due to capacity reduction has led to what’s likely the biggest fuel hedging loss it has ever seen over the last two quarters.

SIA had also suffered fuel hedging losses for the previous five consecutive quarterly periods before this situation took hold, paying more for its hedged fuel than the market rate for well over a year even before these recent two periods.

SIA Group
Fuel Hedging Losses
Quarter Hedging Loss
Oct-Dec ’18 $81.1m
Jan-Mar ’19 $20.9m
Apr-Jun ’19 $57.1m
Jul-Sep ’19 $19.2m
Oct-Dec ’19 $8.3m
Jan-Mar ’20 $908m
Apr-Jun ’20 $535m

Source: SIA Group quarterly / annual financial results

“A further downward adjustment to the expected rate of capacity recovery led to a reduction in expected fuel consumption, causing the Group to recognise additional ineffective hedges.”

Singapore Airlines

As future hedges expire in coming quarters (including the current quarter, already one-third passed) with capacity at minimal levels and oil prices still relatively low compared to when the hedges were agreed, we can expect further fuel hedging losses in the current financial year as significant quantities of fuel go unused.


Fleet renewal

The SIA Group is in the midst of a significant fleet renewal project, with no fewer than 140 aircraft due to be delivered over the coming years:

Orders May 2020 v3
SIA Group’s outstanding aircraft orders (click to enlarge)

In the last financial update, SIA stated that it was in discussion with both Airbus and Boeing, in order to reduce the arrival rate of new aircraft into the fleet.

“As aircraft payments make up a significant portion of our capital expenditure, we engaged the aircraft manufacturers early to negotiate adjustments to our delivery stream for existing aircraft orders and progress payments to reduce near term cash outflows. This will also help to moderate capacity growth in the near term, while we remain committed to our longer term fleet renewal programme.”

Singapore Airlines, May 2020

There’s not much change in the detail on these negotiations in this latest quarterly update.

“We continue to engage aircraft manufacturers to negotiate adjustments to the delivery stream of existing aircraft orders and the schedule of progress payments to reduce near-term cash outflows. We have reached an agreement with Airbus on some of these matters and discussions with Boeing are ongoing. This will help to moderate fleet growth in the near term.”

Singapore Airlines, July 2020

At least 12 Airbus A350s and three Boeing 787-10s were due to arrive at the mainline carrier alone between now and the end of 2020, so it will be interesting to see how many are actually delivered.

The airline is also engaging in sale-and-leaseback transactions on a number of its owned aircraft fleet, in addition to using owned aircraft as security against additional loans, to raise capital during this downturn.


SIA is not alone

Singapore Airlines is far from alone in terms of the financial impact the COVID-19 pandemic is bearing on the industry.

  • Earlier today, fellow Star Alliance carrier All Nippon Airways reported a US$1.04 billion (S$1.43 billion) loss for the April – June quarter, citing “rock bottom [passenger demand] in the first quarter”.
  • Japan Airlines is also expected to register a US$1.1 billion (around S$1.5 billion) loss for the same period.
  • SIA’s primary rival Cathay Pacific issued a profit warning in mid-July, stating that it would “record a net loss attributable to shareholders of approximately HK$9.9 billion (S$1.76 billion) for the six months to 30th June 2020”.
CX Aircraft Parked HKG (SS)
Cathay Pacific aircraft parked in Hong Kong. (Photo: Shutterstock)

Further afield airlines in Europe and USA are also feeling the impacts.

On Tuesday, airline industry group the International Air Transport Association (IATA) projected that air travel demand will exceed 2019 levels only in 2024, a year later than previously forecast. Long-haul flights aren’t expected to make a full comeback until 2025.

Around a third of SIA’s usual traffic comprises transit passengers, a significant proportion of which are transferring from or to a long-haul flight at Changi. That leaves the airline additionally exposed and unlikely to require its larger aircraft like Airbus A380s for the next few years, assuming it ever reintroduces all 19 of its superjumbo fleet.

“Passenger traffic hit bottom in April, but the strength of the upturn has been very weak. What improvement we have seen has been domestic flying. International markets remain largely closed.”

Alexandre de Juniac, IATA Director General & CEO



Singapore Airlines isn’t sugar-coating the situation here, stating in these latest results that “the recovery trajectory in international air travel is slower than initially expected… industry forecasts currently expect that it will take between two to four years for passenger traffic numbers to return to pre-pandemic levels”.

The group is planning for the potential that passenger capacity may still be lower than 50% of usual levels by the end of this financial year on 31st March 2020.

There are also likely to be writedowns for older aircraft like Airbus A380s, many of which in our view will not be used again.

“We are reviewing the potential shape and size of our network over the longer term given Covid-19 and its impact on our passenger traffic and revenue, which will provide better clarity on the fleet size and mix that the Group will need. This review is likely to lead to a material impairment of the carrying values of older generation aircraft, particularly the A380 aircraft which would account for approximately $1 billion. We expect to complete the review by half-year.”

Singapore Airlines

SQ A380 (Rolf Wallner)
There are likely to be writedowns for some of the Airbus A380 fleet, with an update due in the half-year results. (Photo: Rolf Wallner)

Writing down the value of older Airbus A380s effectively means never using them again. Despite insisting to the media only recently that all 19 of the airline’s A380 fleet are planned to be returned to service, this appears to be the first admission that is simply not true.

In our view a maximum operating fleet of 8 to 12 aircraft is more likely in the coming years, with no return for the aircraft before the second half of 2021.


These historic poor results are not unexpected in a quarter where passenger travel demand fell to virtually zero.

Although Singapore Airlines managed to cut its costs by over 50% during the period, an almost 80% fall in revenue severely outweighed this, leading to a record loss of over S$1 billion.

SQ Tails (TK Kurikawa SS)
Singapore Airlines is planning for a capacity cut of over 50% to continue well into 2021. (Photo: TK Kurikawa)

While all three SIA Group passenger airlines have been slowly increasing flights since the low points of April and May 2020, capacity still remains significantly lower than original levels.

Singapore Airlines and SilkAir are continuing to cut around 93% of original planned capacity during August and September 2020, while budget subsidiary Scoot has extended its 97% capacity cuts until at least 31st August 2020.


Leave a Reply