MIAMI – Singapore Airlines (SQ) has this week reported its first-ever loss in the 48 years it has been in service due to the ongoing COVID-19 pandemic.
The losses of S$212m for the 12 months ending on March 31 this year were a complete reversal compared to the S$683m profit it had made in the same period last year.
For the first quarter of this year, losses were recorded at S$732m compared to S$203m in the first quarter of 2019.
The country of Singapore had prohibited all short-term visitation in regards to entering or transiting through the city, causing traffic levels to exponentially drop.
In April, load factors were recorded at 9.3% compared to the more profitable 83.2% in the same period last year.
Singapore Airlines’ subsidiary, Silk Air (MI), also witnessed the same drop, recording 34.1% for April 2020 compared to 78.1% in April 2019 as well as its low-cost firm Scoot (TR), only filling 5.9% of its capacity, which is significantly down from 2018-19’s at 86.8%.
Additionally, around S$710m was lost by the carrier due to fuel hedging contracts in the last fiscal year, thus increasing the chances of a loss.
Furthermore, the airline has reduced up to 96% of its total operations, only operating to 14 destinations.
“The group will maintain minimum flight connectivity within its network during this period while ensuring the flexibility to scale up capacity if there is an uptick in demand,” SQ added.
Some positives notes, albeit with caveats
Conversely, however, the carrier was able to reduce its expenses by 65-70%.
According to analysts speaking to the Singapore Business Times, SQ “highlighted there is no visibility on the timing on the trajectory of the recovery but does not assume to reach pre-COVID levels in the next one to 1.5 years”.
When the pandemic began, around the fourth quarter of 2019, its revenues dropped around 22% compared to the same period last year, representing an S$894m plunge in revenue.
Cargo traffic was a key indicator for positivism in the carrier, recording a 17.5% increase in cargo load factors to 75.6%, but as capacity was cut by 64.7% in that wing, it is something that is embedded in deep caveats.
In a statement, SQ stated that such recovery and the road back to success is dependent on the governance of those around the world when it comes to travel bans and entry control measures.
“The prospects for a recovery in international air travel in the months ahead depend upon when border controls and travel restrictions ease”.
A Speedy Recovery Ahead?
As mentioned in this article, analysts are suggesting that Singapore’s recovery will occur within one to 1.5 years.
This rate of recovery is far faster than the likes of IAG who are predicting that full-blown recovery will not take place until 2024 at the minimum and maybe even 2026 at the latest.
This faster recovery rate could be because of the route portfolio that SQ has as well as its endless options for connectivity around the globe.
At the same time, SQ is right to not be too complacent at this current time, especially as it is now down to nation-states to lift imposed travel bans at the discretion that they deem necessary, so as to ensure a second wave of the virus is not practical.
Only time will tell whether the analysts are right on the money for SQ’s recovery out of the pandemic and whether we may begin to see a more consistent form of losses as recovery continues.