Shareholders of Singapore Airlines Limited (SGX: C6L), or SIA, are being rewarded for keeping their faith.
The airline went through tough times during the pandemic and had to rely on the issuance of rights and mandatory convertible bonds (MCBs) in March 2020 to tide through the challenges.
Three and a half years later, the skies have cleared for Singapore’s flagship carrier.
SIA reported a strong set of earnings for its fiscal 2024 first half (1H FY2024) ending 30 September 2023.
Here are five highlights from the carrier’s financial report card that investors should take note of.
1. A record net profit for 1H FY2024
For 1H FY2024, the blue-chip group reported an 8.9% year on year increase in total revenue to S$9.2 billion.
The better performance was driven by robust demand for air travel that saw a rebound in passenger traffic to North Asia spurred by the full reopening of China, Hong Kong, Japan, and Taiwan.
Total expenses increased by a lesser proportion at 5.9% year on year, resulting in a 25.9% year-on-year jump in operating profit to S$1.6 billion.
Net profit for the airline surged by 55.4% year on year to a record half-year high of S$1.4 billion.
SIA also generated a positive free cash flow of S$1.9 billion for 1H FY2024, though this was 53% lower than the S$4 billion generated in the same period last year.
The carrier declared an interim dividend of S$0.10, unchanged from a year ago.
2. Passenger load factor improvement offset by weak air freight demand
Both SIA and Scoot carried 17.4 million passengers in 1H FY2024, a 52.3% year on year rise.
Capacity expansion by the airline was 29% but was outpaced by the growth of 38% year-on-year in passenger traffic.
As a result, the passenger load factor (PLF) improved by 5.8 percentage points to 88.8%, the highest-ever PLF for the airline.
However, the boom in passenger travel was offset by softer cargo demand caused by inventory overhang (i.e. excess inventory) coupled with geopolitical and macroeconomic headwinds.
The cargo load factor fell by 8.4 percentage points to 52.7% year on year with cargo loads falling 6%.
Cargo yields also fell by 46.2% year on year but remained at 37% above pre-pandemic levels.
3. Fleet and network expansion
Three aircraft were added to SIA’s operating fleet during the quarter and as of 30 September 2023, the group’s operating fleet comprised 195 passenger aircraft and seven freighters.
The airline had 96 aircraft on order and expects its fleet to end FY2024 with 201 aircraft in total.
SIA’s fleet is one of the youngest in the airline sector with an average age of seven years and one month, making it one of the most fuel-efficient within the industry.
The group continues to increase its network of destinations by reinstating services to Busan in the second quarter while Scoot resumed flights to Jinan, Nanchang, and Shenzhen in China.
As of 30 September 2023, SIA’s passenger network covered 119 destinations in 36 countries and territories.
This was a slight increase from the 116 destinations three months ago.
Plans are afoot to increase the number of destinations in China to include Kunming and Changsha from this month, with both SIA and Scoot serving 23 destinations in China compared to 25 pre-pandemic.
SIA group capacity is projected to reach an average of around 92% of pre-pandemic levels in December 2023, with pre-COVID capacity reached by FY2025.
4. A three-pillar growth strategy
SIA intends to strengthen its foundation for the future and has devised three growth pillars to achieve this.
The first is service excellence involving active crew hiring with the airline on track to hire 2,800 crew in the current fiscal year.
Artificial intelligence is also being harnessed to better serve SIA’s customers while all SilverKris lounges worldwide were reopened in September this year.
The next pillar is increased network connectivity, with SIA commencing four times non-stop weekly flights to Brussels from April 2024 to increase its European points served to 15.
Finally, the group emphasizes product leadership by being the first airline to offer free unlimited Wi-Fi to customers across all cabin classes.
SIA also has 7.7 million KrisFlyer members as of 30 September, a healthy 36% year-on-year increase.
5. A cautious outlook
Despite the robust results, the airline sounded a note of caution.
Significant capacity restoration across the airline industry may put pressure on passenger yields.
Also, the demand for air freight will continue to be weak with continued excess inventories and macroeconomic headwinds.
Inflation, along with a rise in fuel prices, could bump up SIA’s operating costs in the near term.
Management will continue to increase both SIA and Scoot’s connectivity to stay ahead while investing in industry-leading products and services to garner customer loyalty.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
