It’s been good news galore for Singapore Airlines Limited (SGX: C6L), or SIA, for the past few months.
Singapore has reopened its borders and switched to a vaccinated travel framework to replace the previous vaccinated travel lanes scheme.
The result has been nothing short of amazing.
Pent-up demand for overseas travel has pushed SIA’s passenger numbers comfortably past the one million mark for April, up 13-fold from the same time last year.
Airfares have also surged in tandem as people rush to book holidays in the coming months.
Amid the resurgence in demand, SIA’s share price has also risen to a 52-week high of S$5.62 recently as investors displayed optimism over its future.
However, this is still significantly below the S$8.05 that SIA’s shares clocked back on 1 June 2018.
Can the carrier regain its mojo and see its share price surging back to higher levels?
Positive financial momentum for SIA
To be sure, the airline has reported much stronger financial numbers for its recent fiscal 2022 (FY2022) earnings.
It managed to eke out a small operating profit of S$9.7 million for the second half of FY2022.
However, the net loss for the year still came up to S$962 million.
It’s important to note, though, that these numbers reflect SIA’s passenger numbers and load factor up till the end of March this year.
April’s numbers have shown that SIA is now carrying significantly more passengers due to the easing of restrictions, and this looks set to continue into the months ahead.
As such, there is a high chance that investors will see better financial numbers for FY2023 as the airline lifts itself out of the doldrums.
Scope for higher passenger numbers
Source: Singapore Airlines’ operating statistics; author’s compilation
The chart above shows the increased passenger numbers on SIA flights over the past year.
These numbers may look impressive, but there is scope for further increases as the airline flew as many as two million passengers during pre-COVID times.
A slew of initiatives geared toward recovery
There have been a slew of initiatives announced in recent weeks that reflect renewed optimism over SIA’s continued recovery.
First off, SIA spent S$50 million for a makeover of its airport lounges, enhancing them with improved and larger facilities.
This facelift demonstrates the group’s confidence in business and premium air travel.
On this note, CEO Goh Choon Phong is expecting that the airline can ramp up to two-thirds of pre-COVID capacity by September.
The lack of domestic flights puts the SIA in an unfavourable position.
That’s why SIA is collaborating with international and regional partners.
Speaking of international flights, India is a key growth area as it is expected to become the world’s third-largest aviation market by the middle of this decade.
SIA teamed up with conglomerate Tata Sons to form full-service carrier Vistara which currently serves nine overseas destinations and 31 in India.
Vistara is still loss-making but there are plans to scale up its offerings in time to come.
Codesharing and joint marketing activities can also help to expand SIA’s network, and according to Goh, the carrier has added more than 200 new destinations through its numerous tie-ups with other airlines.
Elsewhere, Singapore’s Changi Airport Terminal Two is also reopening in stages to meet the expected increase in passenger numbers.
When upgrading works are completed by 2024, the terminal capacity will be expanded by five million to 28 million passengers per year.
Hiring to ramp up
Meanwhile, the Singapore government has also stepped in to help the airline by launching a new job portal for applicants within the aviation industry by the third quarter.
Called the OneAviation Careers Hub, it is an initiative by the Civil Aviation Authority of Singapore (CAAS) along with NTUC and the Employment and Employability Institute.
This portal will also be a one-stop platform for career and training advisory, counselling, and job facilitation.
This move comes at an opportune time as SIA is looking to recruit as many as 2,000 cabin crew, on top of over 800 hired in March.
Higher fares and fuel prices are dampeners
Investors should, however, be wary of both higher fares and fuel prices that may dampen the airline’s outlook.
The former should abate in the coming months as the surge in demand tapers off, but fuel costs may stay stubbornly high due to the effects of the Russia-Ukraine war.
To counter these effects, SIA is in discussion with its partners to possibly offer a “buy now, pay later” option.
Get Smart: The future looks bright for SIA
The stars are aligned for SIA as it embarks on a sustained recovery.
Not only are passengers flocking back to its flights, but the opening of Terminal Two and upgrading of its lounges also signal confidence in the months ahead.
Investors may not have to wait long to hear even more good news from the carrier.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
