Singapore Airlines Limited (SGX: C6L), or SIA, is going from strength to strength.
The airline had declared its first dividend since the pandemic broke out as border reopenings and the resumption of air travel boosted its financial results.
The group’s latest fiscal 2023’s third quarter (3Q FY2023) earnings have continued to shine because of pent-up demand for travel.
SIA turned in a record operating profit for 3Q FY2023 due to its highest-ever passenger load factor.
This stellar performance was the result of revenge travel as well as the airline standing ready to welcome travellers again once COVID restrictions were lifted.
Here are five highlights from SIA’s latest earnings report card that investors should take note of.
A sparkling set of numbers
Revenue for 3Q FY2023 more than doubled year on year to S$4.8 billion as SIA continued to enjoy robust demand for air travel.
Passenger capacity reached 80% of pre-COVID levels in December 2022, higher than the average of 51% for the Asia-Pacific region, according to the Association of Asia-Pacific Airlines.
Both SIA and Scoot ferried 7.4 million passengers during the quarter, up 17% from 2Q FY2023.
For the first nine months of fiscal 2023 (9M FY2023), the carrier reported that 18.8 million passengers took the skies, up nine-fold from the previous year.
As a result of this surge, the passenger load factor hit 87.4%, the highest ever for the group for any quarter.
Operating profit came in at S$755 million, an all-time high, and was up close to 10-fold compared with the operating profit of S$76 million in 3Q FY2022.
Net profit clocked in at S$628 million, up more than eight-fold year on year from S$85 million.
For 9M FY2023, SIA reported an operating and net profit of S$2 billion and S$1.6 billion, respectively.
Bulking up its fleet
As of 31 December 2022, SIA’s fleet comprised 133 passenger aircraft along with seven freighters.
Scoot carried 55 passenger aircraft within its fleet.
The average age of the group’s fleet was just six and a half years, making it one of the youngest in the airline industry.
SIA continues to invest in growing its fleet, with two aircraft re-joining the fleet in 3Q FY2023 following cabin retrofitting.
For 4Q FY2023, the airline will take delivery of one Airbus A350-900 and one Boeing 787-10, with these two aircraft being ready for flight in the next financial year beginning 1 April 2023.
Scoot intends to add nine new Embraer E190-E2 aircraft to its fleet with the first scheduled for 2024 and the remaining eight arriving by the end of 2025.
Expanding the network
Even as SIA boosted its fleet, it was also expanding its network to more destinations that relaxed their travel restrictions.
Not only did the airline reinstate flights to both China and Indonesia during the quarter, but it also added more flights to destinations such as Hong Kong, Seoul, Taipei, and Japan.
Both SIA and Scoot are now serving 14 destinations in China compared with 25 in pre-pandemic times.
As at end-2022, the group’s network covered a total of 111 destinations in 36 countries.
Capacity is expected to reach an average of 77% of pre-pandemic levels in 4Q FY2023.
Collaboration with other airlines
SIA continues to partner with other airlines to extend its reach.
The group reached an agreement with Tata Sons in November last year to merge Air India and Vistara, giving SIA a 25.1% stake in the enlarged Air India group.
In the same month, Virgin Australia also resumed the sale of codeshare flights to 42 of SIA’s destinations across the latter’s network.
In December 2022, Thai Airways and SIA signed a memorandum of understanding (MOU) to establish a codeshare arrangement between Singapore and Bangkok.
This year, Thai Airways intends to put its code on SIA’s flights to both South Africa and the Americas.
And just this month, another MOU was signed between SIA and Vietnam Airlines to explore codeshare arrangements.
These collaborations are beneficial for SIA as it helps to expand its reach into more destinations around the world.
A mixed outlook
SIA did, however, sound a note of caution.
Although demand for air travel is expected to remain robust, air freight demand looks set to take a hit as importers trim inventory levels in response to a slowdown in new orders.
The airline industry is also facing high inflation along with a surge in fuel prices that will dampen earnings in the months ahead.
Also, competition is likely to intensify as other airlines get their act together and increase capacity on international routes.
Investors should rejoice at SIA’s strong results for now, but also note that things may get bumpy in the coming quarters for Singapore’s flagship carrier.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
