Blue skies are here again for Singapore Airlines Limited (SGX: C6L), or SIA.
For its previous fiscal 2023 (FY2023) ending 31 March 2023, the carrier reported its highest-ever net profit in its 76-year history as air travel returned with a bang.
The share price of the blue-chip airline also hit a five-year high of S$8.05 back in June and is up 37.1% year-to-date, vastly outperforming the benchmark Straits Times Index (SGX: ^STI) which rose just 3.7% over the same period.
Just last week, SIA reported its fiscal 2024’s first quarter (1Q FY2024) earnings for the quarter ending 30 June 2023.
The financial numbers continued to impress with the group reporting its highest-ever quarterly profit.
Here are five aspects of the airline’s latest earnings report that investors need to know.
1. A sterling set of numbers
Total revenue for the airline rose 14% year on year for 1Q FY2024 to S$4.5 billion, lifted by robust demand for air travel through the mid-year school holidays and the commencement of the summer season.
Operating profit jumped by 35.8% year on year to S$755 million while net profit soared 98.4% year on year to S$734 million.
The better performance was contributed by a 33.4% year on year decrease in fuel prices that helped to reduce net fuel cost by 17.3% year on year for the group.
SIA also recorded a net finance income for 1Q FY2024 compared to a net finance charge in the same period last year.
Its associates delivered a share of profits versus losses which further helped the airline’s net profit to grow much more than its operating profit.
2. Passenger load factor at a record-high
SIA saw passenger traffic grow 49% year on year with strong demand across all route regions and market segments.
Both Singapore Airlines and Scoot, SIA’s low-cost carrier, ferried 8.4 million passengers in 1Q FY2024, 65.5% higher than a year ago.
The increase in traffic outpaced the airline’s 32.4% year-on-year capacity expansion, resulting in the passenger load factor registering a record high of 88.9%.
In contrast, SIA’s cargo segment performance continued its downward trend as demand for air freight softened.
Cargo load factor plunged by 13.7 percentage points to 51.8% as loads dipped by 11.3% year on year.
Yields on cargo also fell 44.3% compared to the same period last year but remained 50% above pre-pandemic levels.
3. Steadily expanding its fleet
The airline continued to expand its fleet with the addition of four aircraft during the quarter.
As of 30 June 2023, the group had 199 aircraft in its operating fleet comprising 192 passenger aircraft and seven freighters.
With this delivery, SIA still has 99 aircraft on its order book and continues to maintain one of the youngest fleets in the airline industry with an average age of six years and 11 months.
4. Adding more destinations to its network
With China’s reopening in January, Scoot has added seven destinations to its network during 1Q FY2024.
Collectively, both Singapore Airlines and Scoot now serve 17 destinations in China.
SIA’s passenger network covered 116 destinations in 36 countries as of 30 June 2023, seven more than the 109 destinations covered three months ago.
The carrier’s cargo network added three destinations to increase its network from 118 to 121 destinations in 38 countries and territories.
SIA’s group capacity remains on track to reach an average of close to 90% of pre-pandemic levels by March 2024.
5. A mixed outlook
Management expects demand for air travel to remain strong for all route regions throughout the summer peak.
The group is well-positioned to take advantage of the robust demand as it increases its network in the coming months.
Scoot resumed flights to Jinan and Shenzhen in July and will serve Nanchang from August.
Additional flights are also slated for destinations such as Chiang Mai, Davao, and Jeddah.
The group will also resume weekly flights to Busan in late August and increase flight frequencies to Hong Kong, Japan, and Thailand from October 2023 through March 2024.
However, the airline cautioned that competition will intensify in the coming months as other airlines inject capacity to serve more international routes.
Cargo demand will also remain weak as inflation and weak economic conditions persist.
Elsewhere, geopolitical tensions and macroeconomic uncertainties could also put pressure on the airline industry.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.