May 14, 2020 / 9:49 AM / 19 days ago

Singapore Airlines posts first annual loss on fuel hedges, virus

SYDNEY (Reuters) - Singapore Airlines Ltd (SIAL.SI) on Thursday reported its first-ever annual loss, citing poor fuel hedging bets and the collapse in demand driven by the coronavirus pandemic, and said the timing of any recovery was uncertain.

FILE PHOTO: Singapore Airlines planes sit on the tarmac at Singapore's Changi Airport March 11, 2020. REUTERS/Edgar Su

The airline, a bellwether for premium travel in Asia, swung to a S$212 million ($149.14 million) net loss in the financial year ended March 31, down from a S$683 million profit a year earlier, in line with guidance to investors provided last week.

In the fourth quarter, it lost S$732 million, down from a S$203 million profit the prior year. Singapore Airlines did not declare a dividend and said the prospects of a recovery in international travel depended on when border controls and travel restrictions eased.

“There are few signs of abatement in the COVID-19 pandemic,” the airline said in a statement. “The group will maintain a minimum flight connectivity within its network during this period, while ensuring the flexibility to scale up capacity if there is an uptick in demand.”

Airline passenger traffic is not expected to return to pre-crisis levels until 2023 at the earliest and domestic markets will recovery more quickly than international travel, the International Air Transport Association said on Wednesday.

Singapore, a small city-state that lacks a domestic aviation market, is closed to transit passengers on which the airline normally relies for much of its revenue.

Singapore Airlines and regional arm SilkAir have cut 96% of capacity through the end of June, and low-cost arm Scoot has cut 98%.

The airline said in February it had entered fuel hedging contracts through March 31, 2025. A collapse in the global oil market LCOc1, which has lost more than half of its value so far this year, led to big losses on those contracts, including S$710 million recorded in the fourth quarter.

Singapore Airlines said further hedging losses were likely in the current financial year.

The airline’s majority shareholder, state-fund Temasek Holdings, in March agreed to underwrite the sale of S$8.8 billion of shares and up to S$6.2 billion of convertible bonds in one of the biggest rescue packages in the global aviation industry since the coronavirus crisis hit.

Singapore Airlines said on Thursday it would only tap the convertible bonds if necessary and was concurrently exploring other funding sources such as secured financing and sale-and-leaseback transactions over its airplanes.

The carrier has cut executive salaries and is in talks with manufacturers to push back deliveries of new planes as it looks to conserve cash and moderate capacity growth in the near term.

The airline’s management team is due to hold a results briefing for analysts and media on Friday.

Reporting by Jamie Freed; Editing by Alex Richardson and Barbara Lewis

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