Singapore Airlines Limited (SIA Group)
Source: SIA Group
SIA Group holds parent airline SIA, a number of full-service and budget airlines, as well as other aviation-related businesses. The company is headquartered at Changi International Airport and majority owned (54.5%) by the Singapore government's investment arm, Temasek Holdings.
FY 2018/19 Financial Highlights:
Source: SIA Group FY 2018/19 Annual Report
- SIA Group achieved its highest ever total revenue of SGD 16,323 million for the financial year ended 31 March 2019 (FY 2018/19), also representing a 3.3% increase from the previous financial year.
- However, FY 2018/19 operating profit declined by 31.1% year-on-year to SGD 1,067 million, largely due to a significant rise in fuel prices and the absence of one-off revenue items recorded last year.
- SIA Group’s expenditure increased by 7.0% to SGD 15.3 billion, with a substantial hike in net fuel cost accounting for two-thirds of that increase.
- The company’s FY 2018/19 net profit dropped by 47.5% year-on-year to SGD 683 million, mainly due to the decline in operating profit, as well as higher non-operating costs for the financial year.
Source: SIA Group FY 2018/19 Presentation Slides
Significant growth in flown revenue was the primary driver behind SIA Group’s record FY 2018/19 revenue. The growth in flown revenue was in turn largely boosted by the flown passenger segment. However, the company suffered a decline in FY 2018/19 operating profits, which was caused by a hike in fuel costs, non-fuel expenses from expansion of operations, the absence of non-recurring revenue recorded last year, as well as a number of other non-operating items.
Performance Drivers (Positive Factors)
- Parent Airline SIA (Passenger Segment)
SIA Group’s record FY 2018/19 revenue was mainly due to the SGD 829 million increase in flown revenue, out of which the passenger segment contributed SGD 784 million. This increase was in turn boosted by traffic growth of 8.5%, as well as a 6.4% expansion in capacity.
The company’s parent airline SIA accounted for the main bulk of the increase in the passenger segment revenue. Parent airline SIA achieved a SGD 613 million growth in flown revenues, of which the majority was in the passenger segment. All route regions recorded healthy revenue gains in the passenger segment – with Europe, West Asia and Africa, and Americas benefitting from robust customer demand and more responsive commercial practices. The introduction of new non-stop services to the Americas region also contributed to the higher revenues.
Apart from parent airline SIA, the rise in SIA Group’s flown revenue was also attributable to budget airline Scoot. The airline’s revenue growth was similarly driven by the passenger segment, on the back of a 14.6% jump in passenger traffic and 15.1% increase in capacity.
- Parent Airline SIA (Cargo Segment)
Parent airline SIA’s cargo segment also saw a SGD 45 million increase in revenues resulting from higher yields. Despite weaker trade conditions in the latter half of the financial year, the company successfully mitigated the impact of the resulting lower loads.
Performance Drivers (Negative Factors)
- High Fuel Costs
SIA Group FY 2018/19 expenditure rose by 7% year-on-year to SGD 15,256 million, primarily due to the 21.6% jump in average jet fuel price. Nevertheless, this price hike was partially alleviated by a higher fuel hedging gain of SGD 314 million, compared with last year. Fuel cost before hedging increased by SGD 1,002 million, but the hedging reduced the impact down to SGD 688 million.
- Non-Fuel Costs
Non-fuel costs increased by 3% mainly due to a major capacity expansion at Scoot and the implementation of ultra-long haul flights at the parent airline SIA. Both initiatives led to a 4.6% rise in staff costs (increase in staff strength and crew allowances), a 13.6% hike in depreciation (addition of new aircraft), a 3.8% increase in inflight meals and other passenger costs (growth in number of passengers carried during the year), as well as a 11.3% jump in sales costs (higher commissions and incentives payable on passenger traffic growth, and increased advertising spend).
- Absence of Non-Recurring Revenue
Contributing to the decline in SIA Group FY 2018/19’s operating profit was the absence of non-recurring revenue recorded last year: KrisFlyer breakage rate and member benefit adjustments amounting to SGD 178 million, as well as SGD 65 million in compensation for changes in aircraft delivery slots.
- Other Non-Operating Items
SIA Group also recorded a number of other non-operating items in FY 2018/19, including a SGD 116 million share of losses for associated company Virgin Australia. Further, SIA Group absorbed a SGD 60 million charge regarding full-service airline SilkAir’s re-fleeting costs for its transition from an Airbus to Boeing fleet, as well as restructuring costs incurred in preparation for the carrier’s integration into SIA.
Source: SIA Group Annual Report 2018