Despite challenges from increased competition and capacity expansion, SIA maintains its dividend and strengthens growth plans.

Singapore Airlines (SIA) Group announced its unaudited financial results for the first half of FY2024/25, showing a net profit of $742 million, a notable decrease from the previous year. Total revenue for the half-year period rose by 3.7% to $9,497 million, driven by healthy passenger demand and stronger performance in the air freight sector. However, increased competition, yield pressure, and rising operational expenses, particularly in fuel costs, impacted overall profitability. Consequently, SIA’s operating profit for the period was down 48.8% year-on-year, totaling $796 million.

The Group’s passenger operations saw strong demand, with SIA and its low-cost subsidiary Scoot carrying 19.2 million passengers—a 10.8% increase from the previous year. However, passenger capacity expanded by 11.0%, outpacing a 7.9% rise in traffic, resulting in a slight decrease in passenger load factor (PLF) by 2.4 percentage points to 86.4%. Specifically, SIA achieved a PLF of 85.7%, while Scoot recorded a higher PLF of 88.6%. In the air cargo sector, e-commerce growth and ongoing sea freight disruptions contributed to a cargo load factor increase of 4.7 percentage points to 57.4%, with cargo volumes rising by 20% as capacity expanded by 10.2%.

Amidst these dynamics, SIA’s expenditures surged 14.4% to $8,702 million due to a 19.6% increase in net fuel costs to $2,730 million. This rise was driven by higher fuel consumption and reduced gains from fuel hedging. Non-fuel expenses rose by 12.1% to $5,972 million, impacted by inflationary pressures. Notably, the Group implemented operational efficiency initiatives to mitigate these cost increases, aligning with its capacity growth of 10.6%.

In the second quarter, SIA recorded an operating profit of $325 million, a sharp decline of 59.3% from the previous year. Revenue from passenger services slightly decreased by 0.9% to $3,840 million, with a 6.5% drop in yields due to intensified market competition and capacity expansion. Meanwhile, the cargo segment experienced an 8.3% revenue growth, reaching $43 million, as demand for air freight continued to grow despite a yield decrease of 7.7%.

On the balance sheet, SIA’s shareholders’ equity decreased by $2.6 billion to $13.7 billion due to the redemption of Mandatory Convertible Bonds in June. As a result, the Group’s debt-to-equity ratio rose from 0.82 to 0.96. Cash reserves stood at $9.0 billion, down by $2.2 billion, which covered bond redemptions and dividend payments, offset partially by operational cash flow.

Strategic Investments and Fleet Expansion

SIA continues its commitment to strategic expansion and fleet development. In the second quarter, the airline added four Boeing 787-10 aircraft, bringing the Group’s fleet to 205 aircraft with an average age of 7.4 years. The Group also launched new routes with Scoot beginning operations in Subang and Kertajati and increased frequencies to popular destinations like Ahmedabad, Copenhagen, and Brisbane.

The Group announced a $1.1 billion investment in retrofitting 41 Airbus A350-900s with new long-haul cabins, including enhanced first-class and business-class products. The retrofit program, set to begin in 2026, aims to elevate SIA’s premium offerings, aligning with upcoming Boeing 777-9 seat designs.

Air India-Vistara Merger and Future Plans

SIA’s partnership with Tata Sons to merge Vistara and Air India is expected to conclude in November 2024. This strategic move grants SIA a 25.1% stake in Air India and is anticipated to yield a non-cash accounting gain of S$1.1 billion. The merged entity will cater to India’s high-growth domestic and international air travel market, enhancing SIA’s multi-hub strategy.

Looking ahead, SIA anticipates steady passenger demand but acknowledges a competitive landscape with potential macroeconomic challenges. The airline will continue adjusting its capacity to meet demand and remains committed to optimizing costs while enhancing service quality and network connectivity to uphold its leadership in the aviation industry.