Air travel bellwether Singapore Airlines suffers $1bn net loss

The grim condition of the international air travel industry has been laid bare by industry bellwether Singapore Airlines which has posted a massive loss as a result of COVID-19 travel restrictions.

The net loss of $S1.1bn ($1.12bn) in the April-June 2020 quarter is Singapore Airlines highest on record, and is down from a profit of $S111m for the corresponding 2019 period.

Revenues for the group plunged 79 per cent year on year to $S851m for the April-June quarter from $S4.1bn in Q2 2019.

Some analysts suggest the red ink will keep flowing in the airline’s accounts.

“Projecting [a] $S2.2bn loss for Singapore Airlines in financial year 2021, as we assume international travel to normalise only in mid-2021,” said analysts at Singapore-based bank DBS in a note Wednesday.

Australia’s airline sector is also struggling.

Passenger traffic slump

Passenger numbers on the airline’s three carriers – Singapore Airlines, SilkAir and Scoot — slumped 99.5 per cent year on year in the April-June 2020 quarter.

The company said it will take two to four years for passenger traffic to recover to pre-COVID-19 levels.

The airline is pruning its costs and exploring alternative ways of increasing its cash position.

Singapore Airlines has cut salaries, and capacity across its network, deferred non-essential projects, and negotiated terms with its aircraft makers and suppliers.

It carried out an equity raising for $S11bn earlier this year.

Share price floundering

Singapore Airlines’ share price dipped 3.4 per cent to $S3.40 ($3.46) Thursday on the Singapore Exchange after its results announcement.

Its share price had been in recovery mode from a low of $S2.03 in March, and had got back up to $S4.41 in early May.

Some airline stock analysts suggest a COVID-19 vaccine could be a magic bullet for carriers such as Singapore Airlines.

“An effective COVID-19 vaccine by early 2021 would help international air travel to recover,” said DBS bank which has a price target for Singapore Airlines of $S3.75/share.

The bank noted that six vaccine candidates for COVID-19 are in phase three clinical trials, giving hope that a human vaccine would be ready in early 2021.

Other airlines affected

Singapore Airlines is not alone in battling the impact of the COVID-19 pandemic.

The combined market capitalisation of the world’s five largest airline companies has collapsed by $US40bn ($56bn) since January, according to UK investment website Buy Shares.

At the start of the year, American Airlines, Delta Air Lines, Air France, Lufthansa Group and United Airlines were together worth $US77.8bn, and this is down to $US37bn, it said.

Airlines’ passenger revenue is forecast to drop by $US300bn in 2020, according to Buy Shares’ analysis.