Singapore Airlines Reports its Highest Profit in 76 Years: 5 Highlights from the Airline’s Full Year Results

Singapore Airlines Plane
Singapore Airlines Plane

The reopening of borders and resumption of air travel and tourism has benefitted a wide swath of businesses.

One of the biggest beneficiaries has been Singapore Airlines Limited (SGX: C6L), or SIA.

The carrier reported a stellar set of results for its fiscal 2023 (FY2023) ending 31 March 2023 as pent-up demand for travel resulted in an all-rounded excellent performance.

After an extremely tough period where the airline had to struggle to cope with plunging demand and was forced into a dilutive issue rights to survive, the group can now bask in the sun.

Vaccinated travel lanes opened up a window of opportunity for the airline back in August 2021.

Just over a year later, SIA resumed its dividend payments as it ramped up its flights and reported a sharp recovery.

Now, Singapore’s flagship airline has reported its highest-ever net profit in its 76-year history.

Let’s delve deeper and take a look at five highlights from its earnings.

1. A blowout set of earnings

SIA reported a blowout set of financial numbers for FY2023 as demand for air travel exploded.

Revenue more than doubled year on year from S$8.2 billion to S$15.1 billion as bookings soared and both SIA and Scoot (its low-cost carrier division) sharply ramped up flights.

The airline turned in an operating profit of S$2.7 billion, a record for the group, reversing the S$610 million operating loss in FY2022.

Net profit came in at S$2.16 billion, the highest level achieved by the group since its inception 76 years ago in 1947.

SIA also generated a strong positive free cash flow of S$7.4 billion for FY2023, a turnaround from the negative free cash flow of S$81.6 million in the prior year.

2. Record passenger load factor offset by weaker cargo

The robust performance was the result of strategic decisions made by management during the pandemic.

A large proportion of the group’s aircraft was kept operational, properly maintained and fully functional despite the low utilisation.

Hence, when travel demand surged back suddenly last year, SIA was able to quickly ramp up services at short notice and capture this business back.

The passenger load factor for FY2023 surged by 55.3 percentage points to a record-high of 85.4%, with group passenger capacity hitting 79% of pre-COVID levels for March 2023.

Combined, SIA and Scoot ferried 26.5 million passengers, a more than six-fold year-on-year increase.

Cargo demand, however, moderated slightly year on year as inflation dampened consumer demand and high inventory levels led to slower new orders.

As a result, cargo revenue fell by nearly 17% year on year to S$3.6 billion for the fiscal year.

3. Continued fleet renewal

As of 31 March 2023, SIA had a fleet of 195 aircraft comprising 188 passenger aircraft and seven freighters.

The average age of this fleet is just six years and nine months, making it one of the youngest and most fuel-efficient in the airline industry.

SIA is also a supporter of decarbonisation and maintaining a young fleet is an effective way to lower the group’s carbon emissions over time.

The airline recently agreed with supplier Boeing (NYSE: BA) to adjust its aircraft order book in line with the group’s projected operational requirements.

Following this discussion, SIA’s order book consists of 100 aircraft.

4. Broadening its network

With China’s reopening earlier this year, SIA plans to expand its services in China and broaden its network.

The group’s passenger network as of 31 March 2023 covered 109 destinations in 36 countries and territories.

This level was slightly below the 111 destinations covered just three months ago.

Its cargo network, however, expanded to 118 destinations, up from 116 as of 31 December 2022.

SIA will resume Scoot’s flights to destinations in China such as Nanying and Shenyang this month, as well as Jinan and Nanchang in July and August 2023, respectively.

The group will also add more flights to Barcelona, Frankfurt, and Rome to meet higher demand during the summer peak season.

Group capacity is projected to hit around 83% of pre-pandemic levels by the first half of fiscal 2024.

5. Paying out a full-year dividend

The directors have recommended a final dividend of S$0.28.

Together with SIA’s interim dividend of S$0.10, the FY2023 dividend stands at S$0.38, giving its shares a trailing dividend yield of 6.4%.

This is the airline’s first full fiscal dividend payout since FY2019.

This round’s S$0.38 even exceeds that pre-pandemic payout as it stood at just S$0.30 back then.

Demand for air travel remains robust in the current quarter with a strong increase in bookings for destinations such as China, Japan, and South Korea.

Barring a major recession, investors should expect continued good numbers to flow from SIA in the coming quarters.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

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