Is Singapore Airlines well-positioned to navigate the post-pandemic era?

Vytautas Kielaitis /

Singapore Airlines (SIA1) (SINGY) (SIA) is among the most recognizable full-service carriers (FSC) in Southeast Asia. Dating back to the 1970s, SIA has operated for more than five decades as an airline with a sterling reputation.

However, Singapore Airlines (SIA1) (SINGY), which lacks a domestic market, was among the airlines worst affected by the COVID-19 pandemic. Today, SIA is still not out of the red. But compared to its rivals in the region, is the carrier well-positioned to navigate the post-pandemic era?

A dramatic decline in passenger traffic during COVID-19

Singapore Airlines (SIA1) (SINGY), which has a hub at Changi Airport (SIN), is the flag carrier of Singapore. As a result of the decrease in global air travel demand during COVID-19, SIA has witnessed a dramatic downturn in passenger traffic. 

However, SIA’s yearly earnings results from 2002 to 2021 suggest that the airline has only suffered significant financial losses during 2020 and 2021. 

In the financial year ended March 31, 2021, SIA posted a record net loss of S$4.3 billion ($3.2 billion), which is a notable decrease when compared to a net loss of S$212 million ($156 million). The net loss was attributed to low passenger traffic, which slumped to 97.9% due to border restrictions across the globe. 

In September 2020, SIA announced that it had laid off 4,300 staff members (20%) in a bid to reduce costs. This decision was made due to the lengthy recovery faced by the aviation industry in the wake of the COVID-19 pandemic. 

“This is not a reflection of the strengths and capabilities of those who will be affected, but the result of an unprecedented global crisis that has engulfed the airline industry,” Singapore Airlines CEO Goh Choon Phong was quoted in a statement dated September 10, 2021. 

The airline also made the decision to retire a number of older aircraft in a bid to tackle cost issues. According to the latest data, SIA’s operating fleet currently consists of 162 passenger aircraft and seven freighters. This excludes 41 aircraft, which were deemed surplus to the group, seven Boeing 737 MAX withdrawn from service, and one Airbus A330 as well as an Airbus A320, which left the operating fleet due to lease returns.

In February 2021, SIA announced that it had deferred new aircraft orders worth S$4 billion ($3 billion) after reaching an agreement with manufacturers Boeing and Airbus. SIA’s aircraft will be delivered over a longer period than originally contracted, “with the delivery stream spread out beyond the five years”.

“The agreements with Airbus and Boeing are a key plank of our strategy to navigate the disruptions caused by the Covid-19 pandemic,” Singapore Airlines CEO was quoted in a statement dated February 9, 2021. 

The SIA’s order book comprises 35 Airbus A320s, 31 Boeing 737 MAX 8s, 31 Boeing 777-9s, 20 Boeing 787 Dreamliners, and 15 Airbus A350-900 aircraft. 

Is SIA better positioned than its rivals in Southeast Asia?

Singapore Airlines (SIA1) (SINGY), which lacks a domestic market and relies solely on the recovery of international air travel, will likely face a long road to recovery. 

The Asia-Pacific region is likely to be the last market segment to recover from the debilitating impacts of the pandemic. Independent aviation analyst Brendan Sobie told AeroTime that Southeast Asia is “particularly behind the rest of the world with international traffic still stalled at only about 3%” of the pre-pandemic levels”. 

In an emailed statement, Sobie added: “There will not likely be a significant improvement in international traffic in Southeast Asia or APAC overall until at least early next year.”

Subhas Menon, Association of Asia-Pacific Airlines (AAPA) Director General, said: “The outlook for air travel is dependent on further progress with vaccinations across Asia and globally. Crucially, greater collaboration amongst governments on harmonised cross-border measures is necessary, in line with ICAO and WHO recommendations.”

In contrast to its rivals, and despite a decreased passenger traffic forecast for the region, Singapore Airlines (SIA1) (SINGY) appears to have a steady financial ground for recovery and dominance in the region. 

In its filing to Singapore Exchange, SIA outlined that it has sufficient liquidity to weather current challenges. The airline has raised a total of S$21.6 billion ($16.1 billion) in fresh liquidity since April 1, 2021.

“The liquidity that we will raise through the MCBs will further strengthen our financial position during these uncertain times, while providing the resources to position the SIA Group for growth and leadership,” Singapore Airlines Chairman Peter Seah was quoted in a statement regarding the additional proceeds in May 2021.

Cash-rich with a solid credit rating and the government’s support, SIA is the envy of its biggest rivals in the region, including such as full-service carriers Thai Airways, Garuda Indonesia, and Malaysia Airlines, which are gradually downsizing their fleet and undergoing restructuring. 

In response to questions of SIA’s readiness to dominate the Southeast Asia post-pandemic, Sobie stated that the airline is “ready as it is very well funded and has been operating more international flights than anyone in the region, enabling it to pounce should demand improve quickly”. 

He continues: “However, any improvement in demand is likely to be gradual which could somewhat negate its current advantage. Ultimately whether it is well positioned to capitalise in the post-pandemic world depends on many factors outside its control.”

With current proceeds and support from the government, SIA is able to last a “very long” time while passenger traffic is still low. However, the company’s ability to move out of the red will depend on the recovery of international air travel. To achieve this, SIA will need to rely less on governmental support and become profitable, which Sobie suggests “could take a few years, but is impossible to predict as there are so many unknown variables”.

With cost-cutting measures, robust cargo performance and support from the government, SIA narrowed a net loss to S$409 million ($303 million) in Q1 2021, an improvement of S$714 million ($528 million) against Q1 2020.

Despite narrowing losses, SIA’s outlook for the near future seemed gloomy as the group expected to reach 33% of the pre-pandemic levels in Q2 2021. According to SIA, the trajectory of recovery will be dependent on government border control regulations and vaccination rates. 

“The growing pace of mass vaccination exercises across many countries provides hope for further recovery in international air travel demand. However, the risk of new variants and fresh waves of COVID-19 infections in key markets remains a concern,” stated SIA in a statement dated July 29, 2021.


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