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Singapore Airlines grapples with delta variant as COVID losses persist

SIA kicks off second fiscal year under pandemic pressures with $302 million net loss

SIA managed to cushion some of the devasting effects of the pandemic on the travel industry by removing seats from some aircraft to allow the transport of cargo.   © Reuters

SINGAPORE -- Singapore Airlines faces an uneven road to recovery as the more contagious delta variant of the new coronavirus and a persisting pandemic threaten to upend the resumption of mass travel worldwide.

The Singapore Exchange-listed company on Thursday reported a net loss of 409 million Singapore dollars ($302 million) for the April to June quarter -- the first in its new financial year, after racking up an annual net loss of SG$4.27 billion the year before.

"The growing pace of mass vaccination exercises across many countries provides hope for further recovery in international air travel demand," SIA said in a press release. "However, the risk of new variants and fresh waves of COVID-19 infections in key markets remains a concern."

During the second quarter, SIA showed in an SGX filing that it was operating at 24% to 28% of pre-COVID passenger capacity across the group -- still a far cry from its days before the pandemic, but an improvement over the 3% to 5% of pre-COVID capacity it experienced in the same period a year ago.

The SG$409 million net loss in itself was also already an improvement over the SG$1.12 billion in losses it sustained over the same quarter a year ago. "Border controls and travel restrictions remained largely in place," SIA noted of the three months to June.

It expects passenger capacity to be around 33% of pre-COVID levels in the July to September quarter. By the end of September, the company said it expects to serve around 50% of the points that were part of its passenger network before the onset of the pandemic.

SIA re-instated services to Cape Town in July, as well as services to Manchester and Rome. Scoot, its budget subsidiary, re-introduced flights to Sydney in July as well, and will resume flights to Berlin in August subject to regulatory approvals.

An increase in both passenger and cargo flown revenue resulted in SIA's group revenue for the quarter increasing by SG$444 million, or 52.2%, on the period a year ago, to SG$1.3 billion, the company said.

It removed seats from passenger cabins in some planes to be able to load cargo, including in two Boeing 777-300ER and two Airbus A320 aircraft under the Scoot brand, creating modified freighters, SIA highlighted.

Operating cargo-only flights to tap what it said was strong demand for freight operations, the carrier said it reached 58% of pre-COVID cargo capacity in June.

Additionally, its pivot to e-commerce through its online shop has led to a 121% growth on the year in sales through the shop, which helped cushion the loss of travel retail.

SIA said it had raised SG$21.6 billion in liquidity since April last year, as the devastation of air travel severely cut earnings for the carrier. The amount was raised from shareholders, rights issues of shares and mandatory convertible bonds, among other sources.

The airline maintains that it is still closely watching its expenditure, and said it moved to reduce 20% of positions in its previous fiscal year, kept pay cuts in place, deferred non-critical projects and renegotiated contracts.

The city-state of Singapore plans to establish travel corridors with countries or territories that have coped well with COVID-19 and where infections are minimal, which could open the doors to boosting SIA's services.

The country and Hong Kong have repeatedly put off plans to start such a travel corridor, due to the shifting COVID-19 situation. Both places have agreed to revisit the idea in late August upon review of the public health conditions on each side.

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