In a SGX filing on Friday (6 Nov), Singapore Airlines (SIA) posted its biggest ever quarterly loss as demand for air travel continues to be tapered due to the ongoing coronavirus pandemic.
SIA reported a net loss of S$2.3 billion for the three months ended in Sep versus a S$94.5 million profit the same period a year ago. Revenue plunged 81% to S$783.8 million.
In particular, SIA’s oil hedging alone contributed some S$563 million out of the S$2.3 billion losses. Its fleet impairment charges also weighed in on its bottom line.
For the first half of the present fiscal year (Apr to Sep 2020), SIA reported a total net loss of S$3.5 billion.
In May this year, SIA reported its first annual net loss in its 48-year history (‘Singapore Airlines posts first annual net loss in 48-year history after COVID-19 cripples demand‘, 14 May). It reported a net loss of S$212 million for the 12 months ending 31 Mar 2020.
According to Wall Street Journal (WSJ), U.S. carriers have in general cut back on these financial bets in recent years, after being wrong-footed by an earlier plunge in oil prices about five years ago. Many airlines instead use customer fuel surcharges as a way to adapt to changing oil prices.
But SIA continues to use oil hedging strategy. Not only that, SIA uses an “unusually farsighted approach” to manage its fuel costs, said WSJ. In recent times, SIA has hedged some of its fuel costs up to five years out, while others in the industry will generally go with a 1 to 2-year horizon. Of the 33 listed global airlines with fuel-hedging policies, SIA was by far the longest, according to Morgan Stanley research last year. In fact in Jan this year, SIA said it had hedged the bulk of its expected fuel costs out to March 2025.
In Sep, SIA laid-off 4,300 positions across its airlines – Singapore Airlines, SilkAir and Scoot (‘Massive layoffs at Singapore Airlines‘, 10 Sep).
While laying off staff, it was disclosed that SIA CEO Goh received a total of S$4,223,274 in remuneration for the last financial year ending on 31 Mar.
Despite SIA reporting its first net loss of S$212 million in its 48-year history for the last financial year, Goh continues to receive bonuses of S$1,046,967 and shares valued S$1,643,940.
His total remuneration was S$5,500,463 in the previous financial year (FY18/19) (‘SIA CEO announces 15% pay cut for himself; he earns $1.4m in salary with total package $5.5m last FY‘).