If you need further evidence that Singapore is well on its way to succeed in a post-pandemic world, look no further than the most recent third quarter FY2022/2023 result announcement from Singapore Airlines (SIA) (SGX: C6L). On 21 February 2023, Singapore’s national carrier released a set of strong financial results, which included the group’s best-performing quarter when it comes to operating profit.
In this week’s edition of 4 Stocks This Week, we look at 4 highlights from SIA’s financial results.
#1 Operating Profit For SIA Is A Record $755 Million For 3Q2022/2023
For 3Q2022/2023, SIA announced that it made a record operating profit of $755 million for the quarter. This is off the back of an increase of 8% in revenue to $4.846 billion for the quarter, as compared to the quarter before.
Passenger flown revenue also increased by 14% to $3.767 billion as compared to the quarter before as traffic grew 12.2% for the quarter. More importantly, revenue per available seat-kilometre (RASK) – a measurement of how much revenue an airline is making per seat and per kilometre it flies – is at 10.6 cents. In other words, SIA, on average, makes $106 in revenue per seat for every 1,000km flown.
The nine-month operating profit for FY2022/2023 is $1.989 billion, which is also a record for the group. Net profit for SIA for the quarter is at $628 million, while the nine-month net profit is $1.555 billion.
#2 Scoot Is Thriving
Scoot, the low-cost airline that is part of the SIA Group, is thriving.
In the announcement, it’s said that both SIA (87.3%) and Scoot (87.8%) are enjoying record load factors for the quarter. Load factor measures the percentage of available seating capacity that has been filled with passengers. So for example, Scoot, on average, sells about 87.8% of their seats for each flight.
Naturally, this has translated into better results. Scoot achieved a record quarterly operating profit of $135 million, up $123 million or more than 11-fold from the previous quarter. Scoot’s operating revenue also surged to a record $592 million, up about $145 million, and significantly outpacing the increase in operating expenditure which went down by $22 million.
As more passengers are filling in each plane, revenue will be increasing while expenditure can remain the same.
#3 SIA Cargo Segments Have Moderated
While the cargo segment for the group was a strong driver of revenue during the pandemic, this has since moderated in recent months. Cargo flown revenue for the quarter fell $141 million to $862 million with the cargo load factor also declining by 2.7% to 54.3%.
According to the group, demand for air freight is expected to face headwinds, in addition to the seasonally weaker fourth quarter. This is due to macroeconomic concerns, and a slowdown in new orders as importers trim inventory levels. The increase in bellyhold cargo capacity will also increase the pressure on cargo yields.
#4 Ease In Travel Restriction For China & Other Asian Destinations Will Support The Recovery In Air Travel
There are more reasons to be positive for 2023. As China eases up on its travel restriction, we can expect to see more Chinese tourists flying to and fro from China to Singapore as well as other Asian destinations that SIA flies to including Hong Kong, Japan and Taiwan. This would support the recovery of travel in the region.
According to SIA, forward sales remain strong across all markets for both leisure and business travel, as well as all cabin classes.
Over the past year, SIA share prices have increased by about 13.8%. It is currently trading at $5.77.
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