SIA aims to hit 50% of pre-Covid passenger network by end-September

The group also expects passenger capacity to be around 33% of pre-Covid-19 levels in the upcoming quarter.

  • Singapore Airlines Ltd (SGX: C6L) shares declined as much as 2.3% on Monday morning (02 August 2021)
  • The group posted a net loss of S$409 million for the first quarter of FY2021/2022
  • It expects to service around 50% of the points that were part of its passenger network prior to the pandemic by 30 September 2021
  • CIMB reduced its target price on SIA to S$5.54 while keeping a ‘buy’ rating
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SIA stock price: what’s the latest?

Singapore Airlines (SIA) shares fell as much as 2.3% in early trading on Monday, after it reported its financial results for the first quarter of FY2021/2022.

The group posted a net loss of S$409 million for the quarter, an improvement of S$714 million (or 63.6%) year-on-year.

This was primarily driven by better operating performance and the absence of non-cash impairment charges relating to the liquidation of NokScoot.

An increase in both passenger and cargo flown revenue also resulted in group revenue increasing by S$444 million (+52.2%) year-on-year to S$1.3 billion.

Group passenger traffic grew year-on-year on the back of a calibrated increase in passenger capacity, rising to 28% of pre-Covid-19 levels by the end of the quarter in June 2021.

What is the outlook for the rest of FY2021/2022?

Looking ahead, SIA expects passenger capacity to be around 33% of pre-Covid-19 levels in the second quarter of FY2021/2022.

By end-September 2021, it expects to serve around 50% of the points that were part of its passenger network prior to Covid-19.

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

‘The recovery trajectory will be dependent on government regulations, vaccination rates, and the risk profile of individual regulatory authorities,’ it further noted.

How do analysts view the results?

CIMB analyst Raymond Yap said SIA’s 1Q core net loss of S$430 million was ‘in-line at 26%’ of his firm’s full-year loss estimate of S$1.66 billion.

This was also ‘sharply narrower than the S$1 billion loss for 1QFY21, as cumulative ineffective fuel hedging losses of S$462 million were transferred from balance sheet equity into the P&L (profit and loss) during 1QFY21’.

Despite this achievement, SIA’s core net loss for the quarter was ‘wider than the immediately preceding 4QFY21’s core net loss of S$321 million, most likely due to higher interest expense, and/or lower deferred tax credits’, Yap added.

He reduced his target price on the stock to S$5.54, which equates to a 10.8% upside potential from its most recent price of S$5 on Monday.

He also maintained an ‘add’ call, on the prediction that international travel will resume gradually from late 2021, before becoming more meaningful by the middle of next year.

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