Good morning, everyone. Welcome to the Singapore Airlines Media and Analyst Briefing for our half-year results. My name is Siva, and I'm from the Singapore Airlines Public Affairs department. Very happy to see everyone here again. We will follow the usual format again this year. We will have our presentations by our CFO, followed by the presentation by our CEO, followed by a question-and-answer session. We also have people joining us online, and if you wish to ask questions, there's a little box in there where you can key in the questions, and we'll come to that at the appropriate time. If I could kindly ask everyone to please switch off your mobile phones or put them to silent mode, that would be really useful.
Without much further ado, could I invite our Chief Financial Officer, JoAnn Tan, to present the half-year results? JoAnn, please.
Good morning, everyone. Thank you for joining us. I will begin with the key highlights from our results for this half-year 2023-24. The SIA Group achieved a record operating performance of SGD 1.55 billion, a better performance compared year-on-year by 25.9%. This came largely on the back of very strong passenger revenue demand, which overcame the drag from weaker cargo. Lower fuel costs was another contributing factor to the record operating performance. This was primarily due to a 26% reduction in net fuel prices after hedging. This first half-year record was SGD 96.1 million higher than the previous record, which was just set in the prior preceding second half of last FY.
For the first half year, the robust passenger demand led to the group turning in a record first half load factor of 88.8%. SIA and Scoot individually set their own first half load factor record of 88% and 91.3% respectively. At the net level, the group recorded a half-year profit of SGD 1.44 billion. Now, moving on to capacity. Passenger capacity was up 29% year-on-year, including cargo. Overall capacity was nineteen point nine percent year-on-year. We expect, at the group level, to return to approximately 92% of our capacity by December of 2023. Looking at the group financials, let's look quarter-on-quarter, Q2 first. The group delivered a record Q2 operating performance on the back of stronger PAX demand, lower net fuel costs, offset by weaker cargo.
At SGD 799 million operating profit, this was SGD 44 million higher than the previous record, which we set in quarter three of the last financial year. Looking half year, year-on-year. Against a year-on-year capacity increase of 19.9%, revenue improved 8.9%. The drag came from cargo. Expenditure increased 5.9% year-on-year, significantly less than the rate of capacity increase. This was mainly driven by net fuel costs being 15% lower despite higher volumes. Excluding fuel, expenditure tracked up 18.7%, almost in line with overall capacity. Consequently, operating profit of SGD 1.55 billion was SGD 319 million higher, compared to last year. At the net profit level, SGD 1.44 billion was a net half-year record for the whole group. Now, let's take a closer look at group first half revenue.
Passenger demand was up 26.3%, marginally lower than a capacity increase of 29% at the half year, comparing half year to half year. We saw a 38% growth of passenger traffic, but this was partially offset by 8.5% decline in yield as a consequence of increased capacity of increased competition. Cargo revenue was lower by almost 50%. This was on the back of weaker market demand, coupled with increased competition from more belly hold capacity coming back on stream in the industry. Passenger demand was very robust over the peak summer season. Compared against last year, passenger traffic growth was most pronounced in the North Asia routes, because most of the key markets, Japan, China, Hong Kong, had borders that were fully reopened this year compared to last.
Breaking down by segments, both FSC and the LCC segments delivered record half-yearly load factors on the back of very strong passenger demand. Cargo has been declining for several quarters now. In quarter two, cargo demand remained weak for all the reasons I highlighted before. Nonetheless, if you look at the cargo yields, they continue to track above pre-COVID levels, in excess of 30%. Moving on to the expenditure line. First half, expenditure increased 5.9%, significantly behind the rate of capacity increase. Now, the increase, this was actually due to lower fuel prices, but I'll talk more about that later. On this chart, just to highlight, staff costs rose 23%, mainly due to higher pay and allowances, because we had increases in staff strength and average wages, variable crew allowances from increased flying activities....
Other variable costs rose roughly in line with increase in capacity. The exception is passenger costs, which outpaced capacity expansion. This was because in addition to uplifting more passenger meals, we also saw higher unit costs in our meal costs as a consequence of improvement in our meal product. Waterfall of our fuel costs. You can see from this that the lower weighted average fuel price far outweighed the increase in higher fuel uplift and lower hedging gains. The table below in the chart here shows the fuel price that we experienced in first half, both before and after hedging. This is a snapshot of our fuel hedging status for the next 18 months out, the table on the top.
In addition to these open hedging positions, we also have additional gains that we locked in from close-out trades that we will progressively recognize in the rest of this financial year and the next, based on the maturity dates of the original trades. This is shown in the table at the bottom. Operating profit for quarter two was a record SGD 799.3 million. Stacked together, first half delivered operating profits of SGD 1.55 billion. This is a waterfall chart. Essentially, it shows fairly clearly that the benefit from higher passenger flown revenue, together with the lower net fuel costs, more than overcame the drag from lower cargo, as well as other expenditure items. Breaking down the performance by the main companies in the group, you can see the bulk of the improvement for group numbers came from better operating performance for the parent airline.
Scoot also turned from an operating loss last year to operating gain this year, and this was primarily due to stronger revenue. Last year, many of the markets that Scoot operated to were still not fully reopened. SIAEC also turned from an operating loss to a marginal operating gain this year. Higher revenues from more flying activities more than offset the corresponding increase in their expenditure line. Looking at the net results, net profit for Q2, combined with the record for Q1, brought in our first half net profit record of SGD 1.44 billion.
Looking at the waterfall chart, other than the higher operating profit for this year, our record and improvement for this year was also aided by having net interest income versus what we had net finance charges last year, as our bank deposits were rolled over at higher interest rates. Share of profits this year was also higher compared to our share of loss last year. Among our associate companies, we saw lower share of losses coming from Vistara. For the first half year, the SIA Group is declaring an interim dividend of SGD 0.10 per share. This will be paid out on the 22nd of December. Looking at our financial position, SIA Group continues to maintain a very strong balance sheet. As at 30th of September, we still have SGD 13.5 billion in cash and in bank deposits.
We also announced yesterday that we will be redeeming the remaining 50% of our remaining 2021 MCBs. Covering both principal sum and accreted yield, this would result in a cash payout of SGD 1.71 billion. With this payout, we would have redeemed a total of 75% of our 2021 MCBs, leaving SGD 1.55 billion of remaining MCBs that that we have not yet paid. This is a picture, a snapshot of the group operating fleet. We expect to take on another 6 aircraft deliveries before the end of this financial year, and we will end the year at 201 aircraft. Sharing with you the projected group CapEx numbers for the next 5 years. Now, this picture is very similar to what we had disclosed before in the May results.
And this is my last slide. So with this, thank you. Let me invite now our CEO, Mr. Goh Choon Phong, on stage to share with you our strategy going forward. Thank you.
A very good morning and a warm welcome. I see quite a number of familiar faces. So again, welcome to SIA for our briefing. JoAnn has spoken about the record performance in the first half of this financial year, and that continues from last year's record performance. And so it is actually useful for us to recap what is it that we have done during the COVID years that have led to this strength in our performance. This should be a familiar chart of how, in the worst, in the depth of the financial... of the COVID crisis, the plunge in our carriage and capacity. But what we've done during that period, if you may recall, and now I've kind of reorganized it in a different manner, was three priorities. First, to boost liquidity, and we will-...
We're very glad and grateful for the shareholders coming and supported us with SGD 15 billion in fund, in the forms of rights and Rights MCBs , and we're able to also raise a further SGD 8.5 billion through various schemes, sales and leasebacks, secure financing, and bonds. The good thing, of course, is that for our shareholders, what they have put in, in terms of the rights, for example, at SGD 3, is today more than double. With the redemption MCBs, they are also getting the reward of the yield from their MCBs. Plus, as you may recall, last year, we have paid a very good dividends, a yield of more than 6% following the financial end.
The other priority that we have, you would expect SIA to do that, that we have, we have done, is really to care for our customers. To start with, immediately following Wuhan's closure, we actually have gone out, and the very next day, started our crisis management, set up to take care of customers who were affected by that closure. And, going forward, as all the borders were closing in rapid succession, I think we were one of the very few airlines that have gone out and told our customers that, you know, if you can't travel because we have no flights available, we'll honor refund. So we were doing from outset what we deem as right things to do by our customers.
Of course, the whole series of things that follow, each of them is focusing on what is convenient, what is assuring to our customers. Going through more than 100 touchpoints to ensure that at each touchpoints, our customers continue to be comfortable traveling with us, with all the concern about COVID infections. We were also clear from the outset that we want to preserve our operating capabilities, and that, of course, come in a form of, firstly, our people. We wanted to retain the operational capability of our people in being able to man the flights when the borders begin to recover, to open. Beyond that, we continue to also take delivery on new aircraft. In fact, 36 planes were delivered during that period.
Again, to make sure that we have the ability to actually bounce back quickly, when the demand returns. Everybody were talking about emerging stronger at that point in time. Again, to us, we know we have to be clear what, what we mean when we say to emerge stronger. We have two focus areas. To emerge stronger means we want to be first off the block when demand returns, and we want to also retain our industry leadership as we begin to emerge from, COVID. The emphasis on both objectives were communicated to everybody in the organization at the very early stage of the, the crisis. As you can see here, we begin to talk about the need to be first off the block as early as March of 2020 to the organizations.
We started the new Lead the New World transformation program in April of 2020. To be first off the block, we know that we need to be able to continue to keep the skill set of our staff relevant, so upskilling, reskilling, and also to keep the resources, the key resources, operationally ready, and that means both aircraft as well as our operating crew. The outcome is that throughout the entire period, as soon as the borders are open, we're almost always the first to put in the capacity on the route, even up to today. Lead the New World transformation program was successful. It generated a lot of new ways of doing things, work processes, productivity gain, et c.
The work process improvement were not just about cost saving, it was about how to improve customer service, how to enhance revenue generating opportunities, et c. The outcome of both objectives really led to the record performance last financial year, you can see here, and its continued strength in the first half of this year. I won't belabor because you have seen the earlier presentation by Joanne. But it's not just about financial performance, as I pointed out earlier. The other objective was to come out as continue to be an industry leader. And for that, you can see that in the year 2023, you continue to be recognized by various parties to be the leader. You have here the 50 Most Admired Company, which is published by Fortune Magazine every year. We were the only company in Singapore recognized on that list.
In fact, we were the highest ranked Asia company on that list, ahead of household names such as Toyota, Samsung, et c. And this list, they were actually voted on by executives across all industries, particularly those in the Fortune 500 list. Of course, we were also recognized by our customers to be the best airline, industry leaders, with the people within the industry, our unions, as well as people, the workers, employees in general in Singapore. So various segments have provided recognitions of what we have achieved, so it's not merely financial. Of course, we didn't do this just on our own.
We're glad and very grateful for the support shown to us by our customers, our shareholders, the Singapore government, who has been, throughout the whole COVID period, very proactive in opening up borders in a safe but yet progressive manner. Our ecosystem partners, such as the airport, Changi Airport, SATS, as well as engineering company. But I would say that most of all, most of all, it is really the hard work of our people, the dedication and the full commitment from them to make sure the company continue to perform well despite all the challenges. There are, of course, other things that we have done in strengthening the foundation for the future. I'll go through this quite quickly because it hasn't changed very much. Of course, like all long-term strategy, you shouldn't change from year to year.
The focus on continuing to improve on our brand promise, continue to build our network connectivity to be relevant to our customers. You, of course, have heard about Brussels coming online. We have just also announced increase in frequency to Australia. Products, we will be introducing all brand new seat products on our 777-9, which was meant to be this year, but unfortunately, it's delayed because of Boeing. And of course, leveraging both IT capabilities as well as our improvement in terms of continuing to upskill and reskill our staff to make the customer experience even better. Scoot and SIA, the network continue to grow, but also in a way that would enhance connectivity through Singapore. Everyone would have heard about Scoot's intention to bring in the new fleet of E2 aircraft, 112 seaters.
That will enable us to add many new destinations, especially in this part of the world. Commercial partnership continue to be an important area. We continue to enhance, both in terms of the number of partners, as well as depth of cooperation. And Air India, Vistara merger, for which we will have eventually a 25.1% of the combined entity. And you are aware, you know, that recently the CCI, which is Competition Commission of India, had approved the merger to take place. Of course, there are other regulators, as well as authorities that we have to seek approval for, but the process is on track. Development of new revenue streams. Let me just particularly highlight the KrisFlyer as well as the Kris+ development.
As you can see here, we, we have almost 8 million KrisFlyer members now, and the revenue from KrisFlyer program, last year in the full year, we said it was SGD 900+ million. This year, at the half year point, is about SGD 600 million, and we expect, therefore, the full year to exceed SGD 1 billion. And of course, Kris+ has been getting more and more popular, and this allow our customers to both redeem as well as earn points from micro transactions. Transactions other than flying. We continue to be very focused on our sustainability objectives. You would have heard about the pilots that have recently been concluded for the use of SAF in at Changi Airport, and we continue to look at other ways of reducing our carbon footprint, one of which is the installation of solar panel.
Digital capability has been something we were very focused on building over the last decade or so. And, of course, recently, with the advent of generative AI, we've been looking at how best to make use of that technology within the organization. Many project has started, and some of them have yield very encouraging results. So in this case, there was one particular initiative that would help us cut down our response to customers by 75% in terms of time. So that particular case, it usually take about 8 days for us to respond to customers, which is cut down to 2 days. So very promising, and this is something that we are putting a lot of focus on. The challenges before us are not very different from what I showed last year, and they are all here.
Of course, some of them has intensified, such as geopolitical concerns, the tensions in the Middle East, for example. But as you can see from the earlier presentation I have, we are well-positioned with all the initiatives that we have put in place, not just over the COVID years, but even before that. And that we are quite confident that will ensure that we retain our leadership positions going forward as well. Thank you.
Thank you, Goh Choon Phong. We will now proceed to the Q&A session. So while we set up for that, maybe I'll quickly go through some of the now familiar house rules, I suppose. We've got quite a lot of people here, as well as online, so really appreciate it if you could keep to one question each, please. As I call on you, please, if you could identify yourself and the organization that you're from. Folks who are online, if you wish to send questions, you've got that function there. Just key in your questions, and then we'll take it as it comes. So I'd like to invite Goh Choon Phong back on stage, and JoAnn.
Joining them will be Lee Lik Hsin, our Chief Commercial Officer, as well as Tan Kai Ping, who is our Chief Operations Officer. There'll be people roaming around with microphones, so when you're ready, I'm happy to take the first question. Anybody? Yes, over there. Greg Waldron, please. Thank you. Just the mic switched off. So just give us-
It's okay.
Sorry, just give us, just give us a second, Greg. We'll fix that for you.
Okay. How's that? All right. Good stuff.
Thank you.
Okay, so, this is Greg Waldron from Flight, and questions for Goh Choon Phong. Goh Choon Phong, I've noticed with the fleet, you've got this kind of sub-fleet of 737-800s, and I don't... Just wanted to check with, you know, what's the long-term plan for those, you know, 7 aircraft, and what might be your, you know, replacement considerations for that aircraft?
Yes, we do have the remaining, older 737-800 that you mentioned. Those will actually be retired over time, probably in the next couple of years. And with that, actually, that particular fleet is the only one that doesn't have, Wi-Fi and doesn't have, a full flat seat for the business class. So with that, retirement of that fleet, the entire SIA, fleet of planes will all have those features, that there is a full flat on the business class as well as, Wi-Fi capabilities.
Thank you. Can we get the next question, please? Maybe this gentleman here, and then we'll follow by Danny, please. Thank you.
Yeah. Good morning. My name is Gurdeep Singh. I'm from Press Trust of India. With your stake in Air India coming down 25.1%, what is SIA's strategy going to be for the Indian market, new destinations? How are you going to operate, and how are you going to perform with that 25.1% in Air India? Thank you.
Thank you.
So actually, these are two different questions, even though they are somewhat related. So with regard to our investment in Air India, as you know, we started with a joint venture with the Tata to set up Vistara, for which we have 49%. And during the Air India due diligence that the Tata has done, we were actually supporting them in the due diligence process. So when the opportunity comes for us to consider the Air India involvement, and having gone through the analysis and all that, we agreed to be part of that venture, and hence Vistara is the startup process of folding Vistara into Air India. And the result of that is that eventually we'll look at- we'll be looking at actually 5.1%.
Now, India is a huge, huge market. It's fast-growing. It's going to be the third largest economy in the world. It's already the third biggest travel market in the world, and it's got huge potential, as you can see. So our investment in Air India was to allow us to also participate directly in the growth from India. And this hasn't changed because whether it's Vistara initially, and this opportunity is to actually be part of the Air India structure, in both cases, we were looking at being able to participate directly in the growth. As regards to SIA's operations, you would expect that, when Vistara was operating, or Vistara is still operating, with Vistara operating, we have been working with Vistara to enhance commercial cooperation between Singapore Airlines and Vistara.
You can expect that, with the folding into Air India, that kind of discussion will continue.
Thank you, Choon Phong . To Danny here, please. Thank you.
Good morning. Danny Lee from Bloomberg News. Can you give some color about how you see forward demand in the fiscal third quarter and into the fiscal fourth quarter? Do you see forward bookings at above average levels? And consequently, do you see a benefit from higher airfares as a result? Thank you.
We have said that demand is still strong all the way up until the end of the financial year. Of course, there has been increasing competition by way of more airlines putting their capacity back into the market. Consequently, there is pressure on yields, as you would also note from our most recent results. I think that same pressure on yields is expected to continue into the third and the fourth quarter as well. Overall, from a total demand perspective, in respect of filling our flights, we still believe that the full financial year will still have a positive picture. Thanks.
Thank you, Lee Lik Hsin. We'll go to the lady, and then in front of her, please. Thank you.
Hi, Naomi from Cirium. My question is mainly on fleet. So with the incoming six aircraft deliveries, I mean, it's widely publicized that production ramp up has not been as fast as expected, and airlines are, you know, hungry for more aircraft. So how much slower or fewer are you seeing in terms of Airbus and Boeing and Embraer deliveries that will crimp your growth plans? And the other thing is also with AOGs, as in, sorry, for Pratt & Whitney engines, those inspections are coming up, so I know four engines for Scoot are affected. So, is that going to result in any AOGs? And, is there any spillover to the planning for E-Jets where the impact is not, you know, not yet known? Thank you.
Yeah. So on your first question, what JoAnn has presented earlier on the fleet delivery is has factored in the latest, we understand, of any delays. So that is the picture. And as you know, and I mentioned that we were expecting 777-9 to be delivered from this year. It is now looking at 2025. So that particular one is actually delayed by another two years.
Yeah. Thanks for the question. So we have 4 engines affected by the PW1100 in the Scoot fleet. That's 2 aircraft on the ground. Now, working with partner Pratt & Whitney to get the engines serviced and back online. We are also working closely with Pratt & Whitney. Obviously, this is a multi-year problem. I think it's quite well known. So working closely with them on spare engine support and also the shop turnaround for the engines. We have some flags. So I think you mentioned the E2. Now, the E2 coming to us brand new, so it does have a yet unknown impact, as you said, but the planes are brand new, so engines are brand new, so they'll be fine for a while.
So it gives us a bit of flex. And Scoot also has 320 classics, which are, you know, due for these renewals or these returns, and those provide flex as well. So that's how we always plan our fleet. Yeah. So I think next year, don't know yet what the impact is, but we do have some flex. Thank you.
Thanks, Kai Ping. Next over there, please.
Hi, good morning. Tabitha from DBS. Do you see more opportunities for the SIA Group and Vistara, given that peers in the region are more impacted by the engine issues?
Different, the full impact of the engine issue on various airlines is not something that is public. Obviously, the airlines themselves would have to come out and clarify. But we—the deployment, because as we emerge from COVID, especially, we are actually very agile, and that goes for Vistara as well, because we do have our staff, such as the CEO of Vistara, plus there's a staff that got seconded from Singapore Airlines.
So, we do have an agile process of responding to market demand, and the capacity will be adjusted accordingly.
Thank you, Goh Choon Phong. Next, maybe the gentleman over there, please.
Thank you. Kaseedit from Citi. When I look at your forward capacity of the industry on long haul, whether ASEAN to North America, Europe or Australia, Asia, they're approaching 90% to above 100% by summer next year. Do you expect yield to normalize back to pre-COVID level, or are you seeing structural changes in passenger behavior, such as like premiumization of leisure, for example? Thank you.
As I said in my answer to the earlier question, the addition and restoration of capacity by the other airlines does put downward pressure on yields, as we have experienced ourselves in the latest set of financial results, that you see. We are not making any projections on where this might finally land, but we will respond to the market situation as necessary. Thanks.
Thank you. We'll just take some questions that have come up, virtually. Sean has asked about the impact of the GTF issue. I think we've answered that question already, so maybe we'll go on to the next. Neil Glynn is asking: What percentage of corporate traffic recovery have you seen so far, and how much further recovery do you expect?
So I think it is well-publicized that corporate travel has not yet fully returned to its level pre-pandemic. On our end, we have been able to substitute for this travel with additional leisure travel, with additional family travel, and therefore, our load factors are at an all-time high.
Great. Thank you. Harry Yan is asking two questions. Firstly, in Q2, non-fuel costs was actually flat quarter-on-quarter, despite increased operating capacity. Can you provide some color on what the company has done to manage the cost during Q2? And, well, he's asked about the Pratt & Whitney question again, which just we answered. So maybe fuel.
Okay. If I can just take the question on quarter-over-quarter costs. Quarter-over-quarter, Q2 was relatively flat, largely on account of staff costs. And staff costs, quarter-over-quarter, that was relatively flat because of timings in when we provisioned for PSP. So if you look at it on a full half year basis, that should even out any of the timing differences. Thank you.
Thanks, JoAnn. Any other questions? Maybe we'll go to Tim over there, please.
Hi, this is Tim Bacchus from Bloomberg Intelligence. A question on fuel. Quite an impressive, you know, performance to keep fuel costs actually down year-on-year. When you look at 3Q and going forward, maybe you could just talk a little bit about hedging profile. From your slide, it looked like, you know, 10% on Brent and maybe 26% on jet. Are those profiles a little bit lower than you typically hedge? Thank you.
Thank you for that question. Actually, we hedge on a fairly programmatic basis. We say typically 50%-40%, on a declining wedge. So in fact, if you look at the Q3 and Q4 numbers, it is actually still in line with our declining wedge profile. Thank you, Tim.
Thank you. Chuanren , over there, please. Thank you.
Morning. Chuanren from Air Transport World. A question on your wide-body fleet. I understand there's only two A350s left for on order books. Is that enough for your long-term, long-haul fleet operation network? And with that being said, now with the 777-9 still uncertain, are you looking to have backup plans from Airbus? Thank you.
As you know, Choon Phong, we do have flexibility, as mentioned also earlier by answering two different questions, which is that a number of our planes are obviously on lease, for which we have the flexibility of extending, that give us some flexibility. As to future aircraft order, well, you'll hear about it when we do make the order.
Thank you, Goh Choon Phong. Mayuko, right up front here, the front row, please.
Thank you. I'm Mayuko Tani from Nikkei. First about Air India, I think you have said that you're looking at the share purchase to complete by March 2024. Is that schedule still on? You seem to have quite a number of the permits that you need to have. Can you give us an update? Another is about SAF. After the result of a pilot came out, what's next for SIA? Thank you.
On the merger, as we said, at this point in time, it looks to be on track, so we are talking about, by end of the financial year, thereabout, it could be plus or minus, but that particular timeline remains. On SAF, we have previously mentioned that we are talking to suppliers on our requirements and so forth. But we do believe that this is not just it. It has to be such a problem of that scale, has to be tackled at an industry level, not just individual airlines. Of course, individual airlines would have to look at what kind of commitment they have, but given the scale of this issue, many more players have to come in and make sure that there is enough supply.
Thank you, Choon Phong. Next question, please. Maybe... Sure, Kaseedit, and then Danny, I think you got another question.
Thank you. Last one from me. Just on premiumization of leisure traffic, right? You mentioned that corporate hasn't fully recovered, but we see load factor closer to 90%, which means that the leisure really has moved up front. In your forward booking, are you seeing the mix staying where they are, or your frequent flyer moving back to the back seats? Thank you. For the leisure segment. Thank you.
So my answer to the earlier question already indicates that we are filling up our business cabin with new segments, and some of those segments would include leisure travel. I think the market is evolving. We came out of COVID not too long ago, and we don't know where the final stable numbers will be. Our objective, of course, ultimately is to fill our flights, all the cabins, with any market segment that we can get, and we will adapt our strategies as the market moves to make sure that we fulfill that objective. Thanks.
Thank you, Lik Hsin. Danny, and then Peggy.
Danny Lee from Bloomberg News. Do you have a figure of how much long-term SIA has to spend on SAF to get to the kind of targets you want to, and maybe even beyond? Do you have a big number in mind that you could share with us today? Thank you.
SAF today is 3-5, but we expect that as the volume builds up, obviously, the price will be different. That's the reason why I say it's not an individual airline issue, it's not. It's an industry. And by industry, I, I refer to it in a broader sense. It's not just airlines, but the whole aviation partners, everyone, including, not, well, the manufacturers, the fuel companies, and the airport, the government, all these have to come in. Obviously, at 3-5 times, is not going to be something that many airlines can bear, but it's a chicken and egg sometimes. You know, in order to produce more, you've got to invest. The people who want to invest will want to see that there is actually demand.
But we are increasingly seeing commitment by at least the airline industry. For example, we, most airlines, I would say, would have committed to the 2050 target. That's a good starting point, and we will have to work from there.
Thank you. Peggy, over there, please. Right up front.
Good morning, Peggy from the Business Times. Okay, I'm not sure I understood the fuel cost correctly. There was a decrease in fuel cost in the last quarter, Q2, in fact, for the first half as well. But, I thought that first, the quarter two, there was an increase, quite a significant increase in the industry fuel cost, because I think Qantas actually also mentioned that they might have to impose surcharge if this continues, the fuel cost continues to increase. But for SIA, somehow you managed to rein in the fuel cost and with SAF pilot, right, I will assume that that will also raise your fuel cost, but contrary to expectations, that has decreased. So maybe... So could you share with us that recipe, secret recipe for that?
Okay, thank you for your question, Peggy. Maybe if I can just refer you, you may not have it, but to the chart that I showed around our net fuel costs. Okay, so first half of this financial year, our average fuel price before hedging, as we showed in the chart just now, was about $105 per barrel. Post-hedge, it was $95 per barrel. Compared to last year, first half, so same period last year, the fuel price before hedge was $148 per barrel. Post-hedging was $128 per barrel, so I was making that comparison versus last year. Okay. Second question on SAF. It was a SAF pilot.
The quantity that we used for the pilot actually was very little, very low, so it's not material to the cost of fuel in this case. Thank you.
Thank you. This lady over here, please.
Thank you.
Go ahead, go ahead.
Sorry, I have one last question. SIA Group would have ramped up your group passenger capacity to 92% by December. So, and it's projected to achieve full recovery by the end of financial year 2025. So that will be March 2025.
Maybe let me just clarify. We will be 92%. We are planning for capacity at 92% by the end of this year.
December of 2023. We intend to go back to 100% within next financial year. So next financial year starts from April of 2024 and ends in March of 2025.
Yes, so-
Sometime within 2024, we are expecting to be 100% of pre-COVID capacity.
Yes. So what is holding back you from increasing that last 8%? It's going to take, like, about a year. So is it because of projected demand, because of your capacity due to, you know, aircraft, or what are the factors?
So it is, as you noted, a combination of factors. Firstly, aircraft. Our fleet, at this point in time, is still not the same size as pre-COVID. Now, there's good reason for that, because coming out of COVID, we also took the opportunity to fully modernize the fleet, and we removed some of the older aircraft types, for example, the A330s and some of the B777 classics. And by doing so, you know, we actually improved our product proposition. For example, in business class, wide bodies, we are 100% lie-flat in business class. I'm not too sure any other airline in the world can claim that. The second reason, for not being at a 100% is because we also, restructured our network as well.
Coming out of COVID, there were some points that we decided not to go back to operating, for example, Wellington in New Zealand. And so, that results in your capacity being a bit less than pre-COVID. And the third reason is China. China resumption, as we have said, is not yet exactly at pre-COVID for a whole host of reasons, one of which, as you alluded to, being demand. And so we have not fully restored our China flights, though we are progressing in that respect, having restored 23 out of 25 points, with capacity at about three-quarters of where we are pre-COVID as a group. Thanks.
Thank you, Lixin. Yes, please.
Hi, I'm Peggy from Phillip Securities. I notice your sales in advance of carriage is still very strong, the number. Could you tell us, give us an idea how is the... In terms of region split, which ones are the stronger ones, which are the weaker ones? And because for first half of this year, we saw there was some weakness in European and the American routes. Is there any particular reason there or anything that you noticed that has changed the operating landscape for the airline industry? Thank you so much.
So, across all route regions, we are experiencing good and high load factors. I mentioned China just now, so that would be one area where perhaps we can get better load factors. We would continue to work towards that. But there are... Aside from that, there aren't any other standouts. We are achieving, managing to achieve our objectives of high load factors across the rest of the globe. Thanks.
Thanks, Lixin. We've got one more question online, from Sean, Sean Ng. The question is: Do we have a target timeline to redeem the remaining MCBs and introduce a dividend payout policy? Does SIA have any minimum cash availability liquid that we need to we would like to maintain to balance aircraft, CapEx, and operating needs?
We do not have a dividend policy, and there is … As regards to remaining MCBs, if there is any development on that front, we will certainly announce it, so something that you can wait for the announcement.
Thank you. Sorry, we'll have Naomi and then Chuan Ren.
Hi. Just a question on cargo. I mean, I understand that it's sort of now starting to pick up slowly and it's still above 2019 levels. So do you have any sort of thing you can share with us in terms of the outlook? Like, you know, are you slowly seeing sort of a return to increase, increases and so on? Yeah. Thank you.
Well, as you note, we are still above 2019 levels, but of course, very far below the COVID years. I think it remains to be seen how it pans out. Obviously, there is a lot more capacity in the market because airlines are restoring their passenger flights, so there's a lot more belly hold capacity. And the overall macroeconomic situation across the globe is also quite uncertain at this point. We will simply respond as necessary to the changes in the market.
Thank you, Lixin. Chuan Ren?
Yeah, a question on the operations. I understand from the MRO sector that there's a severe labor and skills shortage. Has that affected your operation, day-to-day operations? You know, for example, getting planes back from AOG and, you know, things like that. Thank you.
Yeah. The labor shortage is affecting not just MRO, it's actually affecting everything, whether it's ground handling, tech handling, or aircraft maintenance. Yes, you're correct. I think one of the defining features of SIA's, SIA Group's response to COVID has been we kept our core capability. And so in our recovery, as Goh Choon Phong shared just now, we were quite focused on being first off the blocks, retaining experience. Now, we are, to be clear, managing difficult supply chain situations. We are managing manpower shortages, but I think we are doing as well as can be. Evan, we have a bit of a leg up, because really, we kept talented people.
Great. Thank you, Benjamin. We've probably got quick time for one more question, if anybody's got one. All good? Great. Well, thank you, everyone. That brings an end to the proceedings today. Thank you for your time. We'll see you during our full year meeting and this briefing. Thank you, panelists. Thank you, everyone.