Good morning, everyone. Welcome to the Singapore Airlines full year media and analyst briefing for FY 2021/2022. I'm Siva Govindasamy. I'm from the SIA Public Affairs department. I'm very happy to see everybody in person this year once again after two years. It's really good to have the buzz of having a live event, so we are really excited to have you here as well. Thank you again for making your way down to STC. We've got the usual program this year, so we will start with a presentation by Singapore Airlines Executive Vice President, Finance and Strategy, Tan Kai Ping, who will take you through the financial results for the full year. That'll be followed by a presentation by SIA CEO, Goh Choon Phong, who will take you through the strategy and outlook for the next year.
We also have some colleagues, media friends and analysts who are joining us from overseas who are dialing in, so welcome as well. I hope you can hear us clearly. We will then, after the presentations, have a Q&A rather. Without much further ado, I'd like to invite Kai Ping to come up here and make his presentation. Kai Ping, please.
Thank you, Siva. Good morning. Good to see everyone. I've heard you guys over audio for the past two years, so good to finally see everybody in person. For those of you dialing in from overseas, hopefully we'll get the opportunity to see you next time. Let me go through the numbers for financial year 2021/2022. The SIA Group ended financial year 2021/2022 with an operating loss of SGD 610 million, but it's a SGD 1.9 billion improvement year-on-year. This was made up of an operating loss of SGD 619 million in the first half, followed by an operating profit of SGD 10 million in the second half.
The significant improvement year-on-year across the two halves of the financial year came from revenue improvement with the recovery of network, capacity and ultimately passenger traffic shot up strongly by robust cargo revenue performance. Passenger carriage staged a decisive upswing, up six times year-on-year, reaching passenger revenues of SGD 2.8 billion, activated by the launch and subsequent expansion of vaccinated travel lanes or VTLs in Singapore and the progressive relaxation of COVID border control measures in many of our key markets. Cargo revenue reached a new record high of SGD 4.3 billion against the backdrop of robust demand and continued global industry capacity constraints. At the operating cash level, the group's performance improved decisively from a cash burn to a cash surplus of SGD 824 million for the financial year.
With the benefit of a strong balance sheet, thanks to support of our shareholders and from debt investors, the group has been able to navigate the recovery from the pandemic in a decisive and calibrated manner. This chart shows capacity deployed as a percentage of pre-COVID for various quarters since the start of the pandemic, with the blue bars showing passenger capacity, the green bars showing cargo capacity, and the orange bars showing overall capacity. Passenger network and capacity recovery continued through the financial year with a step improvement in the second half versus the first half of the financial year, taking advantage of the step up in demand. Passenger capacity in quarter four reached 47% of pre-COVID levels while cargo capacity was at 72%.
On a blended basis, the overall capacity in CTK terms for quarter four was 9.1% higher quarter-on-quarter, 32.4% higher half-on-half, and 101.9% higher year-on-year. I'll come back to these numbers repeatedly throughout this presentation as a benchmark against revenue and cost numbers. Based on current public schedules, the group expects passenger capacity to go from 47% of pre-COVID in quarter four, financial year 2021/2022 to 61% for the first quarter of financial year 2022/2023, and 67% by quarter two. Slightly lot of numbers, so let me orient you through it. Beginning with the columns on the left, showing second half versus first half operating performance.
Against the 32.4% overall capacity increase from the first half to the second half of financial year 2021/2022, revenue improved by a much larger 69.4%. Non-fuel expenditure was up by a smaller 25.2%. A small fair value loss on fuel derivatives in the second half versus a SGD 79 million fair value gain in the first half. Net fuel cost was higher by SGD 568.9 million or 70.2%, dragging the total expenditure upwards 38.6%, lower than the increase in revenue, hence the swing from operating loss of SGD 619 million to an operating profit of SGD 10 million. Looking now at the columns on the right, comparing financial year 2021/2022 year-on-year performance.
Revenue grew 99.6%, about keeping pace with a 101.9% increase in overall capacity year-on-year. While net fuel costs increased by 115.6%, non-fuel expenditure was managed at a much smaller 19.9%, hence holding total expenditure increase at a smaller 30% year-on-year. We took a SGD 487 million fuel ineffectiveness charge last year, none this year, partially offset by a smaller fair value gain on fuel derivatives of SGD 205 million. With the stronger revenue recovery, the full-year operating line improved SGD 1.9 billion to register an operating loss of SGD 610 million. Net loss was SGD 962 million, a SGD 3.3 billion improvement on better operating performance and lower non-cash impairment charges.
This chart shows a sequential plot of revenue since the start of the pandemic. There was a distinct revenue uptick in the second half, higher by 69.4% compared to the first half and outpacing capacity injection of 32.4%. However, the keen eye amongst you would have observed a somewhat weaker quarter four compared to quarter three and noted the quarter four revenue increase of 6.7% quarter on quarter, lagging the quarter on quarter capacity increase of 9.1%. I will unpack this later in a Q4 slide. The numbers do not really show up the encouraging underlying trend. This expenditure time series plot is impacted by the effects of fuel hedging ineffectiveness charges and fair value movement in fuel derivatives in financial year 2021 and in the first half of financial year 2021/2022.
Let's remove this impact to look at the underlying expenditure trend in the next slide. A more intuitive trend of rising expenditure with the restoration of capacity. Expenditure was up year-on-year for FY 2021/2022 by 35.8%, significantly behind the increase in overall capacity of 101.9%. For second half versus first half, increase in expenditure of 35.5% was slightly ahead of the increase in overall capacity of 32.4%. More pronounced in quarter four versus quarter three numbers, where expenditure increased 13.4% against the capacity increase of 9.1%. You have no doubt guessed by now that this is mainly driven by the higher fuel prices in more recent times. Again, some more details on this in the later slides.
This time series plot shows the progress in group operating line since the pandemic started in quarter one of financial year 2021. The group registered an operating loss of SGD 610 million, SGD 1.9 billion better year-on-year, but the results were made up of two quite different halves, as you would observe, with a swing of SGD 629 million from an operating loss in first half to an operating profit of SGD 10 million in the second half. Breaking down the performance of second half, quarter 3 registered an operating profit of SGD 76 million, but quarter four saw an operating loss of SGD 67 million. Let's take a look at the drivers of quarter four versus quarter three performance in the next slide.
Keep in mind that from quarter three to quarter four, passenger capacity was up 21.6%, while overall capacity was up 9.1%. Revenue was up 6.7% quarter on quarter, so seemingly lagging the capacity injection. However, passenger revenue was up 46.5%, outstripping the passenger ASK capacity increase of 21.6%. This was despite the temporary suspension of VTL ticket sales for most of January as Singapore imposed restrictions due to the surge in COVID-19 Omicron cases. Strong pent-up demand saw ticket sales rebound as soon as VTL ticket sales suspension was lifted. Cargo revenue came off a record-breaking quarter three into a seasonally weaker quarter four, hence causing some drag to the overall quarter on quarter revenue numbers. However, we should keep in context that in quarter four, cargo revenue did not perform poorly.
It was still robust at more than 2x of pre-COVID, even though cargo capacity was at 72% of pre-COVID levels. In a sense, if you like, quarter three numbers was floated by extremely strong cargo revenue performance. Quarter four was still strong cargo revenue performance, but really we have the passenger engine finally firing up in quarter four. For the first time since the pandemic, we have all major segments of the business finally marching towards recovery. The ex-fuel expenditure increased in line with the increase in capacity and stronger passenger load. However, net fuel price increased by more as fuel price spiked. Let's take a look at fuel. Net fuel cost increased by 17.7% quarter on quarter, Q4 versus Q3 or SGD 112 million.
This was made up of SGD 50 million from higher uplift, SGD 119 million from higher fuel prices. Hedging gain blunted the impact by SGD 56 million or in fact a cushion of $14 a barrel in quarter four. A weaker USD versus Sing Dollar made up the remaining amount. In comparison to average fuel prices of $90.31 a barrel for financial year 2021/2022. Spot prices in early May have moved up by more than 50% and were close to $150 a barrel. Thankfully, the group remains hedged in Brent up to quarter one of financial year 2023/24 to about 40% of the expected consumption at about $60 a barrel.
A further $98 million will be recognized via P&L in financial year 2022/23 from earlier fuel hedge close out trades and $110 million between financial year 2023/2024 to financial year 2024/2025. This is on top of what is the outcome from the fully hedged position. These are the P&L gains from the close out trades that were taken earlier. The group will remain disciplined, you know, as appropriate in cost areas, even as operations expand in line with demand. Moving back to full year operating performance, and here are the components of the SGD 1.9 billion reduction in operating loss for financial year 2021/2022.
The improvement in performance was mainly driven by higher passenger and cargo revenue, partially offset by higher net fuel costs from higher uplift and higher prices, year-on-year movement in fuel derivatives line, and higher variable costs due to higher capacity. Breaking down the operating performance by the main companies in the group, the full-service carrier segment delivered an operating profit of SGD 275 million in the second half, driven by better revenue performance, staging a marked improvement compared to the first half. For the full year, the full-service segment registered a loss of SGD 112 million, but SGD 1.8 billion better year-on-year. The LCC segment, the low-cost segment, incurred a full year operating loss of SGD 454 million, SGD 116 million better year-on-year.
Scoot's capacity recovery has been slower than SIA, as many of Scoot's major markets only started to reopen at the end of quarter three and quarter four. SIA Engineering Company incurred an operating loss of SGD 15.2 million for the second half as operating expenditure increase outpaced revenue growth. Revenue increase was insufficient to offset the reduction in grant from government wage subsidy. For the full year, SIA Engineering Company incurred an operating loss of SGD 21.9 million. At the net result line, the group incurred a net loss of SGD 135 million in the second half. SGD 712 million better or an 85% improvement over the first half. Full year net loss weighed in at SGD 962 million, just shy of SGD 1 billion, but a SGD 3.3 billion improvement year-on-year.
This SGD 3.3 billion improvement was mainly due to SGD 1.9 billion in better operating performance, SGD 1.7 billion lower year-over-year aircraft impairment charges. The absence this year of certain other non-cash impairment charges taken last year of SGD 210 million, SGD 113 million surplus from aircraft and spares disposal, partially offset by a reduction in tax credit year-over-year, an increase in net finance charges, mainly due to additional borrowings. For financial year 2021/2022, impairment charges for aircraft of SGD 51 million were recorded, mainly due to the impairment charges of two Boeing 737-800s deemed surplus to requirement and further write-down of three previously impaired 777-300ERs due to change in aircraft trading plans. EBITDA was positive at SGD 1.3 billion for the financial year with an EBITDA margin of 17.1%.
As at 31st March 2022, gearing was healthy at 0.7x . Cash and cash balances stood at SGD 13.8 billion. The group expects to add 14 wide-bodies and two narrow-bodies to the operating fleet by the end of financial year 2022/2023. You have this table. You can get this presentation from our website or from SGX, so you can study the table in your own time. Moving on to the projected CapEx. Projected CapEx compared to what we announced in November 2021 is higher by SGD 900 million from financial year 2022/2023 to 2026/2027 due to two reasons. One, delay in certain deliveries in financial year 2021/22, which has pushed certain aircraft deliveries into future years.
Additional CapEx relating to the order for seven A350 freighters, net of the swap-out of two A350s and 15 A320neos from the group's order book. This concludes my presentation for the financial results. I'd like to invite CEO on stage for the strategy and outlook presentation. CEO, please.
Good morning, friends. Again, a very warm welcome to our STC. I think many of you are familiar with this premise, so we hope that's what Kai Ping and Siva have said, more of you will be able to attend in person in future briefings. I will touch on two key topics. The first one is about what we have learned as we navigate this pandemic and how it has actually made us stronger, and also what we continue to invest during the last two years when even though we were going through a very difficult time. The pandemic has been devastating for the airline industry, but even more so for an airline like SIA because we have no domestic market. We are completely dependent on international operations.
When the borders are closed globally and for a period of almost two years, you can imagine the stress it has on an organization like us. Let me take us back to the period of pre-pandemic, which is the year 2019. Many of you will recall that we embarked on our first phase of transformation before that, three years before that. In 2019, we were completing our first phase of transformation, our first transformation exercise. We were coming out of that transformation exercise at the end of 2019 with all cylinders firing. We were achieving in that quarter, the October to December of 2019 quarter, record revenue, record carriage, passenger carriage, one of the highest load factor we have achieved, and one of the best operating profit for the quarter. Of course, COVID came.
If we saw the first sign of the effect of COVID towards the end of January 2020 when Wuhan announced its closure, the lockdown in Wuhan. Thereafter, very quickly within a few months, virtually the whole world closed its borders to each other. You can see here that by the time we reach April, we were operating only at 3% of the pre-COVID capacity. What's worse, our passenger carriage dropped from 3.4 million in January to a mere 11,000 people by the time we reached April. Huge drastic. You can imagine that when we have such a steep drop in terms of carriage and therefore revenue, the stress it would have on the organization in terms of cash requirement.
At that point in time, we were having cash burn, you may recall, of SGD 300 million-SGD 400 million per month. That is before we factor in the need to pay for aircraft that were to be delivered. Very frankly, at that point in time, it was a survival mode. How do we make sure that we have enough liquidity to keep the organization going? Fortunately, as what Kai Ping has mentioned earlier, we have strong support from our shareholders. We were able to raise SGD 15 billion from our shareholders. After that, with the strong statement of support from the Singapore government, we were then able to go out to many different sources of funding to raise additional funding.
A cumulative funding raised since the April of 2020 was SGD 22.4 billion, which of course, makes us one of the strongest balance sheets among airlines. It is actually a learning process for us as well. We have never had the need to reach out to so many different sources of funding. In the process, we learn a lot about how best to actually organize the process of getting those fundings. What are the preparations we need to make, how do we make assessment of the viability of those funding sources. This learning is going to make us more resilient. You saw in my headline earlier, one of the things that we have actually emerged stronger in is resilient, being more resilient.
Not that we want another crisis of this nature, but it should something of a similar nature that demand a lot of, you know, cash in the short term were to happen, we know now and we're equipped with the necessary knowledge to respond even more effectively. Of course, it's not just about funding. We took rapid and proactive steps to reduce our expenditure. Part of that is also about working with the OEMs to defer some of the payment that we have to make. Again here, we are one of the earliest airlines to reach out to all our major OEMs to negotiate the deferral of aircraft deliveries, and as a consequence, moving out over $4 billion of aircraft expenditure, capital expenditure, for the immediate terms. Our staff have to regretfully also take these sacrifices.
Besides taking pay cuts, we also had to do a very painful exercise to reduce our staff strength. As all of you know, we've consistently said that our people are our greatest and most valuable asset. That's the reason why in this area of letting go of staff, we are probably among a very late comer in terms of execution among airlines. It is deliberate. We know that in a pandemic that affects just about all industries, it's going to be difficult for our staff to actually get jobs at that point in time. At the same time, we also know that this pandemic, like all the other crises that we have gone through, will pass at some point, and we need our ability to actually bounce back as quickly as possible when that happened.
You see that we took a rather different approach to actually bringing down and letting go of people. Specifically, among our crew, whom you know would depend a lot on flying allowances to actually earn enough to bring back to their family, we have arrangement by reaching out to both public and private sectors in Singapore and talk about whether or not they would need extra manpower during that period. There are organizations such as hospitals, you know, public transport and all that require additional people to help them with handling the customers that they have during the pandemic. Many of our people were attached out as care ambassador, as transport ambassador, safe distancing ambassador, contact tracing ambassador. Over 2,000 of our staff were placed out.
The consequence of that is that when they are placed out with these organizations, our staff is able to get full pay. That addressed the issue of them being able to provide for their family. At the same time, because they are actually working alongside people who are actually at the front line of fighting against COVID, they are contributing directly to the effort, and that generated a lot of goodwill. At the same time also, that they are gaining new skill, and they know that they can actually come back to SIA at some point where we see a recovery. From a company's perspective, we're getting back experienced people who actually have acquired new skills because of this exposure they were given.
This is the reason why we're able to actually now crew many of our flights that have taken off in the last few months, especially. We have been also more innovative during this pandemic. We have to. We know that health safety became such an important consideration. People want to reduce contact and all that. We're able to quickly leverage on the investment that we had before that, the digital investment on that foundation, to introduce ways in which our customer can interact with us without necessarily having physical contact. Things like your in-flight reading materials, they're able to do so and read on their personal devices. Similarly, they could also use their personal mobile devices to control IFE on board instead of using the screen or the handset.
We had a situation whereby nobody is flying, but we've got to see how we can continue to engage our customers. Our people have found novel ways to actually engage when people are not flying, and maybe some of you have experienced that. We had our now well-known A380 restaurant experience. Overwhelming response. We planned for two sessions. We end up having to organize 15. We also, I don't know whether when you came in, you hear the music that we're playing. That was a signature tune that we have introduced as well during this period to again engage our customers at an emotional level.
Because if you listen carefully, you'll find that in that tune, in that signature tune that we have introduced, there is that familiar SIA jingle, "It's a great way to fly." We have also introduced a signature scent made of flowers, extracts from flowers that are indigenous to Singapore, and they are now made available for sale on our KrisShop. If you want to get something unique for, especially for your overseas friends, this is a gift idea. Sales pitch. We continue to actually innovate even more in the various areas, be it product and services. By now, it's well-known what we have done with regard to introducing the bento service using serviceware where there is made up of recyclable papers.
Not only did it actually allow us to introduce more varieties for our customers in terms of food varieties, it also reduced weight on the aircraft, and that contributed to reducing more than 2,000 tons of carbon emission a year. Of course, you would have read about our initiative with NUS in setting up corporate lab, looking further ahead on what are some of the innovations we want to proactively pursue. Of course, we talk about what we have done in terms of introducing new business models. Again, you should be familiar with it. Maybe I'll just highlight the point on KrisShop because it really shows how we have pivoted from before COVID to now. Prior to COVID, most of KrisShop sales were onboard sales. In fact, above 60% of the revenue came from onboard sales.
Today, or in the year just passed, with very little flying, and in fact, only recently did we actually reintroduce the onboard sales for KrisShop items. Today, even without hardly any onboard sales, our revenue for KrisShop in 2021-2022 was actually higher than that of pre-COVID, that is 2019-2020. That says a lot on how KrisShop have been successful in pivoting what we used to get in revenue to e-commerce. I wanna talk about also how we have become more agile. Let me show you this slides that shows a line indicating the capacity increase that we have up to this point in time, which is Q1 of this new financial year.
I think it's easier to see how this reflects how proactive and how prompt we are in tapping demand when we compare it against what other airlines in Asia has been doing. This is a slide. This is a line that from data that we get from AAPA. You can see that we have been driving up our capacity way ahead of our peers, especially in this part of the world, bearing in mind that we're talking about international operations. Also very importantly is to see how we have been preparing and ensuring that our resources are able to respond to actual demand, even at short notice. If you look at these two lines are the key to operating resources, one, the aircraft, secondly, the crew.
You can see in both cases that we have been utilizing the crew and rotating them at a much higher percentage utilization than our recovery profile relative to pre-COVID in terms of capacity. This is where we can keep our operating resources ready for any increase that we see in the market and to be effective in tapping those demand opportunities. We're not just putting in capacity and not factoring in what kind of demand we could expect. If you look at the profile of how we inject the capacity in the various regions, you'll see that there's a so close association between when we inject capacity and when announcement of greater openings were made. In fact, as a result, you can see that our passenger carriage correspondingly has picked up strongly.
Beyond that, you also would note that despite the increase in capacity and quite aggressive injections, we are seeing higher load factor. This is an indication of not just us wanting to put in capacity without assessment of what the demand is. The slides on your right indicates what the profile looks like going forward. The next three months, you'll see that the demand profile, the forward demand profile actually is getting close to that of pre-COVID level, which again is very reassuring. Cargo, I don't need to elaborate a lot, but you can see that even for cargos, actually, you probably can see even more clearly that we are responding to this pandemic in a way that is more innovative. We converted passenger aircraft to carry more cargo.
We are also getting more active in making agile decisions on putting in capacity so that we can fully tap the recovery profile. Cargo, obviously, has done very well in this context. One of the outcome of all this proactive action that we have taken is the strong recovery in terms of cash flow. You can see this profile. Now, beyond what we have done and what we have learned, and how we have become stronger in some of these key attributes because of COVID, we did not stop investing and reinventing in other areas, particularly our core areas. We continue our transformation exercise. This is now the second year of our new transformation exercise.
The focus is on getting our people to be even more productive through reskilling, through upskilling, and also introducing more innovations and workflows, adjustments to make us more effective. We continue to improve our products, so all the A380s that you see operating today are featured with the latest A380 products. We introduce new products on the narrow body 737 MAX. We'll continue to invest to make the customer experience better. An example of that is the lounge. Okay, there are, as you are aware, some of the reports have shown, there are some congestion at our lounge, and you'll be happy to note that, by the 20th of this month, we'll be opening up the new KrisFlyer Gold Lounge. By end of the month, the full renovated SilverKris Lounge at the airport will be open.
Combining the two of them, you will almost double the current capacity for lounge. That will, to a great extent, ease the congestion. At the same time, you'll be able to see some of the very thoughtful innovation that we've introduced for the customers' comfort. Of course, despite the pandemic, we went ahead and did our freighter renewal, continue to invest in new, more efficient aircraft. As was mentioned earlier, we have also new models that we've achieved with cargo operations, particularly the business ventures that we have with DHL recently. The other part that we have always focused on is our network. We, as you saw earlier, we continue to be very proactive and aggressive in actually putting in place more connectivity.
At the same time, we continue also to pursue even greater collaboration with our alliance partners. Some existing ones, you know Lufthansa, Air New Zealand, KL. Not KLM, but SK. At the same time, we have been proactive in working with new alliance partners. We have actually announced our partnership with MH, Malaysia Airlines, with Garuda, with United Airlines, and we are stepping up even greater collaboration with ANA. The other important aspects, and something that is dear to our customers, is the loyalty program. Here, again, we continue to make it even more attractive for our customers. In fact, it'll be interesting to note that even during a pandemic, we managed to increase our KrisFlyer membership. Certainly not least, in fact, it's really high up in our agenda, is sustainability.
I've always said that the most effective immediate action any airlines can take with respect to sustainability is by having a fuel-efficient fleet. Our fleet age, on average, is about six years. The industry is more than double that. If you were to contrast from our own operating experience, a new generation aircraft with the older generation aircraft on the same route, we have seen an improvement in terms of fuel efficiency of about 30%. Correspondingly, that would reduce the carbon emission by similar percentage. You can see that we continue to do that. We also know that this, the use of SAF, sustainable aviation fuel, have to be part of the solution. The industry has spoken about hydrogen and other possible technology.
However, even the aircraft manufacturers would not acknowledge that the technology will not be available for long-haul wide-body aircraft even by 2050. Which is the commitment we have made to bring our emissions to net zero. We have announced various initiatives that we have to try to bring SAF in, and we'll continue to update as those initiatives progress. This is my last slide. Thank you for your attention.
Thank you, Mr. Goh. Probably need to remove my mask. While we get set up here, maybe I'll go through a few of the administrative details. Can you hear me? Okay. We have folks who are dialing in virtually, so if you would like to ask some questions, please could you scroll down your screen. There should be a little box in there where you can type in those questions, and my colleagues will be able to send those questions to me. At some point, I will ask questions from the colleagues, from our friends who are dialing in from overseas. For everyone here, you know the usual routine. If you could please mention your organization.
Really, we are short of time as always, so if you could keep it to one question each, please, that will allow more people to ask questions. Without any further ado, we just need a minute for CEO Mr. Goh. I'll invite the rest of the panelists. I'll introduce them as well. Joining Mr. Goh and Tan Kai Ping will be Mr. Mak Swee Wah, who will be the Executive Vice President, Operations, as well as Mr. Lee Lik Hsin. He is the Executive Vice President, Commercial. They will be able to take your questions as we go along. Okay, let's get started then. Could I get the first question, please? We have a mic coming to everybody, so please could you wait for the mic.
First, this gentleman here and then the gentleman behind him, please.
Hi. Greg Waldron from FlightGlobal. Great to see you guys in person again. Quick question about the fleet. When do you expect the 737-800s to, you know, finally leave the SIA fleet? What are the implications of the 777X delays for SIA?
Maybe I'll just address the second questions on the 777. As you know, we previously have indicated that the 777 is expected by end of 2023. Obviously, Boeing has made the announcement that it'll be delayed. The way that we have organized our fleet plan is such that we do have some flexibility in terms of making up for any potential loss in capacity. You'll see that because some of the aircraft we own, we can extend the use of it. Others, even on lease, we can also have the options of extending. At the moment, we are not, you know, I don't think that our growth plan will be severely hampered.
Thank you for the question. I believe your question is in respect of the 737 NG series. We have already recognized earlier an impairment of SGD 120 million in respect of the own 737 NGs. That was eight own 737 NGs. Those have been marked for sale and some of them have been sold. We are really talking about the nine remaining leased 737 NGs. Now, these leases will end between September 2024 and January 2026. At the end of the lease, the plan is that the airplanes will be returned to lessor. Yeah.
Thank you. The gentleman here on the far right.
Hi. Good morning. Chen Chuanren from Air Transport World. Earlier this Monday, IATA chief Willie Walsh said there's enough growth in Asia Pacific without China in play. My question is, in terms of revenue, how much does China play in terms of your profits in the near term? Could I also get a bit of a clarification from Tan Kai Ping regarding your mention of a change in aircraft trading plans? Thank you.
Lik Hsin, you wanna remove your mask?
As you know, we have not been able to restore our passenger services to China, and this affects both SIA and Scoot. As a proportion, it affects Scoot a bit more than it affects SIA, because SIA operates to fewer points. We do not expect it to impact us significantly in this first year of recovery because we are ramping up on all of the other points. The capacity guidance which we have provided so far, of the 60%, we have plenty of room to ramp up from that point before we even start reaching the point where we need to add back China. This year's growth is still going to be a very strong one, even without China. Thanks.
Thank you, Lik Hsin.
Maybe I'll just supplement by referring back to what I mentioned earlier about agility. We are very agile. Where there is demand, we can very quickly deploy our resources to where the demand is. We believe that over the next year or so, there will be opportunities for us to tap this demand, and we will be very responsive to those demand.
Thank you.
I think there's a question, Siva, sorry, on the impairment, right?
Oh, yes.
The change in trade-in plans in respect of three 777-300ERs. We have certain trade-in rights in relation to our 777-300ER fleet. This comes from some of the aircraft orders that we made earlier, yeah. We have different options in terms of the condition we trade the airplanes in. These are purely accounting. Now, our earlier plan was to trade in certain airplanes with higher engine life. We have now decided that for three of the 777-300ERs, we want to trade in with a different condition, with a more tired engine condition. Having made that plan, the accounting rules require us to take the charge, you know, ahead of time.
Now, the reason why we want to do that is because we basically want to use the engine to power the triple seven three hundred ER fleet for a longer period of time. That's partially the resilience that we're thinking around the triple seven dash nine fleet delay. Thank you.
Thank you, Kai Ping. Over here, please. Maybe here, and then the lady in blue, followed by the lady in the jacket, and I'll take some online questions. Thank you.
Yes. Hi, Brendan, the independent analyst, Sobie Aviation. I have a question about your forward capacity. I notice on slide 30, you kind of had the frequencies through September for all the regions. If you look at your forward schedules as well, things kind of plateau after kind of the bump up for June and, you know, June, July, August, September, kind of, a little bit of an increase, but not so much of an increase at around 70% ASKs and 65% seats, I think, versus 2019. But competitors are continuing to ramp up during that period, including here in Singapore. I was just wondering, you know, why are you slowing down during that period? Are you re-looking at that?
You know, are you concerned about losing your higher elevated market share that you have at the moment?
We provided some guidance on what we think the capacity injection would be for now. You can be sure that when the opportunity is available, we will certainly ramp up as we have done so previously to actually tap those demand. This is a general answer. What I can assure you is that with the agility that we have, we will actually go after any demand that we can see in the market.
Thank you. The lady over there, please.
Hi. Grace from CNA. My question is a bit more to do with the higher than usual flight prices, which would be of interest to the layman. Will SIA be aiming to keep fares priced as high as possible to benefit from the possible pent-up travel demand? And what factors determine if and when SIA will bring prices back down?
Yeah. This is a favorite question. We always say airfares are a function of demand and supply. The reality is that the flights for the next two months or so are quite booked up for many sectors. Therefore, on those sectors you will see higher prices. As you well know, with our pricing, dynamic pricing, when the flights are empty, the flights tend to be cheaper, and when they are full, they tend to be more expensive. If you go out beyond two months, the prices come back down. In fact, we regularly conduct promotions to try and get early bookings and early sales. I would say that there are actually attractive prices out there in the marketplace. It really depends on when you need to travel and where you need to travel. Thanks.
Thank you, Lik Hsin.
Hi, this is Chu Peng from OCBC. I have a question on the cost side. Given the cost inflation, also stronger USD, because I think some of the key cost items for airlines such as fuel costs and also the aircraft payment are priced in USD. Just wondering what will be the impact, and also how are you going to mitigate some of the cost pressure?
Well, certainly, stronger U.S. dollars, higher fuel prices, they will be a drag. They will increase expenditure. We will benefit from what we have done the last two years with our transformation program. There are many things that have been done, many small things that have been done. All added together, we believe will be quite significant in the ex-fuel expenditure area. We will see efficiency flow through as we ramp up our operation. There's no escaping higher fuel prices, stronger U.S. dollar dragging the expenditure line. The only place where we're gonna find some relief, as far as high fuel prices is concerned is our hedging program.
The question you have is really a general issue confronting the entire airline industry. Here is where even before COVID, we have one of the best cost structure. With the experience of the last two years and the continued transformation, we can be assured that we have improved our cost structure even more.
Thank you. Maybe we'll just take some questions from the folks who are dialing in online. Firstly, we've got Adrian Schofield, who has quite cheekily asked two questions. How is demand recovering for transit connecting flights, particularly on routes between Australasia and Western Europe? And also, do you think there'll be increasing preference for long-haul nonstop versus connecting flights? That's from Adrian Schofield.
The increase in demand that we have seen is really global. For us, therefore, it translates to both demand for passengers traveling in and out of Singapore, as well as the demand for our capability to provide connecting passengers an itinerary between point A and point B via Singapore. The transit, definitely, demand has seen that same strength as we have seen for demand to and from Singapore. The question of whether there is greater demand for long-haul, was it?
Yeah. Well, long-haul.
Nonstop.
Nonstop versus connecting.
Maybe the way to answer that question is through observing that we have actually put on more services on our nonstops to the U.S. Definitely, we are seeing a good demand there.
Thank you, Lik Hsin. One more question from Jamie Freed from Reuters. Could you please explain your strategy for Vistara in India as more competitors like Akasa and Jet emerge in the market, and now that Tata owns Air India? Sorry, the question is, what is the strategy for Vistara going forward, given the increased competition in the Indian market?
Vistara has always been competing with all the airlines in India, and that happened even before COVID. In fact, when Vistara was first formed, there were many more airlines in India that you had to compete with. Some of them obviously no longer exist, you know, Kingfisher, Jet and all that. I don't see that change. I mean, we are in a very competitive industry, so any airlines who wish to be successful has to be competitive. Vistara has established itself clearly as the leading full service carrier in India with great review from our customers. In fact, it has gone further during this pandemic period to many more international points. We're continuing to support Vistara's growth.
Thank you. We'll take some from the room. The lady in the front row in black, please. Followed by this gentleman here, and followed by Mayuko.
Hi, I'm Sharon Chen from Bloomberg Intelligence. Just one question on your cash balance. Given the strong recovery we're seeing, is there still a need to maintain such a high cash balance and have you earmarked it for any particular use? Thanks.
The answer is no, there's no need to maintain such a large cash balance. I think we are early days. We have just started on the real inflection point in the recovery path. We will look at this once we look at the balance sheet. We have a firm view, we have a very confident view about operating cash generation and the recovery trajectory. Yeah.
Thank you, Kai Ping.
Hi, morning. Taufiq from The Edge Online. We note the number of positions reduced at SIA Group in general, but I'm more interested about how many former cabin crew did you have to let go throughout the pandemic? As we recover, how many have returned so far, and do you intend to add on more as you expect more growth?
As Goh Choon Phong mentioned just now, in the early days, we did resize our workforce eventually, not at the early stage. Because there was uncertainty about the growth profile. We have kept enough. Looking at the planned growth that we have, the trajectory that we have seen, we are already now planning ahead and we have started recruitment since a couple of months ago. I think we are in a good place now to be able to support the capacity growth that we anticipate. I think this recruitment will carry on to make sure that we have enough and beyond the stage that we are seeing. Thanks.
Thank you. The lady here, Mayuko, in the second row behind Bala.
Hi, thank you for the presentation. I would like to ask about staff. I believe you have been doing a pilot with partners. Can I know when exactly you are going to start using it, and t he volume, how much of, you know, the total, you are going to use, in your maybe midterm plan? Also, what is the role that you're going to play in that, simply as a user, a consumer of it, or are you planning to do, you know, participate in any business, any plan? Thank you.
The questions you have asked are really questions that we are currently discussing with our partners, so I will not be able to give you any answer at this point until we reach an understanding of how we're gonna take it forward, so.
We'll take one question from online. We've got Kaseedit Choonnawat from Citibank asking. First question. Please comment on potential demand impact from rising ticket prices and cost, and whether there'll be a full pass on or down trade to lower cabin class. Second, why didn't CASK ex fuel decline quarter-on-quarter? And which cost items in particular? The third question is, with 777X being pushed out to around 2025, 2026, CapEx of SGD 4 billion looks very high compared to delivery plan. Any plans to revise it downwards?
As we said, we are nimble in adapting to demand and supply. Rising ticket prices are because of strong demand. If there is a weakening of demand, ticket prices will fall back. In relation to whether or not there is a possibility of down trading to lower cabin classes with higher ticket prices, that's not something that we have seen in the recent months. Of course, like we said, we will continue to be nimble and watch out for that and adjust prices accordingly to make sure that all cabin classes are filling up nicely. Thanks.
Thanks for the question, Kaseedit. We missed you in the room. Next time you have to come physically to ask the tough questions. You asked quarter three to quarter four CASK ex fuel, cost item ex fuel. Now, I think you're comparing the increase in, cost ex fuel expenditure quarter on quarter 11.7% against the overall ASK change of 9.1%. I think you have to take a blended view because, passenger capacity was up 21.6%. The reason why we provide both numbers is because some of the cost items will be driven by passenger ASKs. Some of the items will be driven by overall CTK. For example, fuel will be driven by overall aircraft activity. Certain items like in-flight meals, obviously driven by load and passenger capacity increase.
Really, on a blended basis, we are still seeing economies of scale playing through, with the injection of capacity. I think if you look at cost breakdown for items that are off trend, frankly, they are relating to items which are driven by much higher passenger load factor. They are actually, if you like, encouraging cost increase. Okay? As for CapEx, the CapEx schedule has not taken into account any impact that may come with the 777-9 delay yet. Those discussions are still in progress with Boeing, and we will update when there is a conclusion. Yeah.
Thank you, Kai Ping. Any other questions in the room? Okay, we've got. Sorry, Kyunghee, I missed you earlier. Peik. Well, the gentleman with the mic, maybe you could go first then, and then we'll go to Kyunghee and Peik.
Hi, this is Jason from DBS Bank. Thank you for this Q&A session. Maybe two questions for now. Just following on the question on manpower earlier. In terms of manpower, where are you today relative to pre-pandemic levels with regard to your flight crew and cabin crew? The second question is, forward bookings today are fast reverting to pre-pandemic levels. Can I check if this is uniform across all customer segments? Could you maybe provide a bit more color on the level of corporate bookings you're seeing at the moment?
Thank you, Jason.
With regard to manpower, as you recall, for the pilots, I think we did lose a few, but I think we kept almost all of them. If you recall also, we had an agreement to mitigate some of the costs by having a pay cut regime for them. The numbers that we have now are almost where we were before COVID. As more and more flights fill up, their flights and the utilization has been going up, so we are in a very comfortable position on that.
Cabin crew, as mentioned earlier, we did let some people go. The numbers that we have now is slightly below pre-COVID, of course. We are operating at 60% of capacity, going up in the coming months. This is where I mentioned just now, we are both, I mean, putting back into operation crew who have not been flying so much, as well as topping up with crew that we are recruiting. The numbers that we have will be tracking the capacity that we are planning to deploy in the coming until the end of the year. Yeah. Thanks.
When the passenger recovery first started with the VTLs, if you recall, late last year, it was correct that the corporate bookings at that time were slower to recover. Since April of this year, when Singapore fully opened its borders, we have seen a strong rebound on corporate travel and the corporate bookings moving forward. We are seeing that the contribution is already very similar to pre-COVID. I would say definitely that the momentum that we are seeing in our forward bookings is coming across all customer segments, which was the baseline question. Thanks.
Thank you. [Qinyi], please.
Hi. Thank you. Wanted to follow up on the manpower question. We have heard a lot, not just in this region, but other regions, where lack of manpower has severely sort of undermined operations, where flights have to be canceled. You know, and, probably, flights, you know, we're planning to put back in, had to be delayed. I'm just wondering, like, how much of that is actually undermining your sort of plans to increase capacity, given Changi Airport also just said that they are looking to hire like 6,600 people, to ramp up operations at the airport itself. You know, could you give us a bit of color, like how much of that is really affecting your ability to increase capacity? Thank you.
Maybe I will just take that question. Internally, as Mak Swee Wah has mentioned, we actually have been preparing for recovery right from the start, as you also can see in my earlier presentation. Even the way we have let go of staff, we bear that in mind to try to keep as many of these valuable resources as possible. Of course, from reports, you can hear that there are constraints elsewhere. Quite frankly, we just have to work with our ecosystem partners to address this issue. There is no simple solution, but you can be assured everybody is working towards the same goal of restoring the Singapore hub to what it was before.
Thank you. I'm really conscious of the time, so maybe Peggy and one or two more questions, and that lady there. Thank you.
Good morning. I'm Peggy from The Business Times. What is the ETA for return to profitability? Given that the annual loss was about SGD 1 billion, people are asking why is SIA still sponsoring F1? Thank you.
When do we go back to profitability? Well, look at our second half, it's already profitable at operating level. I will leave all our, you know, very experienced analysts to project forward what would that be. You can be assured that we will continue to share our operating stats so that it'd be quite transparent. On the F1 sponsorship, we obviously, you can expect that we obviously would have been negotiating with the partners, with the relevant parties, and have arrived at a conclusion that it is a worthwhile deal for us going forward in view of the spin-off effect it has in terms of bringing people into Singapore and also our brand exposure.
Thank you. The lady over there, please.
Hi. Good morning. It's Yi Zyan from OCBC on the bond side. The first question is, what will be some of the potential goalposts before you start thinking about potentially redeeming the Mandatory Convertible Bonds? If I may, just a quick follow-up question on the fuel hedging programs. Is there any plans to maybe, say, hedge more? Or are you still intending to keep this more neutral position and absorb the fuel costs? That's all. Thanks.
Sorry, could you repeat the second question?
Question is, as a follow-up on the fuel hedging program, is there any plans to hedge more, or you are intending to keep this more neutral position and then absorb the potential higher costs?
Yeah. Thank you for your question. On the MCBs, there are no definitive plans at this point in time that we can disclose. It's something that we will look at. Definitely we need to think about as the recovery firms up and takes hold, together with the whole review of the balance sheet. Now, fuel hedging, we have an active fuel hedging program in place. You know, the fuel hedging is not for the purposes as we have always say, of making money from fuel hedging or certainly not losing money from fuel hedging, but to stabilize prices. We are comfortable with our current hedge position, which carries us to FY 2023/2024, something into first quarter of financial 2023/2024.
It's something that is live, active, and under constant calibration. The philosophy continues to be to look at the hedging programs mechanism to stabilize prices. Yeah.
Great. I think that's about it, and we're done. Right on time. Well, thank you, everyone. Thank you, Mr. Goh Choon Phong. Thank you, Tan Kai Ping. Thank you, Lee Lik Hsin. Thank you, Mak Swee Wah. Thank you everyone for coming down today. It's great to see everyone in person again. We'll see you again in six months' time. So take care. Have a great day and a great week. Thank you.