Good morning, everyone, and I hope you're all well. My name is Siva, and I'm from the Singapore Airlines Public Affairs department. Welcome to our half year media and analyst briefing. Given the COVID-19 safe management measures that are in place in Singapore, we are unfortunately unable to meet everyone in person once again. However, we have organized this virtual session, and we hope that it will be useful for you. Today, we have two presentations. First, Mr. Tan Kai Ping, Executive Vice President of Finance and Strategy, will present the group's first half results. Next, our Chief Executive Officer, Mr. Goh Choon Phong, will take you through the outlook and strategy for the SIA group. Following that, we will have a question and answer session. Without any further ado, I'd now like to invite Mr. Tan to make his presentation. Mr. Tan, please.
Good morning. Thank you for joining us. I hope you have a copy of the slides that we have been sent over or uploaded, and I will be calling out the slide numbers. If we could start with slide number two. Here are the highlights of the first half financial year 2021-2022 results. The group incurred a net loss of SGD 837 million, SGD 2.6 billion better year-on-year. The main components of this improvement, SGD 1.2 billion from better operating performance and SGD 1.4 billion due to the absence this year of the large aircraft impairment charges we took last year. The group's operating loss was SGD 619 million, but this included a SGD 564 million debit last year from fuel hedge ineffectiveness and fair value loss against a SGD 79 million fair value gain this year.
Removing the impact from fuel derivatives, the underlying operating performance improvement was SGD 601 million rather than SGD 1.2 billion, with improvement coming mainly from better passenger and cargo revenues. Looking at quarter two performance against quarter one, operating loss widened SGD 71 million. However, this included a much larger fair value gain on fuel derivatives in quarter one. Excluding the impact from fuel derivatives, quarter two operating loss was only marginally higher, and this against a backdrop of higher fuel prices with revenue managing to match up as the passenger network expanded further. Operating cash burn continued to reduce as we progress through the first half, with average monthly operating cash burn at SGD 18 million per month.
Towards the end of the first half, we welcome good news of international borders starting to be open to quarantine-free travel, including via Singapore's vaccinated travel lanes, bringing positive momentum to the passenger business segment. Moving on to slide three. We have continued on a path of calibrated capacity recovery. If I may use this slide to orientate where we are along the capacity recovery profile. The bars show capacity deployed as a percentage of pre-COVID capacity. The blue bars show passenger capacity. Green bars show cargo capacity. The orange bars show overall capacity. We have been gradually rebuilding the passenger network from just 3.8% of pre-COVID in quarter one last financial year to 32.2% in the latest quarter just ended. Passenger capacity in the first half of financial year 2021-2022 was 5.4 times higher year-on-year.
Quarter two, financial year 2021-2022 was 21.5% higher quarter-over-quarter. Cargo capacity versus pre-COVID declined much less, even at the start of the pandemic, from the maximization of greater deployment and the use of passenger aircraft to carry only cargo flights. Cargo has kept on the momentum all throughout this time series. You can see cargo capacity at 62.8% of pre-COVID in the latest quarter. Blended the overall capacity in capacity ton kilometer terms or CTK terms for first half financial year 2021-2022 was 125.9% higher year-on-year, and 15.1% higher quarter-over-quarter, and at 43.6% of pre-COVID. Moving on to slide four, focusing first on the first half operating performance.
Against the 125.9% year-on-year capacity increase in the first half, revenue improved by a large number, 73% year-on-year, by lagging capacity. Net fuel cost was higher by SGD 434 million net of, this is net of, hedging gains. That works out to a 115.5% year-on-year. Non-fuel expenditure was up by only a small 6.1%. We will go into the main expenditure items in the later slides. We took a SGD 461.8 million fuel ineffectiveness charge last year. No ineffectiveness charge this year. The fair value gain on fuel derivatives this year versus the loss last year was a SGD 180.6 million positive swing to the operating line, hence the operating loss of SGD 619.4 million.
Looking at the quarter-over-quarter performance, Q2 operating loss was SGD 345 million or SGD 70.6 million more versus Q1. However, there was a SGD 64.8 million swing caused by the larger fair value gain on fuel derivatives recorded in Q1. Stripping off this item, the underlying operating loss was SGD 352 million in Q2. A much smaller SGD 5.8 million higher quarter-over-quarter. For reference, capacity quarter-over-quarter was up 15.1%. Fuel bill, however, increased more by 25% with higher fuel prices. Non-fuel expenditure trajectory was well under control, up by a smaller 12%. Revenue increase outpaced, being up 18.4%, largely covering for the higher quarter-over-quarter cost, resulting in the underlying operating performance being almost flat quarter-over-quarter.
On slide five, we are moving on to looking at revenue in a bit more detail. Revenue continued on an uptrend over the last four quarters, albeit still a long way from SGD 4 billion per quarter pre-COVID levels, but we are making steady progress. Moving on to slide six. The pie chart on the left shows the share of first half revenue by business segments, while the bubbles above the bars on the right captures the revenue performance levels by business segment versus pre-COVID quarter three, financial year 2019-20. Focusing on quarter two, financial year 2021-22, it shows a larger uptick in PAX revenue, passenger revenue compared to prior quarters, an encouraging sign. The star performer has been cargo. Despite cargo capacity still below pre-COVID levels, cargo revenue reached SGD 1.9 billion in the first half of financial year 2021-22.
This is significantly above pre-COVID levels, and this is a new record high. Moving to slide seven, expenditure. Expenditure was lower by SGD 51 million year-on-year for the first half, despite much higher capacity deployed this year. This is due to the year-on-year impact from the fuel ineffectiveness and fair value movement in fuel derivatives. So if we strip off this impact, and you see this in the next slide, on slide eight, we have a more intuitive picture with expenditure up SGD 591 million for the first half or 20.2% year-on-year. But this still lags the year-on-year capacity increase quite widely. So let's understand this better by looking at a breakdown of major expenditure items in the next slide. On to slide nine now.
Fuel costs, net of hedging gains, handling charges, landing, parking and overflying charges increased in tandem with the year-over-year capacity increase. Staff costs increased from higher crew allowances due to the higher level of activity with more capacity deployed year-over-year, lower government grants partially offset by lower headcounts. Depreciation and lease aircraft charges declined by a significant quantum due to the aircraft impairments we took in the last financial year. Lower heavy maintenance performed due to the reduced flying hours since the pandemic began, expiry of certain aircraft and engine leases. You see there the big change. AMO costs fell due to maintenance credit received from OEMs for the half, which more than offset the increase in AMO costs from more flying. Looking closer at fuel costs on slide 10.
The SGD 434.2 million higher fuel bill came from higher uplift, with the increase in capacity contributing SGD 243.3 million of the increase. Higher fuel prices contributing SGD 436.3 million were offset by hedging gain of SGD 209.4 million. A weaker USD against Singapore dollar made up the remaining of the amount. Onto slide 11. This time series plot shows the progress in the group operating line since the pandemic started in Q1 FY 2021. As mentioned before, first half operating loss was SGD 619.4 million, SGD 1.2 billion better year-on-year. However, the numbers contain quite a bit of impact from the fuel hedge ineffectiveness charge and fair value movement of our fuel derivatives on a year-on-year basis.
We strip this out to look at the underlying operating performance, and you should see that in slide 12. Here are the adjusted numbers. The group continues to make steady improvement in the operating line. The underlying operating loss was SGD 601.1 million, lower year-on-year, while quarter-on-quarter operating loss was marginally wider by SGD 5.8 million. On slide 13, I'm moving back to the reported numbers. The SGD 1.2 billion operating loss reduction was driven by higher passenger and cargo revenues. The positive year-on-year impact from fuel derivatives, mostly offset by higher net fuel costs from higher uplift and higher prices, lower depreciation due to the surplus aircraft impairments taken last financial year. Higher costs from deployment of more capacity, partly offset by continued cost saving initiatives. On to slide 14. Operating results of the main companies in the group.
All the major companies in the group delivered reduction in operating loss in the first half. For the full service carrier, operating loss narrowed by SGD 1 billion year-on-year for the first half, driven largely by revenue improvement and the absence, again, of fuel hedging ineffectiveness charge taken last year and the impact from the fair value changes in fuel derivatives. For quarter two, taking out the impact from the fair value change in the fuel derivatives line, the underlying operating loss quarter-on-quarter was slightly wider by SGD 27 million. For low cost carrier segment, the factors driving the reduction in operating loss were the same, albeit a smaller magnitude. Operating loss reduced by SGD 196.7 million for the first half. For engine company, improvement in performance came from higher revenue, largely from airframe, line maintenance segment, engine and component segment.
There was higher expenditure, largely attributable to higher staff costs of SGD 31.7 million, due to lower government grants on a year-on-year comparison basis. Material costs increased due to rise in business activity, partially offset by lower depreciation, SGD 6.1 million. Moving on to slide 15, and here, you see the net results line. Group net loss for first half was SGD 836.8 million, an improvement of over SGD 2.6 billion year-on-year. Slide 16 shows the waterfall chart for the items that contributed to this improvement. The improvement in the net line was mainly driven by better operating results and the absence this year of the impairment charges we took last year, chief of which, relates to the impairment taken in respect of surplus aircraft last year. Slide 17. Balance sheet metrics.
Cash balance at the first half stood at SGD 12.5 billion. Debt to equity ratio at 0.69x . Just some update on the fleet picture and what we are expecting in terms of deliveries for the rest of the year. You can see in the table where we were at the half year mark, as well as, what we see coming in for the second half. No changes really in the final fleet tally compared to our last update, except, we have included now the 737-8 MAX into the operating fleet table. Also, taking into account the delay in delivery of one Scoot A321neo, which will move into the next financial year. Slide 19. This is an update on our hedge book position.
It's a little bit complicated, so if you don't mind, I'll take a bit of time to explain this. Following the outbreak of the COVID-19 pandemic, there was a material reduction in the group's capacity compared to the prior planned flight schedules, as you're aware. As a result, we had to recognize fuel hedging ineffectiveness and fair value movement in prior quarters, as you've heard me repeat quite a few times in the course of this presentation. In view of the reduced fuel consumption projections compared to pre-COVID and the uncertainty that still remains in the capacity recovery profile, we took steps in the first half of financial 2021-2022 to recalibrate our hedge book closer to a neutral posture. This was achieved through sell swaps, which matched and closed out some of the hedge positions.
As a result, our hedge book is currently as follows: Around 30% of expected consumption for second half FY 2021-2022 hedged in Brent at an average price of about $57 per barrel. Around 40% of expected consumption for the period between Q1 FY 2022-2023 and Q1 FY 2023-2024 hedged in Brent at an average price of about $60 per barrel. Hedge positions beyond Q1 FY 2023-2024 have been closed out. The closed out trades taken into a period of rising oil prices have locked in gains of $89 million for the second half FY 2021-2022 and $225 million for periods beyond that on a cash-settled basis. Cash-settled basis means this is a cash that we receive from our hedge counterparties when the trades mature. Okay?
For perspective, the cash settlement gains from closeout trades. For example, for quarter three, financial year 2021-2022 is $38 million. Which is equivalent to an offset of $12 per barrel for the unhedged volume as currently projected. Net of mark-to-market gains, which have already been recognized in prior periods. Hedging gains to be recognized in P&L will amount $24 million for second half financial year 2021-2022, and $208 million for the periods beyond. There's a difference between the cash settled amount and the P&L amount because of the accounting rules, as fuel prices go up, we have to mark to market the hedges which no longer qualify for cash accounting, basically the volumes which exceed what we expect to consume. That accounts for the difference between the P&L impact and the cash impact.
Moving on to slide 20, this is my final slide. These are updated CapEx projection compared to what we have announced in February 2021. We are lower by SGD 600 million over financial year 2021-2022 and financial year 2022-2023. This has taken in two main updates. One is our latest projection on heavy maintenance and engine overhaul. With the lower level of activity, of flying during the COVID period, there is a reduced schedule on heavy maintenance and engine overhaul. It's also taken in the buyer furnished equipment or BFE and aircraft modification CapEx projections following finalization of some further contract negotiations. Thank you for your attention. Allow me to hand over to our CEO.
Thank you, Tan Kai Ping, and good morning, everyone. Welcome again to our mid-year analysts media briefing. I'm on slide 22. My presentation will cover four topics. Slide 23. I move on to slide 24 now. You may recall that Wuhan lockdown happened in near the end of January 2020, and thereafter, the virus spread rapidly throughout the world, and international border closures happened in quick succession. As a result of that, by April, most of the international borders are closed. You can see that, we were only carrying 10,000 passengers in April, compared with 3.4 million in January, just before COVID hit. It's a very significant drop within a very short time. Our capacity was brought down to only 3%-4% of the pre-COVID capacity.
With such a drastic drop and massive disruption to the travel market, you can expect that one of our key priority then was to handle the massive disruptions to our operations, to our customers, and also to our staff. Indeed, a lot of our resources were devoted to handling such as the disruptions as a result of this, and to minimize the inconvenience to the extent possible for our customers. The other key priority is about ensuring that we have enough liquidity to survive. You're aware that we're among the earliest to actually went out and raise a significant amount of funding. In this case, we started with the SGD 15 billion we raised from our shareholders, supported by our majority shareholders, Temasek, and also other shareholders.
With that strong support and with a strong statement of support from the Singapore government, we were able to successfully raise another SGD 6.6 billion from various sources. At the same time, we were also one of the earliest airlines to begin the conversation with the OEMs to talk about deferring our capital expenditure, deferring our payment to, for aircraft. In fact, we succeeded in moving out about SGD 4 billion worth of capital expenditure in the first three years. We also took steps to reduce costs in other area, including the very painful exercise we have to do in reducing our staff headcount. All these efforts, and also some of the initiatives taken, as part of our Lead the New World transformation, have led to an effective reduction in our cash burn.
As you can see on the slide, on slide 26, we started off with SGD 300-SGD 400 cash burns, and in the latest quarter, we are approaching breakeven. It's not just about handling the crisis from a perspective of immediate actions as well as having enough liquidity. We have also taken steps to ensure that we have put in place the right foundations so that we can emerge stronger. On slide 28, this is a slide that many of you would have seen in past presentations, but we added more items in there. It's about ensuring that we take care of all health and safety concerns of our customers and that of our staff throughout the entire customer journey. In fact, we examine in detail more than 190 touchpoints, and at each touchpoint to enhance the health and safety measures.
I just call out a few more recent initiatives and achievements in slide 20 on slide 29. You can see here that we are leveraging the digital foundation that was built in previous transformation on digital solutions that would allow our customers to have touchless interactions and also to lead the industries in some of the measures that are critical for travel in a COVID environment, such as the digital health certificate. I would also like to share that from 1 November, the SIA operation itself are now fully staffed with, or rather are fully operated with fully vaccinated staff, fully vaccinated crew, and that will be the case for Scoot as well from 1st December. I would also like to point out that our efforts in all this have been recognized by industry bodies.
In fact, Scoot has been recognized as the first LCC to have achieved those recognitions. Slide 30. We didn't stop there. We also look into other aspects of improving the customer's experience, as you can see on this slide. Left side of this slide, we are looking into all aspects of enhancing the customer's experience. In this case, you are aware that we have always presented a very elegant cabin interior. We have constantly improved and enhanced our food offering on board, including the latest introduction of local famous local fare, like, such as the Boon Tong Kee chicken rice. We are well-recognized for the personal touches by our crew, as well as the materials that we have chosen on board the plane.
You are probably aware of the recent introduction of the SIA Melody, which is an original composition incorporating the it's a great way to fly jingle that we used to have. The next time you fly, you will hear that for our departure as well as landing, as well as at our lounges. In December, we'll be introducing the Batik Flora, so watch out for that. We are also continuing to enhance the value propositions for our frequent flyers. In the case of KrisFlyer, we have added close to 250 non-air partners that would allow our KrisFlyer members to be able to use their miles to redeem beyond just flying. We have enhanced other value propositions for our KrisFlyer members.
Despite the pandemic and very little flying, we're able to increase the membership number for our KrisFlyer program. There are other efforts that we have enhanced as well. I mean, we are well aware of Kris+ which we have presented previously. Let me just touch on KrisShop. KrisShop revenue increased 40% year-over-year, but even more pertinent is to point out that the KrisShop revenue in the latest quarter is actually 7% more than the KrisShop revenue pre-COVID corresponding quarter, that means quarter two of financial year 2019-2020. That's despite the fact that relative to that quarter, we are only carrying about 4% of passengers, 4%-5% of the passengers. This means that KrisShop has successfully pivoted into tapping the e-commerce area to enhance and improve their revenue.
Watch this space as we'll be doing more. We have also used this period to continue our discussion with partners all around the world to look at how we can enhance our partnership for the convenience of our customers' connectivity. I'll just point out two aspects. One is that we are certainly continuing to discuss with partners in Southeast Asia, including Malaysia Airlines. We have recently also announced an MoU with United Airlines to facilitate the transfer of passengers for our passengers onto domestic points in the U.S. You're well aware of all the cargo initiatives, and Kai Ping has presented how well cargo has been able to leverage all those initiatives to both improve carriage as well as yield. All those that I have covered so far. This is slide 32.
All those things that I have covered so far is really part of this overall Lead the New World initiative that we've started now into our second year. We have more than 250 initiatives that touch on both revenue generation and improving customer experience. We have also, separately, more than 200 initiatives that look at how to improve staff productivity. I just want to point out that beyond that, this whole Lead the New World initiative is also about preparing the organization to be able to react to changes in the market in a nimble and flexible manner. I go on to the next part of my presentation, and if you look at slide 34, we're well aware of the many other initiatives that Singapore have experimented with in the past.
That includes the unilateral opening green lanes, as well as the air travel bubble that we were trying to establish with Hong Kong. None of that have really taken off in any significant manner. However, they were very good initiatives to actually try all possibilities to increase and encourage travel. VTL is really the one that has brought about a meaningful increase in traffic, and this shows how important it is to have bilateral quarantine-free travel arrangement for our travelers. As you can see here, this is a snapshot taken on the eighth of November with the announcement and implementation of the VTL, the booking profile has rapidly increased.
In the VTL arrangement, you would note that every time when a new VTL arrangement with a country has been announced, we were the first airline to actually implement, put in place the sales process, as well as implementing the flight itself. That is what I was talking about, the preparatory work that we did all this while before the VTL has enabled us to be the first off the block to capture all these opportunities. Throughout this period too, we have been increasing our network. At the moment in November, we have about 37% of pre-COVID capacity. We expect to reach 43% by December, and by then we would expect also to recover more than 50% of pre-COVID destinations.
On the right side of this slide is an illustration of the agility that we've taken during this period to tap into all possible revenue opportunities. You can see that we have proactively gone into tapping intra-Europe traffic as well, where we have the rights and where the borders are open. Similarly for transatlantic and transpacific traffic. Slide 36. You can see here that we have been actually using, at this moment, almost 80% of our fleet in operation. A significantly high percentage of our crew, over 90% of pilots and, you know, almost 90% of cabin crew have been activated as well.
Given that we are operating, even by the end of this year, 43% of capacity, such arrangement would allow us to react again very quickly to changes in the market and tap on any revenue opportunities that may arise. Slide 37. I think we have seen all this. This is just a summary of some of the announcements that have been made recently by various countries in view of the higher vaccination rates in those countries, as well as the recognition that the opening of border is important to stimulate the economy. Looking at this, we can be confident that there will be more quarantine-free travel arrangement to be implemented. You can be sure that with the preparation that we have been doing to emerge stronger, we'll be there among the first to tap any opportunities. Slide 39.
I just wanted to talk about our commitment to sustainability. I believe everyone is aware, well aware of the emphasis we have been putting on sustainability all this while. I've mentioned in the past that at the moment, the most effective way to reduce carbon emission is really to use more of the modern technology planes. If you were to compare a latest technology plane with the generation before, our experience has been that we were able to reduce up to 30% in terms of emission. Our current fleet age is just over six years. The industry fleet age is just over 15 years. Now, what does this mean in terms of carbon emission?
If we do a simple simulation, assuming that we are currently operating a pre-COVID capacity, and if SIA had not stopped any renewal from, let's say, 2010, today, we would be about industry level in terms of fleet age. If we were to compare the emission, if we had that fleet age to the emission of our current fleet, again, operating the pre-COVID capacity, 2019, 2020 capacity, we would have saved over 2 million tons of CO2 emission. That is a very significant reduction. Of course, it's not just about operating the modern fleet, although that is, as I said, the most significant contribution one can make in the near term. We have always been looking at how to further improve operational efficiency.
As you can see on the slide, on the right side of the slide, initiatives such as weight reduction, optimization of routes, reductions in terms of removing food waste and so forth, all these contribute to reducing fuel burn on the flight. Beyond that, we have installed solar panels on all our buildings, and that contribute to 20% of our electricity requirement for the year, replacing it with clean solar generated green electricity. On slide 40, continuing with sustainability, we fully recognize that SAF, which is sustainable aviation fuel, will be a key component of the ability for us to meet the carbon net zero target by 2050. In fact, our involvement in sustainable aviation fuel went way back in from 2011.
Right now we are discussing with various ecosystem partners in Singapore to look at how we can bring about the supply of SAF in a commercially viable manner. There is this aspect of carbon credit. We have also taken steps to offer offset program for our customers so that they may choose to offset their carbon footprint when they travel by buying into some of these high quality credits. On slide 41, sustainability is not just about CO2 emission. We recognize that there are other aspects of sustainability that we'll need to also work on, such as reducing waste, food waste, paper waste, plastic waste, and also look at how we can contribute to our community. This includes also the latest upcycling project that we are doing as we dispose some of our older generation planes. That was my last slide.
Thank you very much.
Thank you, Mr. Goh. We will now move to the question and answer segment. Now for this segment, Mr. Goh and Mr. Tan will be joined by Mr. Mak Swee Wah, Executive Vice President, Operations, and Mr. Lee Lik Hsin, Executive Vice President, Commercial. We have only around 30 minutes, and we have many participants. If I could please ask everyone to keep yourself to one question if possible, please. Please identify yourself and the organization that you represent before you ask your question. And with that, Rishi, could I leave it to you for the first question, please?
Thank you. We have the first question from Chen Chuanren from Air Transport World. Your line is now open.
Hi. Good morning, Siva and Mr. Goh. We see that your freighter cargo revenue has been high, but it seems that you're still maintaining your freighter capabilities. Now, are there plans to invest further into freight, or is your focus still mainly on passenger and ancillary revenue? Thank you.
We do not comment on our fleet renewal and expansion plans until we are ready to do so. Clearly, we have been utilizing our freighters at a higher level than pre-COVID to take advantage of the strong demand in the freight market. As the passenger capacity ramps up, we will also have the additional belly hold space to similarly take advantage of the market situation. Thank you.
That was for the record, Lee Lik Hsin, Executive Vice President, Commercial. Next question.
Okay. Thank you.
Thank you.
The next question is from James Teo from Bloomberg. Your line is now open.
Hi morning. This is James Teo from Bloomberg Intelligence. My first question is on the VTL versus your normal capacity. I know we've seen very strong bookings for VTL flights that you highlighted just now. How do you know, rationalize with the normal capacity that you had before? Do you reduce? Typically when the VTL opens, how do you balance, you know, I presume the use will be higher on the VTL. Would you still be operating some of the normal flight or non-VTL flight on the same routes? That's the first question. The second one is on fuel hedging. I think Tan Kai Ping mentioned about a neutral posture. Could you elaborate a bit more on what is meant by a neutral posture?
Is there a certain scenario where you know neutral being in line with your scenario of, you know, let's say 50% international traffic recovery next year, and then how many % for the year after that? Could you elaborate more on the neutral posture, please? Thank you.
James, I will take the questions on VTL versus normal routes, and Tan Kai Ping will elaborate on your questions, on your other questions. As you can see from the slide presentation earlier, even before VTL was introduced, we have been increasing our coverage, network coverage and capacity over time. There is no intention to reduce our coverage as a result of VTL. In fact, we'll continue to look for opportunities to increase. Of course, VTL facilitates the travel because of quarantine-free travel both ways, facilitate travel between Singapore and the other countries that VTL arrangement is with. But at the same time, there are also sixth freedom traffic and we will continue to also carry that and strengthen the hub through it. Thank you. Tan Kai Ping.
Thank you James. This is Tan Kai Ping. Let me explain the statement around neutral posture. If I may bring you back to pre-COVID, we have never hedged all of our consumption requirements. However, as we went into the COVID situation, big capacity cuts, we found ourselves being more than 100% hedged in respect of our consumption. Simply, what I meant by moving to neutral posture was just to pare back our hedge pool to, you know, the left or right of 50%. Neutral posture means we take no view on price. Left or right of 50% would be neutral.
Now, our hedge pool is currently on the left side of 50% simply because if we take the balance of risk view, then with the uncertainty still in the profile of recovery, although we see recovery, but our profile is uncertain. The neutral posture in our view will be on the left-hand side of 50%. Now, let me just be clear when I use the term hedge percentage, it refers to the quantum that is fully protected under hedge accounting definitions. When I say 30% hedge, 40% hedge, these are swaps and give a full protection. Now, the so-called unhedged portion that we have taken sell swaps to close out, they still mature.
There is a sell swap and buy swap that still matures at the various quarters. The gain that we expect from that portion is as I have disclosed, so there is protection there as well. Okay? I hope I'm clear, James.
Thank you. Tan Kai Ping.
Yes. Okay. Thank you.
Thank you. Ladies and gentlemen, you may press star one if you wish to ask question. The next one we have is from Adrian Schofield from Aviation Week. Your line is now open.
Oh hi there t hanks a lot. I just have some questions regarding Scoot. First of all, wondering when you might be returning more of the Scoot 787s to service. If you could perhaps talk generally about what sort of advantages and disadvantages long-haul LCC services might have during the recovery phase, compared to other models.
Yes, Scoot. Obviously, as you are aware, before COVID, Scoot's main areas of operations were to China, India, South Pacific, and some long-haul flights to Europe. Scoot has indeed resumed some of its long-haul flights to Europe. At the moment, much of the regional countries and also China, India are limited in the way we can access it, so Scoot would have to deploy its aircraft where the opportunity is there to do so. Of course, we'll continue to explore what other ways that Scoot can effectively tap into emerging traffic. There will be. Scoot is looking at it, and we'll be announcing some of this when we are ready to do so. Akan datang [Foreign language] on the use of 787 and others.
Thank you.
Next question please.
The next question is from the line of Ian Wong from UBS. Your line is now open.
Hi guys. It's Ian Wong from UBS. Thanks for taking my question. I have a question in regards to outlook. You mentioned that Q4 is traditionally a pretty strong seasonal quarter. Can you maybe give some guidance in terms of are we looking for positive sequential yield growth and volumes growth? Or are we starting to see some signs of competition, some of the competitors reported recently that there may be signs of competition as well? Yeah, just any color on the cargo outlook in Q4, please.
Yeah I'll ask Lee Lik Hsin to answer that question.
Yeah. We continue to see strong demand for cargo into this upcoming peak season. We obviously don't make any forecasts around our load and yield. I think we do expect that strong demand to materialize. Thank you.
Thank you Lee Lik Hsin. Next question please. Rishi.
Next one is from Pei Pei Ge from The Business Times. Your line is now open.
Can you hear me?
Very faintly Pei Ge. If you could speak up a bit, please. Thank you.
Can you hear me now?
Yes faintly. Please go ahead.
Okay. Yeah. I wanted to check the bookings for business class travel. Also, I noted that cargo has been in strong demand. I was wondering if at all you've seen any conversion from sea cargo business into air freight. I mean, because sea freight rates have been going up. I was hoping actually diversion business from ocean freight in terms of air freight. Also connected with, I think, pricing. Can you give if I need to move you on price-
Sorry, Pei Ge. We've gotta interrupt you. Sorry, Pei Ge. You know, we can't hear you clearly. I think your line is really bad. If you can't get into a different line, do you wanna send an email to the public affairs mailbox? We'll quickly answer that question when we get it. Because your line is really bad, Pei Ge. Sorry about that.
Okay. I think I'll message you then. Thanks.
Yeah. If you could send an email to the public affairs web email address, we'll address your question shortly. Thank you, Pei Ge. In the meantime, shall we move on to the next question please, Rishi?
The next question is from Patrick Hatch from Sydney Morning Herald. Your line is now open.
Hi Mr. Goh. I was hoping you could tell me what your expectations are around capacity into Australia for the first half of 2022 and then through to the end of 2022. Secondly, your airfares are very low in the first quarter of next year. Do you expect that to continue through 2022 as a way of stimulating demand? Thank you.
I'll ask Lee Lik Hsin to answer the question. I just want to, before you answer the question, state that you probably are aware that throughout the pandemic, we have continued to serve Australia even when the borders are not open. Lee Lik Hsin, please.
Yes Patrick, as you are also well aware, for Australia operations, we still have to operate under the framework of caps for many of the cities. We would obviously be guided by that in our overall capacity recovery to Australia. We are very happy about the VTL routes that we have put in place for Sydney and Melbourne, and we are obviously looking forward to more. In relation to pricing, obviously that is a function of demand. I would only say that customers should take advantage of whatever low prices there are out there. Thank you.
Thank you Lik Hsin. Could we get the next question please, Rishi?
Thank you. Just to remind everyone, you may press star one for questions. The next one we have is from Jamie Freed from Reuters. Your line is now open.
Hi m y question is just on the Indian market. I was wondering if you could talk a bit about your strategy there, and if it changed at all with Tata's purchase of Air India. Whether you see any sense in combining Vistara and Air India.
Okay. With respect to Air India, Vistara and all that, we do not disclose any confidential discussion that we may or may not have with our partners. If there are any aspects that are announceable, we'll certainly do so when the time is right. Thank you.
Thank you Mr. Goh. I will ask Pei Ge's question right now. Pei Ge from Business Times is asking, she's checking on bookings for business class travel, how have they been, so premium cabin. And also any air freight diversion from ocean freight, because ocean freight rates have skyrocketed.
Okay. I'll ask Lee Lik Hsin to answer the question again.
Okay.
As was part of CEO slides, we did say that we are seeing strong demand in the premium cabins. Actually we're just seeing strong demand overall on the VTL flight, as we have said, and this is across all segments. This is business, this is leisure, and this is family travel. The other question was around ocean freight transferring to air freight. Now, as I said before, we are seeing strong demand on the air freight side. Certainly, much of the news around the supply chain disruption around the world may have played a role in that, but we are definitely happy to take advantage of whatever comes our way. Thank you.
Thank you Lik Hsin. Next question, please.
Next question is from Greg Waldron from FlightGlobal. Your line is now open.
Hi guys. Can you hear me?
Yep. Loud and clear, Greg. Go ahead.
Great h ey, Goh Choon Phong, you know, China was a crucial part of the SIA network before, you know, the COVID-19 crisis. You know, what are the implications of a prolonged absence of the China market for SIA strategy and how do you go about replacing such a pivotal market?
Yeah. China, Greg, yeah, China is indeed, of course, an important market. Actually, not just for SIA, by virtue that it is actually the second biggest travel market in the world. It is important for any other countries as well. China have a very strict operating limit to carriers from any countries at the moment. There isn't much we can do about that. However, we are seeing, as I pointed out in my slides earlier, that many other countries are recognizing that with higher vaccination rate and also the need to stimulate and ensure that economic activity is continued.
There is a need to actually open up borders. There is still some time yet for all this to happen, and we are quite confident that as that happen, we are in a position to capture that. Yes, China opening is not likely to happen at the moment, but we are ready to capitalize on any other opportunities that may come our way. Thank you.
Thank you Mr. Goh. Next question, please, Rishi.
Next question is from Lorraine Tan from Morningstar. You may proceed with your question.
Hi g ood morning. I just wanted to follow up about, on, some views on cargo yield and cargo demand. I noticed that obviously with more passenger flights coming up and the fact that you are 80% of your passenger capacity, I'm just curious whether globally, with more flights coming back, whether you will see sort of stagnation in cargo yields for the near term. I know that you don't really comment on that so much, but just some indication of what the industry is expecting, perhaps.
Also, structurally, I'm just curious whether that changes your planning on whether you would continue to have maybe more freight services in the future, and how would you, and strategically, would that be something that you would be adding to in terms of your services? Thanks.
Okay. Thanks. Lee Lik Hsin will answer the question.
Yeah. Globally speaking, the total availability of air freight is still far below what it was pre-COVID, because the passenger services, which contribute a huge amount of capacity in the belly hold, still haven't resumed to what it was like, pre-COVID at this time. I think the question you are posing as to whether or not we will reach an oversupply. I think we are certainly not anywhere close to that situation. To the second question of what we are intending to do to increase our capability, as I already answered that question earlier about greater utilization of our freighters, as well as the increasing passenger capacity we are putting in, which will give us more belly hold capability. Thank you.
Thank you Lik Hsin. Next, please, Rishi.
The next one is from Divya Gangahar from Morgan Stanley. Please proceed with your question.
Thank you very much. Good morning. Just one clarification on the fuel hedge strategy. Just trying to get a sense that given the oil prices have been rising the way they are, you know, what prompted the decision to close out the hedge positions now rather than wait for a while, given and have a more hedged position, given that we had locked in much lower prices in our previous hedges. So that's one clarification question. The second is if you can give us some sense on, you know, passenger yield and how to think about that with the mix of VTL and non-VTL flights going into the next quarter.
How should we think about passenger yields versus pre-COVID levels and versus the current levels with more VTLs and premium cabins being bought? Thanks.
Tan Kai Ping will answer the first question and Lik Hsin will answer the second one.
Hi, this is Tan Kai Ping. Thank you for the question. The purpose of our fuel hedging program is to manage volatility in a major input cost, fuel cost. We don't take a speculative position when we do hedging. That means we don't take a particular view on whether oil prices are up or oil prices are down. Nobody can tell where oil prices are going. Oil prices have gone up in the recent two months. It's pretty elevated now, Brent $80+, but who knows what will happen in the next couple of weeks or couple of months. We just take a posture that we usually take in respect of how we manage volatility. That is what drove our recalibration of our hedge book. Okay.
I'll pass o ver to Lik Hsin for the second question.
Okay. In relation to passenger yields, in the last year when COVID first struck us, the passenger numbers came down to such a small level that the yields are clearly not representative of business as usual. With more and more travel coming back via the VTLs, the yields will move towards a more representative state. I would make the comment that our focus is really on the RASK, the R-A-S-K, which clearly we have that hope and we have that confidence that it will certainly be improving with more and more VTLs coming into play. Thank you.
Thank you, Lik Hsin. Next question, please, Rishi.
The next question is from Lucia Anne Rolli from Channel NewsAsia. Please proceed.
Hi there. Thanks for taking my question. I just wanna check on jobs. Currently, 92% of pilots and 86% of cabin crew have been activated. Can I check on the remaining? When will they be expected to return? When will full staffing be back? If you could share a timeline on that. Will more people, more employees be deployed for the cargo side of the business since it's doing so well? My second question will be, with the looming threat of the E.U. border restrictions, how will this impact SIA's forecast?
Okay. I will take the first questions. Maybe, yeah, Lik Hsin will take the second question. In terms of. Well, I've mentioned that we have, you know, 92% of pilots and 86% of cabin crew now back with us. And actually it is at the level that we're operating now, which is 37% of capacity, pre-COVID capacity at the moment, and going up to 43% in December. We are quite comfortable with this return rate. Some of our cabin crew and pilots are still deployed outside of the organization to help out in other organizations. For example, some of our cabin crews are still working as care ambassadors in hospital and so forth. We expect that gradually they will come back. There is no definite timeline at the moment.
Certainly the current manpower manning level, supplies for the operations we have. Similarly, for cargo, we have always been looking. Of course, cargo have taken on a lot more in terms of its operations, because now we have like a passenger aircraft for cargo mission. Into the extent that those also involve the passenger aircraft operation, obviously the passenger side would have manpower that's supplemented as well. Lik Hsin?
Yeah. The EU classifications is something that is in a state of flux in regard to how it will impact us. Obviously, you would have seen the news about the new restrictions that are coming into play for Denmark. This is an area that we will be watching. I think it is not absolutely clear that I wouldn't describe it the way you have, which is looming border restrictions, because it is a guidance and the EU countries have their capability to make their own call on finally what new rules they want to put in place. Some may, for example, choose to put in place testing if there were no testing previously, and that doesn't really impact demand. We'll see how it goes. Thank you.
Maybe I'll just add that, really some of these measures is outside the airline's control. As we have pointed out in my presentations and others, that the whole idea is getting the organization ready to be very agile, very nimble, such that we can always react at very short notice. Thank you.
Thank you, Mr. Goh. Next question, please, Rishi.
Next question is from Danny Lee. Your line is now open. It's from South China Morning Post.
Hello g ood morning, everyone. I hope you can hear me. I just wondered, do you anticipate a future of operating mostly or only vaccinated travel lane flights, at least one that fly to and from Singapore? Do you have a clearer idea on how the rest of the Asia Pacific will reopen next year? For example, will Hong Kong and China be the last of your markets to operate and open up, in your view? Thank you.
I think it's probably fair to anticipate that there will be more requirements for vaccinated travel. Whether it will be in the exact form that it currently is unclear, and which other countries will join is also something beyond our control. As a general trend, we do expect that there will be increasing opening over time simply because, as I said, you know, vaccination rates are going up and also that there is a realization, the sentiment that the border opening is actually an important part of creating the economic activities for the country.
I just want to say that, as you can see in what's happening all over the world at this point in time, there are various flare-ups in the infection rate, and we fully anticipate that, during this period, things can still be volatile and that the profile could be patchy, but we're fully prepared for that. Thank you.
Thank you, Mr. Goh. Next question, please, Rishi. We probably have time for another two or three more questions depending on the length of them. Next question, please, Rishi.
The next one is from Melissa Leong from Credit Suisse. Please proceed with your question.
Hi all. Hi, can you hear me?
Yes, Melissa.
Hello. Yes. Hi. My question is, it says that the SIA summer schedule is back to pre-COVID levels based on database data. Is it accurate or is it because of slot lease?
Okay. Lik Hsin will answer that question.
Okay.
We publish the schedules based on expectation. You know, as we come closer and we have update on how we need to adjust, depending on the situation at the time, we will do so. It's not a forward view. It's just what we publish so that we have seats available for sale. Thank you.
Great. Thank you. We'll probably take the last two questions, I think. Next, please, Rishi.
The next one is from Shukor Yusof from Endau Analytics. Your line is now open.
Hi, Boon. Quick question on carbon reduction. Do you support calls to tax frequent flyers to help your case for airlines? Thanks.
Sorry, if I may, rephrase that correctly. Are you asking if we plan to tax frequent flyers?
No, no. I'm asking if you are open to ongoing calls. There have been a lot of calls after COP26 for frequent travelers, air flyers to be taxed. Are you supportive of that?
The question is, do we support calls to tax frequent flyers in order to help the sustainability and the environment?
That's correct. Thank you.
I think you are aware that currently there is the CORSIA scheme, and that was something that was endorsed at ICAO. For that, there is credit that the airlines have to purchase for any growth beyond, in this case, 2019 capacity. That's for the airline side. On the consumer, we have also offer the ability for consumers who are willing to actually purchase offset for their own travel. I think those are measures that would help to mitigate some of these concern over carbon emissions as a result of individuals traveling. We do not currently have any support for taxing just a segment of our travelers. Any measures that are to be implemented should be done in an equitable manner. That's our current position. Thank you.
Thank you, Mr. Goh. Next question, please, Rishi.
Next question is from Mayuko Tani from Nikkei. Please proceed with your question.
Yes, hello. Can you hear me?
Yes, go ahead, Mayuko.
Great. Thank you so much for this opportunity. I would like to know about the finance part. The second portion of the SGD 15 billion you have, I think you have already raised, and you're going to use. How long do you think it will last under the current situation where you're approaching the break even? Under these circumstances, do you think you will not need to go for the market to raise more money, you know, for the time being? For how long? Another question is about the unit cost. With all the new measures that you have to bring in under the pandemic, how much unit cost has been added compared to pre-COVID? Thank you.
Okay, I'll ask Tan Kai Ping to answer those questions.
Thank you, Mayuko. Let me just deal with your second question first, which is a shorter one. We don't disclose the breakdown. In any case, I think the measures are extremely dynamic, so not very productive at this point to talk about it, you know. But I think on a quarter-on-quarter basis, you can see our unit cost as we publish. I think we can just take that at face value for the moment. On funding, we have disclosed actually our expectation of how long our latest SGD 6.2 billion rights issue, mainly convertible bond, the second tranche, how long we expect that to last. I think we guided that that would last, that would take us well into financial year 2022, 2023.
That remains our guidance. Thank you.
Thank you, Tan Kai Ping. Thank you everyone once again. We have now come to the end of our media and analyst briefing, for the year, for half year rather. We hope to talk to you again during our full year result briefing. Till then, have a good day. Stay safe, everyone. Good luck. Thank you again.