Despite a strong start to the 2019/20 financial year, the coronavirus has knocked the SIA Group down substantially. The group, which includes Singapore Airlines, SilkAir and Scoot is expected to post its first full-year loss in its 48-year history when it releases results on Thursday. Over the past, it's had close shaves due to various other global catastrophes. Yet the coronavirus pandemic is proving to be a hurdle like no other.

A promising start to the year

Despite a promising nine months of the 2019/2020 financial year, the SIA Group is expected to announce a full-year loss later next week. The group, which comprises three Singaporean-based airlines, is not hopeful for any profit for the full-year, which begins 01 April and ends on 31 March. Should this come to pass, it will be the first year on record that the SIA Group has not made a profit over the course of a full 12-month period.

Back on 14th February 2020, the airline posted a financial report for the quarter between October 2019 and December 2019, which was its third quarter of the fiscal year 2019/20. At that time, it was able to drive net profit up by 10.9% compared to the same quarter the year before. What's more, the carrier also posted a 15.7% increase in operating profit for that quarter.

The growth in Q3 of FY2019/20 provided a lot of hope for final year figures. In the full nine months that had been recorded at that time, operating profits were up 5.9% in the fiscal year. In addition, net profit was also up by 8.3% for the group to $520m.

However, fast forward a few short months, and the SIA Group is now staring in the face of its first loss.

First full-year loss in the SIA Group's history

For so many airlines, the past fiscal quarter was not the one they had hoped for. The next one isn't looking to be any better.

For the SIA Group, the coronavirus pandemic has had a devastating effect on its capacity. Just 4% of Singapore Airlines' fleet is in operation. The same is true for SIA subsidiary SilkAir. On top of that, Scoot the low-cost Singapore Airlines wing has cut its fleet size by 98% until July.

In a press release on 23rd March, Singapore Airlines said the following:

"Singapore Airlines will be cutting 96% of the capacity that had been originally scheduled up to end-April, given the further tightening of border controls around the world over the last week to stem the Covid-19 outbreak. This will result in the grounding of around 138 SIA and SilkAir aircraft, out of a total fleet of 147, amid the greatest challenge that the SIA Group has faced in its existence...It is unclear when the SIA Group can begin to resume normal services, given the uncertainty as to when the stringent border controls will be lifted. The resultant collapse in the demand for air travel has led to a significant decline in SIA’s passenger revenues. The Company is actively taking steps to build up its liquidity, and to reduce capital expenditure and operating costs." 

It's the uncertainty around the end of the coronavirus that has cast such a dark shadow over Singapore Airlines' future and, indeed, the prospects of the entire group.

What effect has the coronavirus had on the SIA Group?

Full financial year results will be released on 14th May. Although the SIA Group has come close to losses like this before, they have never dominated a 12-month period in the same way. In FY2009/10, the SIA Group had suffered due to the global recession and outbreak of H1N1. It lost $213m in the first quarter of the financial year, but that did not affect growth in net profit by the end of the fiscal year.

Before that, the airline had not made a quarterly loss since 2003, which coincided with the SARS outbreak.

Speaking to The Straits Times, the SIA Group said that its top priority is conserving cash to give it a fighting chance post-pandemic. It said:

"The timing of any recovery from the Covid-19 crisis and its trajectory remain uncertain. During this time, the SIA Group continues to pursue steps to reduce costs and conserve cash, and proactively build liquidity and strengthen our balance sheet."

Some of the issues that the SIA Group is contending with is purchasing excess fuel compared to the number of flights it has now scheduled. In addition, managers and directors are taking 30% fee reductions, and some 10,000 staff, including pilots, have been affected by furloughs and unpaid leave schemes.

Unlike other years where it's been able to bounce back, what we've seen so far with the FY2019/20 indicates very little good news for the SIA Group. Perhaps, despite initial losses, the group will be able to make a come-back in FY2020/21.