Singapore Airlines expects full-year net loss for first time ever

Singapore Airlines (SIA) expects to make a full-year net loss for the first time in its history as the coronavirus continues to hammer the global aviation sector. Report informs citing the Business times.

The SIA Group, which comprises national carrier SIA, regional arm SilkAir and budget carrier Scoot, said in a Singapore Exchange update on Friday (May 8) that the forecast is despite "strong results" in the first nine months of the financial year that ended in March 2020.

"The collapse of fuel prices in March 2020 has led to fuel hedging losses on contracts maturing in the final quarter of FY2020. The unprecedented scale of the capacity cuts by the SIA group as a result of Covid-19 has also resulted in the SIA group being in an over-hedged position with respect to the expected fuel consumption for FY2021. Accordingly, the surplus hedges need to be classified as ineffective under applicable financial reporting standards, and the marked-to-market losses as of March 31, 2020, will be recognized in the profit and loss statement for FY2020," the group said in a bourse filing on Friday.

The impact of Covid-19 on SIA has been "exacerbated by the lack of a domestic market for it to fall back upon," SIA explained. As earlier reported, SIA and SilkAir have extended their combined capacity cuts of about 96 percent until the end of June 2020, while Scoot is expecting capacity cuts of about 98 percent.

So SIA has found itself in an "over-hedged position" for FY2021 by locking in higher prices for jet fuel though many of its planes are now grounded.