The mood at the 2024 annual general meeting was extremely positive, given Singapore Airlines Group’s (SIA) strong performance over the past two financial years, posting a second consecutive year of record revenues, operating profits, net profits and stellar industry metrics. This is a stark contrast to previous AGMs when the airline was heavily impacted by the Covid-19 pandemic resulting in significant losses suffered by the group.
SIA is the national flagship carrier of Singapore, with its headquarters located at Singapore Changi Airport. SIA is renowned for its exceptional service and strong industry leadership in the global aviation space. During the year SIA has won various prestigious awards including the Fortune World’s Most Admired Company where SIA is the only Singapore listed company to be awarded in the top 50 which solidifies SIA‘s success as a leading global brand.
SIA today operates 193 aircraft across Singapore Airlines (SQ) and Scoot, its wholly owned low-cost carrier, serving 118 destinations worldwide. The group is known for its ability to make vital critical decisions that has enabled them to be ‘first off the blocks’ post-pandemic and retain their industry leadership in the post-pandemic world.
To learn more about SIA’s past year performance and outlook ahead, I attended its recent annual general meeting. During the meeting I was able to observe the strategic initiatives that the management has undertaken to enable the airline to attain a swift recovery post-pandemic and continue to build on its momentum enabling it to retain its leadership as a leading airline that is well positioned for the future. Here are the five things I learned from the 2024 SIA AGM.
1. SIA provided a masterclass on crisis management following the SQ321 incident. SIA has always had a strong track record for its passenger services and safety. Unfortunately, on 21 May 2024, SIA was reminded of the unpredictable nature of air travel when SQ321 operating from London (Heathrow) to Singapore (Changi) experienced severe turbulence mid-flight and was diverted to Bangkok (Suvarnabhumi). The incident has tragically resulted in one passenger fatality and multiple injuries suffered by both passengers and Cabin Crew members on the flight.
Despite the unfortunate incident, SIA provided a masterclass on crisis management by providing rapid response and effective crisis communication. SIA leveraged it’s on the ground networks with authorities in Bangkok to provide the affected passengers and cabin crew with medical assistance swiftly. The airline also provided relief flights to transport for passengers to return to Singapore the following day for passengers who are well to return to Singapore. SIA mobilised a crisis management team to Bangkok to provide the affected passengers support with SIA CEO Goh Choon Phong personally visiting the affected passengers and cabin crew members.
After the incident, SIA also offered to compensate the affected passengers which includes:
- Full refund of airfare
- US$1,000 upon departure from Bangkok
- Delay compensation in accordance with EU or UK regulations
- US$10,000 to passengers who sustained ‘minor injuries’
- US$25,000 in advance payment which forms part of final compensation. Passengers are invited to discuss final compensation offer after they are well and ready to do so for passengers who sustained ‘serious injuries’
During the AGM, SIA’s management mentioned that these potential outflows are hedged as a result of their insurance coverage and most, if not all the expenses relating to SQ321 which includes compensation would be borne by their insurers.
2. SIA reported record financial results tapping on pent up demand of travellers and borders fully opening. Revenue for the company hit an all-time high at S$19,013 million in FY 23/24 surpassing pre-pandemic level revenues. This also reflected a 7.0% increase in revenue from FY 22/23. The strong revenue that SIA posted is mainly associated with the full reopening of borders globally, especially in North Asia as well as capitalising on the pent-up demand that the pandemic has created.
SIA also has effectively practiced a cost disciplined approach of running its operations and has significantly reduced maintenance repair and overhaul costs of its aircraft fleet through ensuring that it has a young fleet of aircrafts that are more resilient and reliable. Despite an increase in group expenditure, this was partially offset by the decrease in net fuel costs because of a 18.5% decrease in fuel prices. The company was also able to navigate this effectively as they benefited from a 16.0% increase in overall passenger and cargo capacity.
As a result, SIA posted record operating profits and net profits for the financial year at S$2,728 million and S$2,675 million respectively which is a 1.3% and 24.0% increase from FY 22/23. The strong performance has been accredited to strong passenger traffic and uptick in other revenue segments including cargo demand driven by e-commerce.
SIA has also benefited from its strategic objectives to be ‘first off the blocks’ post-pandemic and to retain market leadership in the post-pandemic world which has enabled the company to post stronger industry metrics which include a 26.6% increase in passenger traffic which surpasses capacity growth of 22.9%, a record high passenger load factor (PLF) of 88.0% which rose by 2.6% compared to FY 22/23. Both SQ and Scoot achieved record PLFs of 87.1% and 91.2%, respectively.
This has enabled SIA to have a strong balance sheet with S$11.3 billion in cash balance and an untapped committed line of credit of S$2.9 billion. SIA has also a healthy debt-to-equity ratio of 0.82, indicating that SIA has a balanced approach to financing its operations which has enabled them to invest in the company’s long-term strategic initiatives.
3. SIA seeks to build on its momentum to be well-positioned for the future through investing and enhancing its three pillars of its brand promise. Goh emphasized the importance of continued investment in service excellence, product leadership, and network connectivity. Key highlights from the AGM included continued investments in the company’s talent pool and leveraging customer insights to adapt offerings to the evolving needs of passengers, thereby boosting service excellence. Goh also underscored the group’s commitment to remaining agile and innovative in its product offerings to maintain market leadership. Additionally, SIA has expanded its network with new destinations, including a new service to Brussels and flights to the new Beijing Daxing International Airport. For its low-cost carrier segment, Scoot, the introduction of the new Embraer E2 aircraft will service new routes to destinations including Cebu and Koh Samui. These strategic investments and route expansions underscore SIA’s commitment to excellence and innovation, ensuring it remains a leader in the aviation industry.
4. SIA group will continue to use its strategic location, airline partnerships and dual-segment offerings to enhance its presence especially in Southeast Asia. SIA has indicated that they will continue to leverage Scoot to enhance their presence in Southeast Asia, a high-growth segment for the company with a projected annual growth rate of 4% to 5%. This contrasts with the 1% to 2% annual growth projected for major economies like North America, Europe, and Australia. Goh emphasized that SIA’s strategic location in Southeast Asia positions the airline perfectly to capitalize on the region’s growth, benefiting SIA’s dual offerings and enabling the group to effectively seize the opportunities presented by this strategic market. Additionally, SIA is taking a collaborative approach to strengthening its leadership in the region by forming partnerships with global airlines, enhancing its data advantage.
5. SIA continues to invest in its long-term vision by pioneering expansion into India becoming the only non-Indian based carrier to directly invest in India. As part of strengthening SIA’s long-term vision to enhance connectivity and strengthen its multi-hub strategy, the group’s direct investment in Vistara partnering with Tata and Sons has enabled SIA to be able to attain a seat at the table especially as the Indian aviation market consolidates. With the Indian aviation market projected to grow at 7% annually, this puts SIA in an advantageous position to participate in this high growth segment and attain revenues from Vistara’s success in the Indian market.
Furthermore, as the Air India and Vistara merger is set to happen this year, the merger will result in SIA owning 25.1% stake in the enlarged Air India group which comprises of brands such as Air India, Air India Express, AirAsia India and Vistara. This would enable SIA to attain a strong foothold in the emerging and high growth segment of India riding on the regional operational expertise of Air India, allowing SIA to benefit from strong revenue payoffs from their strategic long-term investment.
The fifth perspective
SIA has successfully navigated through its pandemic turbulence and fully recovered, but looming economic headwinds, particularly inflation and cost pressures, may affect its ascent toward sustained growth. SIA’s recent Q1 results were turbulent, with net profit plummeting 38.4% to S$452 million. Lower yields, intensified competition, and soaring fuel costs, up 30.1%, weighed on the airline. Despite a 5% revenue increase and steady passenger demand, these challenges underscore the industry’s volatility.
However, SIA has proven its mettle. Its resilience during the pandemic, coupled with strong financials and a focus on service, innovation, and network expansion, solidify its position as an industry leader. Though headwinds persist, SIA’s proven track record and strategic vision make it a compelling opportunity that is well-positioned for a smooth ascent.
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