MAINBOARD-LISTED SIA Engineering Co : S59 0% (SIAEC) saw second-half earnings rebound on a writeback of associates&rsquo tax provisions, its latest results showed on Thursday (May 5).

 

But the maintenance, repair and overhaul service provider was still ringing up operating losses, with its full-year bottom line sustained only by what it called &ldquo substantial government wage support&rdquo - and the board warned of risks to its business outlook, despite early signs of recovery.

 

Net profit surged to S$42.6 million for the 6 months to Mar 31, 2022, up from S$7.8 million before, as turnover grew by 37.5 per cent year on year, to S$302.6 million.

 

The latest performance took SIAEC to a full-year net profit of S$67.6 million, reversing the loss of S$11.2 million in the year-ago period, as revenue rose by 27.8 per cent to S$566.1 million.

 

Yet net profit was shored up by associate and joint venture contributions, which came to S$79.1 million for the 12 months. SIAEC had incurred a tax charge from its associates and joint ventures in the year-ago period, and an impairment provision on its base maintenance assets.

 

SIAEC disclosed in its financial statements that the group would have recorded a full-year loss of S$25.9 million without the uplift from government wage support grants.

 

And, even with the revenue growth - which was attributed to a higher number of flights handled - SIAEC continued to notch operating losses, amid rises in staff, sub-contract and other costs.

 

The operating loss in the second half was S$15.1 million, compared with an operating profit of S$2.2 million previously, as SIAEC noted that higher revenue &ldquo was insufficient to offset&rdquo costs from the rollback of government wage support and manpower measures.

 

Meanwhile, SIAEC recorded an operating loss of S$21.8 million for the 12 months, narrowing by 12.8 per cent from S$25.0 million in the year before.

 

Earnings per share (EPS) stood at 3.79 cents for the 6 months, up from 0.69 cent previously, while full-year EPS was 6.02 cents, against a loss per share of 1.00 cents before.

 

Net asset value was 143.5 cents a share, compared with 136.8 cents as at end-March 2021.

 

The board did not recommend any dividend for the financial year, unchanged from the previous year. Though it described the company as &ldquo confident of recovery&rdquo , it also said: &ldquo While flight activities are showing clear signs of recovery, they remained low against pre-pandemic levels.

 

&ldquo Against a backdrop of geopolitical tensions and continuing threat of rising infection in some countries and new variants emerging, there are significant risks to the pace of recovery.&rdquo

 

SIAEC&rsquo s performance &ldquo will be highly dependent on the degree of our revenue recovery vis-à -vis rising costs and declining government wage support&rdquo , it added in its outlook statement.

Investors looking beyond Singapore Airlines for travel plays can look within the region

 

THE world is reopening, and airlines are finally getting that long-awaited boost in air travel demand as well as the accompanying mending of their bruised financials.

 

In Singapore, passenger traffic reached 400,000 or 31 per cent of pre-Covid levels in the week ending Apr 17 - up from 18 per cent a month ago - after the city-state reopened its borders to all fully vaccinated travellers from April.

 

The number of passenger flights also saw an increase to 38 per cent of pre-Covid levels in that week, from 29 per cent a month ago.

 

National carrier Singapore Airlines : C6L +0.74%understandably could capture a decent share from the higher traffic, and indeed it has already begun to report better numbers. It carried some 893,000 passengers in March, up from 544,600 in February 2022. Group passenger capacity reached 51 per cent of pre-Covid levels in March.

 

Besides Singapore Airlines, which other companies could be on investors&rsquo radars? Several other counters in the region look attractive based on fundamentals or recent developments.

 

Korean Air Lines has announced it will add hundreds of international flights per week from May, including another 100 weekly flights to the United States, Europe, Singapore and Thailand, with 100 more weekly flights to be added in June and 300 more in July.

 

The South Korean government has said it is considering abolishing the curbs implemented during the pandemic to stem infections, including relaxing the requirement of mask-wearing outdoors. Such a decision could bode well for Korean Air Lines, which had managed to become profitable in 2021 even with most pandemic-related restrictions still in place.

 

Its cargo segment, like that of most competitors, furnished the airline with financial support during the pandemic, with a 57.5 per cent year-on-year jump in segmental turnover, according to the estimated financial results Korean Air Lines has published.

 

Its liability-to-equity ratio dipped drastically to 275 per cent from 634 per cent, the latest financial results showed.

 

Investors should watch out for elevated fuel prices, though, which might exert downward pressure on Korean Air Lines&rsquo profitability going forward, as it already reported an 87 per cent spike in fuel prices for the fourth quarter of FY2021 to December.

 

China Eastern Airlines is another player to watch. Although it was still loss-making in 2021, Bloomberg data showed the carrier clocked a 14.3 per cent improvement in revenue for the last 12 months.

 

Although China is persisting with its zero-Covid strategy, and this has weighed on Chinese carriers in terms of international traffic and domestic volume, the vast domestic China travel market has the potential to rebound quickly. This underpin the Chinese carrier&rsquo s performance once the current situation comes under control.

 

Hence, Chinese Eastern Airlines would furnish investors with an opportunity to diversify geographically and also leverage strong Chinese domestic travel demand as the country is still largely closed to international players.

 

The company does have another short-term challenge: handling the possible reputational damage and drop in confidence arising from the plane crash that claimed over 100 casualties in late March.

 

Lessors are also a proxy for investors who want to buy into the aviation recovery, outside of the usual airline shares. BOC Aviation has shown resilience since the aviation world was gripped by the pandemic.

 

BOC Aviation, listed in Hong Kong and a subsidiary of Bank of China, reported a 10 per cent rise in net profit of US$561 million in 2021 on a 6 per cent increase in revenue to US$2.2 billion. The company&rsquo s board has proposed a dividend of US$0.1733 per share subject to shareholders&rsquo approval and had earlier approved an interim dividend of US$0.28311 per share.

 

Although it reported that 18 aircraft it formerly leased to airlines in Russia are now being recovered in compliance with sanctions following Russia&rsquo s invasion of Ukraine, BOC Aviation said the net book value of the owned aircraft net of all cash collateral was US$589 million or 2.5 per cent of its total assets.

SIA and its low-cost subsidiary Scoot together carried 893,000 passengers in March. ST PHOTO: GAVIN FOO

 

SINGAPORE - Singapore Airlines (SIA) enjoyed an almost ninefold annual increase in passenger numbers last month as air travel started taking off following the lifting of travel restrictions.

 

SIA and its low-cost subsidiary Scoot together carried 893,000 passengers in March, up from 544,600 in February and 100,100 in March 2021.

 

Passenger load factor, which measures seat occupancy, rose to 54.5 per cent, a jump of 41.7 percentage points from a year earlier.

 

The average passenger load factor during the pre-pandemic era was upwards of 78 per cent.

 

The month of March thus represents the highest load factor since the start of the pandemic in early 2020.

 

On the cargo side, load factors remained a healthy 72.5 per cent in March 2022, though 19.8 per cent down from a year ago. But actual cargo loads carried rose 16.6 per cent on the back of an additional capacity of 48.3 per cent - hence the fall in load factor.

 

Cargo loads to and from China and Hong Kong were constrained by pandemic controls there.

 

With flights resuming for more destinations in Australia, South-east Asia and South Africa, as well as to Gatwick (via Bangkok) and Newark, the group passenger network covered 93 destinations by the end of last month.

 

With the major reopening of borders, the group' s operating numbers for this month are expected to be significantly higher than even March.

 

But it will likely take some time before the operating numbers match the pre-pandemic levels of 2019 when SIA Group carried some 3.5 million passengers.

 

Nevertheless, the group has restored almost 60 per cent of its capacity and flies to up to 80 per cent of its pre-pandemic destinations or routes.

 

Two months ago, the group unveiled a profit of $85 million for the third quarter ending Dec 31, 2021, turning around from a loss of $142 million a year earlier.

 

For the nine months to end-December, SIA still posted a loss of $752 million, though this was a huge improvement from the $3.6 billion loss during the comparable nine months at the height of the pandemic in 2020.

 

Most analysts expect the January-March quarter to be profitable for SIA, but not enough to lift full-year results into the black.

 

But given the solid forward bookings, the outlook remains bright, and the company' s balance sheet remains stable.

 

To date, SIA Group has raised $22.4 billion in fresh liquidity since April 2020, including $15 billion from shareholders through rights shares and mandatory convertible bonds, as well as bond issuances, secured financing, and sale-and-leaseback transactions.

 

SIA also has an additional $2.1 billion available in untapped credit lines.

 

To recapture the travel market, the airline has been actively building up collaborative partnerships with regional peers such as Malaysia Airlines and Garuda, as well as international carriers like United Airlines. It also has significant partnerships with Air New Zealand, ANA of Japan, Lufthansa, SAS, Virgin Australia and Vistara in India.

 

As at end-March, SIA had 33 code-share partners and access to over 200 additional destinations.

 

Meanwhile, its cargo business - which has held strong during the pandemic as SIA became a carrier of choice to move vaccines and pharmaceuticals around the world - covers over 90 destinations with a fleet of 747-400F freighters, as well as the belly holds of its SIA and Scoot planes.

 

As at April 1, the group had 185 aircraft in its operating fleet. It also had 107 planes on order, including new Boeing 777-9s, Airbus A350-900s, and planes from the A320 and B737 range.

 

The main challenge remains fuel costs, which have risen significantly since the start of the war in Ukraine.

 

" Since the start of the vaccinated travel lanes in September last year, we have been nimble and agile in capturing the pent-up demand for air travel," said a spokesman. " We will remain alert to all revenue and growth opportunities that come this way as air travel returns."