SYDNEY (Reuters) - Singapore Airlines Ltd (SIAL.SI) will cut capital spending this financial year by at least 12% from its previous plan, with the final reduction to be determined by talks with planemakers over delivery delays, its chief financial officer said on Friday.
The new forecast of S$5.3 billion or less by the end of the year ending March 31, 2021, compares with a S$6 billion figure outlined in November before the coronavirus pandemic destroyed demand and led the airline to ground most of its fleet.
“Any agreements we may reach with Airbus and Boeing in the coming weeks and months are not reflected here,” CFO Stephen Barnes said of the new estimate at a briefing for media and analysts.
Singapore Airlines on Thursday evening reported its first-ever annual loss, citing poor fuel hedging bets and the collapse in demand driven by the coronavirus pandemic, saying the timing of any recovery was uncertain.
Barnes said the Singapore Airlines did not expect to fly at its pre-pandemic capacity for at least 12 to 18 months. It plans to retire its Boeing Co (BA.N) 777-200ERs earlier than expected and will not renew its eight Airbus SE (AIR.PA) A330 leases, which will expire in the next 12 to 14 months, he said.
Brendan Sobie, an independent analyst in Singapore, said that it would be difficult for Singapore Airlines to make significant changes to its current-year deliveries, but that as the planemakers slowed production, some could be pushed into next year.
“I expect a bigger impact in the following fiscal years, with more significant deferrals in terms of number of aircraft and number of years,” Sobie said. “This is in line with what we are seeing in the industry generally.”
Singapore Airlines and regional arm SilkAir have cut 96% of passenger capacity through the end of June, and low-cost arm Scoot has cut 98%.
The company said its cargo capacity had suffered less, dropping 60% because it was maximising the use of its dedicated freighter fleet, using empty passenger jets to carry cargo and doing ad-hoc charter flights.
Air freight rates have risen sharply as airlines have cut back on passenger capacity; in normal times, around 50% of air cargo is carried in the belly of passenger planes.
Reporting by Jamie Freed; Editing by Shri Navaratnam and Gerry Doyle