Saturday, August 17, 2024
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Singapore Airlines reported record profits in fiscal 2024, raising questions about whether the company’s stock is set to see significant gains in the near future.
The group achieved a capacity increase of 22.9%but passenger traffic increased even more, growing by 26.6%, resulting in a record passenger load factor of 88%, an improvement of 2.6 percentage points year-on-year.
In the freight sector, loading volumes increased by 1.7 percent due to continued e-commerce demand; however, revenues fell sharply by 42.2 percent compared to the previous year.
Despite this decline, freight yields were still almost 30% above pre-pandemic levels.
Expansion of the fleet and route network
SIA has actively expanded both its fleet and its route network.
As of March 31, 2024, the airline’s fleet consisted of 200 aircraft with an average age of seven years and three months.
Management expects the Group to have 209 aircraft by the end of the 2025 financial year.
SIA has ordered a total of 89 additional aircraft by May 1, 2024.
In terms of its network, SIA served 118 destinations in 35 countries as of March 31, 2024.
SIA recently launched flights to Brussels and will begin operations to London’s Gatwick Airport in June 2024.
Scoot, SIA’s low-cost airline arm, is also expanding. This month it added Krabi to its network and plans to launch flights to Koh Samui and Sibu soon.
These routes to smaller destinations offer Scoot valuable opportunities for regional growth.
Expanding the KrisFlyer membership base
In addition to expanding its fleet and network, SIA is also improving its KrisFlyer loyalty program.
The program has been transformed into a leading lifestyle rewards program and offers more than just frequent flyer benefits.
In fiscal year 2024, KrisFlyer had 8.8 million members, a significant increase of 31% over the previous year.
This loyal customer base generated revenue of over S$1.2 billion during the financial year, up 20% from the previous year.
In view of numerous challenges
While the airline continues to expect strong demand for air travel, management has identified several challenges for fiscal year 2025.
Competition has intensified as other airlines have increased capacity again, leading to a decline in passenger yields in the second half of fiscal 2024.
Another challenge is rising costs due to persistent inflation and supply chain disruptions as global market prices continue to rise.
Geopolitical tensions and an uncertain macroeconomic environment could also impact the airline, potentially reducing consumer confidence and spending.
These challenges could impact fiscal year 2025, potentially leading to a decline in revenues and profits from fiscal year 2024 highs.
Outlook: Turbulence ahead
Although SIA delivered excellent performance in fiscal 2024, investors should remain cautious.
As management explains, the airline is likely to face headwinds in the 2025 financial year.
While the 2024 financial year will benefit from a strong recovery in air traffic, this momentum could gradually slow in the coming years.
Investors should remain vigilant and prepare for possible upcoming turbulence at the airline.
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