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When Covid-19 first hit the shores of Singapore in January, many expected that, like the SARS outbreak in 2003, this pandemic would pass in a few months.
But we are now less than three months away from 2021, and while the virus outbreak in Singapore is largely under control, global air travel is stagnant, as many countries still face escalating infections.
Around the world, airlines are still struggling to stay afloat, and Singapore Airlines Limited, or SIA, is no exception.
In early July, SIA announced a disastrous earnings set for the quarter ended June 30, 2020.
Passenger volume fell 99.5% year-on-year and the airline posted significant losses of $ 1 billion in just three months.
The airline also announced in September that it would cut 4,300 positions as they expect the road to recovery to be slow.
As we move into the final quarter of 2020, we take a careful look at the outlook for SIA.
Green lanes and travel bubbles.
By September, Singapore had already established “greenways” for essential business travel with five countries, including Japan, China, South Korea, Malaysia and Brunei.
More discussions are also taking place with other countries with controlled outbreaks to allow for more essential travel and even potentially tourists.
While the move will help alleviate some of the SIA problems, it is far from sufficient, as many countries around the world are still at the peak of their waves of infection.
In early October, countries like Canada, France, and the UK are setting new daily highs for the number of infections.
Unless these countries can decisively reduce their infection numbers, it is unlikely that the journey can be resumed.
As long as this continues, SIA’s passenger volume will remain below normal levels.
Other initiatives fall short
At the start of the pandemic, SIA had expanded its cargo flight capacity and its air freight revenue increased 35.4 percent, or $ 173.3 million year-on-year in the quarter ended June 30, 2020.
However, this was still not close enough to replace the revenue of around $ 3.3 billion lost from the drop in passenger travel.
The SIA recently considered offering “flights to nowhere”, where passengers would depart and land from Changi Airport on a tourist flight.
[[nid:501675]]But a backlash over the environmental impacts of such flights forced the group to scrap this idea.
Then the airline launched the “A380 @ Changi Restaurant”, where customers can enjoy a meal on board the plane, with a tour of the plane included.
The airline also offered Singaporeans the opportunity to savor food from SIA’s business and first class flight menus, which are delivered to their doors.
At this point, it is unknown how the general public will react to these interesting but unconventional proposals.
It is a valiant attempt by the airline to generate some revenue, as most of its fleet remains idle.
However, even if such proposals proved effective, the potential income from them is unlikely to move the needle of the group.
Government support
Singapore is a global hub for business and travel, with the national airline SIA at the center.
To be sure, the government will spare no effort to ensure SIA’s survival, even at the cost of immense short-term pain.
The Singapore government has already distributed generous support packages, including the $ 23.5 billion Employment Support Plan and the $ 187 million Aviation Support Package.
In parliament on October 6, Transport Minister Ong Ye Kung declared that restoring Singapore’s status as an air hub is a national priority and a “critical effort”.
To that end, the Singapore government will assist in the gradual resumption of air travel.
[[nid:497478]]A laboratory will be set up at Changi Airport to perform Covid-19 swab tests for travelers, allowing authorities to remove a quarantine notice.
However, Singapore cannot unilaterally restart global travel.
Much depends on when the rest of the world can finally win the fight against Covid-19.
Despite extensive measures taken by the government, it will be difficult for SIA to regain its former glory in the short term.
The airline will have to hold out for many more months before a shred of hope emerges.
Meanwhile, investors face a long and arduous wait.
This article was first published in The smart investor. Disclosure: Herman Ng does not own shares in any of the listed companies.
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