Saturday, August 17, 2024
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Singapore Airlines posted record profits in FY2024, raising questions about whether its stock is poised for significant gains in the near future.
The group achieved a 22.9% increase in capacity, but passenger traffic surged even more, growing by 26.6%. This led to a record-breaking passenger load factor of 88%, marking a 2.6 percentage point improvement compared to the previous year.
In the cargo sector, load volumes rose by 1.7% due to sustained e-commerce demand; however, yields fell sharply by 42.2% year on year.
Despite this drop, cargo yields remained nearly 30% higher than pre-pandemic levels.
Expanding fleet and route network
SIA has been actively expanding both its fleet and route network.
As of 31 March 2024, the airline’s fleet consisted of 200 aircraft with an average age of seven years and three months.
Management anticipates the group will have 209 aircraft by the end of FY2025.
As of 1 May 2024, SIA had placed orders for a total of 89 additional aircraft.
Regarding its network, SIA served 118 destinations across 35 countries as of 31 March 2024.
Recently, SIA launched flights to Brussels and will begin operating to London’s Gatwick Airport in June 2024.
Scoot, SIA’s low-cost arm, has also been expanding, adding Krabi to its network this month and planning to start services to Koh Samui and Sibu soon.
These routes to smaller destinations offer Scoot valuable opportunities for regional growth.
Expanding KrisFlyer membership base
In addition to growing its fleet and network, SIA is enhancing its KrisFlyer loyalty program.
The program has been rebranded as a leading lifestyle rewards program, evolving beyond just frequent flyer benefits.
By FY2024, KrisFlyer had 8.8 million members, a significant 31% year-on-year increase.
This loyal customer base generated over S$1.2 billion in revenue for the fiscal year, up 20% from the previous year.
Facing multiple challenges
While the airline expects continued strong demand for air travel, management has identified several challenges for FY2025.
Competition has intensified as other airlines have resumed capacity, leading to a decline in passenger yields in the second half of FY2024.
Rising costs, driven by persistent inflation and supply chain disruptions, present another challenge, as global prices continue to climb.
Geopolitical tensions and an uncertain macroeconomic environment could also impact the airline, potentially reducing consumer confidence and spending.
These challenges may impact FY2025, possibly leading to a decrease in revenue and profits from the highs seen in FY2024.
Outlook: Turbulence ahead
Although SIA delivered an outstanding performance in FY2024, investors should remain cautious.
The airline is expected to face headwinds in FY2025, as outlined by management.
With FY2024 benefiting from a robust recovery in air travel, future years may see this momentum gradually wane.
Investors should stay alert and prepare for potential turbulence ahead for the airline.
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