Singapore Airlines Ltd. · SGX:C6L
Singapore Airlines — FY2018/19 Earnings Presentation
55 slides from Singapore Airlines's earnings presentation, May 17, 2019
Slide 1: SIA Analyst/Media Briefing FY2018-19 Results
SIA ANALYST/MEDIA BRIEFING FY2018-19 Results Slide 1 17 May 2019
Slide 2: SIA Group – FY18/19 Key Takeaways
SIA Group – FY18/19 Key Takeaways Achieved highest Group revenue on record (previous high was in FY08/09) – SIA Pax: Captured strong demand, outstripping growth in capacity. RASK higher, helped by premium cabins. – MI: Traffic growth healthy, largely offset by yields. RASK 1.2% lower. – Scoot: Tra
Slide 3: The Parent Airline Q4 and FY18/19 Results
THE PARENT AIRLINE Q4 AND FY18/19 RESULTS Slide 3
Slide 4: Parent Airline Company Operating Results
Parent Airline Company Operating Results Q4 Q4 Better/ Better/ FY18/19 FY17/18* (Worse) FY18/19 FY17/18* (Worse) ($M) ($M) (%) ($M) ($M) (%) Total Revenue 3,253.6 3,210.3 1.3 13,144.2 12,807.5 2.6 Total Expenditure 3,050.0 2,927.4 (4.2) 12,153.7 11,469.4 (6.0) -- Net fuel cost 903.1 829.5 (8.9) 3,76
Slide 5: Gains in pax flown revenue supported by robust traffic growth
Gains in pax flown revenue supported by robust traffic growth; higher RASK with record PLF Q4 Change Change Parent Airline Company (Pax) FY18/19 % FY18/19 % Revenue Passenger-KM (M) 25,666.7 8.8 102,571.9 7.0 Available Seat-KM (M) 31,428.7 8.1 123,486.2 4.5 Passenger Load Factor (%) 81.7 0.6 pt 83.1
Slide 6: Strong growth in pax flown revenue partially offset by absence of non-recurring revenue
Strong growth in pax flown revenue partially offset by absence of non-recurring revenue last year Parent Airline Company FY18/19 Revenue Breakdown ($M) Passenger Flown Revenue 10,384.3 (+567.7, +5.8%) Cargo & Mail revenue 2,220.5 16.9% (+45.0, +2.1%) 79.0% Other Passenger Revenue 357.8 (-135.7, -27.
Slide 7: Overall improvement in RASK over the last two financial years
Overall improvement in RASK over the last two financial years Monthly RASK ¢/ask 9.0 9.0 2016/17 2017/18 2018/19 8.9 8.6 8.6 8.8 8.6 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.5 8.3 8.3 8.3 8.4 8.2 8.2 8.1 8.3 8.2 8.2 8.1 8.1 8.1 8.1 8.0 8.0 8.0 8.0 7.7 7.9 7.9 7.6 7.6 7.5 Apr May Jun Jul Aug Sep Oct Nov Dec
Slide 8: Cargo flown revenue improved as stronger yields mitigated lower loads
Cargo flown revenue improved as stronger yields mitigated lower loads carried for the year Q4 Change Change Parent Airline Company (Cargo) FY18/19 % FY18/19 % Cargo Load Tonne-KM (M) 1,607.6 (6.8) 7,006.5 (3.5) Cargo Capacity Tonne-KM (M) 2,732.3 (0.3) 11,210.4 0.8 Cargo Load Factor (%) 58.8 (4.1) p
Slide 9: Cargo yields held up well over last two years
Cargo yields held up well over last two years; downward pressure seen in recent months Monthly Cargo Yields 35 ¢/ltk 2016/17 2017/18 2018/19 34.0 34.1 34 33.1 33 32.7 32.1 32.3 31.8 31.8 32.7 32 31 30.6 30.6 30.2 30.0 30.2 29.9 29.8 29.9 30 29.1 29.1 29.9 30.0 28.8 29.6 29 28.6 28.2 28.1 27.8 28 27.
Slide 10: Expenditure rose due to higher net fuel cost
Expenditure rose due to higher net fuel cost; ex-fuel costs up on expansion in operations and higher staff strength Parent Airline Company Cost Composition FY18/19 ($M) Handling Charges Staff Cost LPO* Charges 1,182.9 1,968.3 688.1 (-7.8, -0.7%) (+87.0, +4.6%) AMO Costs (+10.3, +1.5%) 723.6 5.7% (-8
Slide 11: Overall unit cost ex-fuel remained stable
Overall unit cost ex-fuel remained stable Overall Unit Cost Analysis (FY18/19) ¢/ctk 60 50.9 50 49.1 14.01 Unit Fuel Cost 15.88 (+13.3%) 40 30 8.16 Unit Staff Cost 8.31 (+1.8%) 20 26.97 Unit Other Cost 26.75 (-0.8%) 10 0 FY17/18 FY18/19 Slide 11
Slide 12: SIA Group Q4 & FY18/19
SIA GROUP Q4 & FY18/19 Slide 12
Slide 13: SIA Group Operating Results
SIA Group Operating Results Q4 Q4 Better/ Better/ FY18/19 FY17/18* (Worse) FY18/19 FY17/18* (Worse) ($M) ($M) (%) ($M) ($M) (%) Total Revenue 4,075.1 4,017.3 1.4 16,323.2 15,806.1 3.3 Total Expenditure 3,821.6 3,683.9 (3.7) 15,256.1 14,257.3 (7.0) -- Net fuel cost 1,099.6 1,018.5 (8.0) 4,587.1 3,899
Slide 14: Group revenue improved led by strong pax flown revenue
Group revenue improved led by strong pax flown revenue $M Group Revenue 4,400 4,300 4,341.5 4,200 FY18/19 4,100 $16,323.2M 4,076.7 4,062.1 4,075.1 4,000 4,017.3 3,900 Year-on-Year $517.1M 3,864.2 3,800 3,847.9 3,844.5 (+3.3%) 3,700 3,600 3,500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY17/18 FY18/19 Slide 14
Slide 15: Excluding non-recurring revenue, Group revenue would have improved more
Excluding non-recurring revenue last year, Group revenue would have reported a larger improvement $M Group Revenue (ex non-recurring) 4,400 Non- recurring 4,300 revenue 4,341.5 4,200 FY18/19 4,100 $16,323.2M 4,076.7 4,062.1 4,075.1 4,000 67.6 3,900 3,949.7 Year-on-Year $760.0M 3,800 3,847.9 3,844.5
Slide 16: Strong growth in pax flown revenue supported by robust traffic growth
Strong growth in pax flown revenue supported by robust traffic growth FY18/19 Group Revenue Breakdown ($M) Cargo and Mail Passenger Flown 2,220.5 Revenue (+45.0, +2.1%) 13,023.3 (+783.9, +6.4%) Engineering 78.8% 14.7% 79.8% Services 485.7 (+4.8, +1.0%) Other Passenger Revenue 393.0 (-209.1, -34.7%)
Slide 17: Breakdown of change in flown revenue and statistics
Breakdown of change in flown revenue and statistics Flown Revenue RASK Yields against Carriage/Load Capacity against against last last year against last against last last year year % year year $M % % % SIA + 567.7 + 1.2 - 1.0 + 7.0 + 4.5 (Pax) SilkAir + 20.2 - 1.2 - 5.2 + 7.2 + 3.2 Scoot + 191.1 - 2
Slide 18: Higher net fuel cost contributed two thirds of expenditure increase
Higher net fuel cost contributed two thirds of the increase in Group expenditure Group Expenditure $M 4,000 Restatement for FY17/18 due to 3,953.9 3,900 adoption of IFRS 1 FY18/19 3,800 3,829.2 $15,256.1M 3,821.6 118.9 3,700 124.3 3,683.9 Year-on-Year 3,651.4 $998.8M 3,600 3,623.0 124.5 (+7.0%) 123.
Slide 19: Ex-fuel costs rose largely from expansion of operations
Ex-fuel costs rose largely from expansion of operations Group Cost Composition ($M) AMO Costs Depreciation and Handling Charges 899.2 Lease Rentals 1,315.0 (-19.4, -2.1%) 2,007.6 (+16.0, +1.2%) (+24.4, +1.2%) Staff Cost LPO* Charges 5.1% 12.6% 2,816.9 8.4% 884.0 5.9% 13.2% (+107.9, +4.0%) (+30.6, +3
Slide 20: Group fuel cost before hedging rose $1B
Group fuel cost before hedging rose $1B, partially alleviated by larger hedging gain YoY Composition of Increase in Group Fuel Cost (After Hedging) $M 5,000 +123.5 +888.0 Higher 4,587.1 uplift 4,500 -314.1 -9.6 Higher Weaker +687.8 hedging USD (+17.6%) gain against SGD 4,000 3,899.3 Higher weighted
Slide 21: Full year operating profit tops $1B
Full year operating profit tops $1B Group Operating Profit $M 500 453.7 400 404.6 FY18/19 387.6 $1,067.1M 357.1 333.4 300 253.5 Year-on-Year 232.9 -$481.7M 200 (-31.1%) 193.1 100 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY17/18 FY18/19 Slide 21
Slide 22: Composition of Decrease in Group Operating Profit
Strong growth in pax flown revenue negated by steep rise in fuel cost and absence of one-off revenue items Composition of Decrease in Group Operating Profit $M 2,500 Cargo +45.0 -242.9 Higher ex-fuel costs largely due to: 2,000 Pax • Depreciation expense (+179.8) +783.9 Absence • Lower lease rentals
Slide 23: Operating results for main operating companies in the Group
Operating results for main operating companies in the Group Group Operating Profit/(Loss) Better/ Better/ FY18/19 FY17/18R1 (Worse) (Worse) ($M) ($M) ($M) (%) SIAR2 991 1,338 (347) (25.9) SilkAir 15 44 (29) (65.9) Scoot (15) 78 (93) n.m. SIAEC Group 57 79 (22) (27.8) R1 Restated depreciation for pri
Slide 24: Group net profit was $683M
Group net profit was $683M Group Profit Attributable to Owners of the Parent $M 400 389.3 337.9 FY18/19 300 $682.7M 293.3 284.1 281.1 200 202.6 Year-on-Year -$618.9M (-47.5%) 139.6 100 56.4 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY17/18 FY18/19 Slide 24
Slide 25: Excluding one-off items, Group net profit would have been higher
Excluding one-off items and SilkAir related costs, Group net profit would have been higher Adjusted Group Profit Attributable to Owners of the Parent $M 400 Non-recurring Non-recurring 389.3 FY18/19 300 $858.1M 293.3 284.1 145.5 56.1 59.8 200 225.0 202.6 Year-on-Year 192.4 -$241.9M (-22.0%) 139.6 11
Slide 26: Group net profit impacted by lower operating profit and higher non-operating costs
Group net profit was impacted by lower operating profit and higher non-operating costs Group Profit Attributable to Owners of the Parent $M 1,400 1,301.6 -481.7 1,200 Due to: • Higher share of losses of associated companies (-88.1) -618.9 1,000 • Lower share of profit of joint (-47.5%) venture compa
Slide 27: Total dividend amounts to 30¢ per share
Total dividend amounts to 30¢ per share FY18/19 FY17/18 Earnings Per Share (¢) 57.7 75.5^ Interim Dividend Per Share (¢) 8.0 10.0 Proposed Final Dividend Per Share (¢) 22.0 30.0 Total Dividend Per Share (¢) 30.0 40.0 ^ Based on FY17/18 reported figures Slide 27
Slide 28: Group fleet development
Group fleet development Operating Fleet As at 31 Mar’19 In Out As at 31 Mar’20 777-200 7 +1 -7 1 777-200ER 5 -4 1 777-300 5 5 Singapore Airlines 777-300ER 27 27 A380-800 19 19 A330-300 17 +1 -10 8 A350-900 XWB 32 +16 48 787-10 9 +6 15 747-400F 7 7 Total 128 +24 -21 131 A319 2 2 SilkAir A320 8 -1 7 7
Slide 29: External events moderate growth in capacity
External events moderate growth in capacity SIA Group passenger operations is expected to grow approx. 6% in FY19/20 o Grounding of Boeing 737 MAX 8 aircraft and Rolls-Royce Trent 1000 TEN engine issues moderate capacity growth o Extension of aircraft leases to support capacity shortfall o Boeing
Slide 30: Capital expenditure to support fleet renewal and capacity growth
Capital expenditure to support fleet renewal and capacity growth ($’M) FY19/20 FY20/21 FY21/22 FY22/23 FY23/24 Aircraft 5,700 5,400 5,000 3,900 3,300 Others 400 400 500 400 300 Total 6,100 5,800 5,500 4,300 3,600 Slide 30
Slide 31: Group fuel hedging position
Group fuel hedging position Q1 FY19/20 Jet Fuel Brent Percentage hedged (%) 80 - Average hedged price (USD/bbl) 75 - FY19/20 Jet Fuel Brent Percentage hedged (%) 64 5 Average hedged price (USD/bbl) 76 53 FY20/21 to FY24/25 Jet Fuel Brent Percentage hedged (%) Up to 14% Up to 46% Average hedged price
Slide 32: Adoption of IFRS 16
ADOPTION OF IFRS 16 Slide 32
Slide 33: Adoption of IFRS 16 – Balance Sheet
Adoption of IFRS 16 – Balance Sheet With effect from 1 April 2019, SIA Group is required to recognise right-of-use assets and lease liabilities arising from the capitalisation of the present value of future lease payments for all leases Main changes to the Group’s balance sheet as of 1 April 201
Slide 34: Adoption of IFRS 16 – Net Profit After Tax
Adoption of IFRS 16 – Net Profit After Tax The Group’s cost of leasing will be represented by: o increase in depreciation expense o increase in finance charges o the above increases will replace the lease rental expense recognized hitherto Estimated increase in Group’s net profit after tax for t
Slide 35: Strategic Developments
STRATEGIC DEVELOPMENTS Slide 35
Slide 36: Key Strategies
Key Strategies Strengthening Premium Positioning Portfolio Multi-Hub New Business Opportunities Slide 36
Slide 37: Strengthening Premium Positioning
Strengthening Premium Positioning Fleet renewal and investment Debut of medium haul A350 with industry-leading regional cabin product 23 new aircraft delivered in FY18/19 - 11x A350 (7 ULRs), 9x B787-10, 3x A380 22 new deliveries planned this FY - 16x A350, 6x B787-10 Boeing 777-9 deliveries
Slide 38: Strengthening Premium Positioning: Enhancing our network
Strengthening Premium Positioning Enhancing our network New Destinations Full-service – Busan – Newark – Seattle Low-cost – Berlin – Kota Bahru – Nanchang – Pekanbaru Extensive growth in frequency on existing routes across all regions within the Group network Slide 38
Slide 39: Portfolio: Integrating SilkAir
Portfolio Integrating SilkAir Plans to transfer 14 737-800s to Scoot suspended pending clarity on MAX situation, however ongoing transfer of MI routes to Scoot remains on track – Deployment of the right vehicles within the portfolio to the right markets Integration remains on track – SQ and MI w
Slide 40: The SIA Group serves 138 destinations in 37 countries
Portfolio The SIA Group serves 138 destinations in 37 countries and territories China 28 Points India 14 Points Southwest-Pac 12 Points Slide 40
Slide 41: Multi-Hub
Multi-Hub Investing in strategic markets to complement and strengthen SIN hub International operations to be launched imminently 24 destinations in India; Fleet of 22 A320/A320neo Inducting 50 A320/A321neo and 6 787-9 within the next four years 10 destinations; Fleet of 5 B777-200 6th/7t
Slide 42: New Revenue & Business Opportunities
New Revenue & Business Opportunities SIA-CAE Flight Training Centre Operations commenced in Aug 2018 and currently operates 5 simulators Provides full range of initial type rating and recurrent training programmes for Boeing aircraft types Premium Omni-channel Retailer Focus on omni-channel se
Slide 43: Digital Transformation
Digital Transformation Digital partnerships and initiatives to enhance customer experience, and propel us towards our vision to be the world’s leading digital airline Strategic partnership with Alibaba Group Unlocks access to >600M monthly active mobile users on Alibaba’s China retail marketplac
Slide 44: Digital Transformation
Digital Transformation KrisConnect Programme Leverage API connectivity to enhance customer experience on partner platforms Travel ecosystem partners include: Amadeus, Ctrip, Google, Skyscanner, Travelport Growing rapidly with >20 partners across 16 markets since launch in Oct 2018 Partnership
Slide 45: Digital Transformation
Digital Transformation Opening of KrisLab, SIA’s Digital Innovation Lab In line with SIA’s drive to be the world’s leading digital airline Collaborative workspace to develop innovative ideas and co-innovate with external partners and start-ups to solve business challenges Inaugural Acceleratio
Slide 46: Transformation: What have we achieved?
TRANSFORMATION What have we achieved? Slide 46
Slide 47: We are streamlining our portfolio of airline brands
We are streamlining our portfolio of airline brands FROM TO 4-Airline Brands 2-Airline Brands working in closer collaboration Slide 47
Slide 48: We have improved our product & service offerings
We have improved our product & service offerings Enhanced personalisation & in-flight wellness in F&B New Regional Business Class – B787-10 & A350 Medium Haul ULR Flights to US Expanded IFE Options & Product upgrade for Wifi Connectivity SilkAir’s fleet A380 Retrofit & New Cabin Products Slide 48
Slide 49: We have lifted our customer experience
We have lifted our customer experience Improved overall response time to resolve customers’ issues Enhanced product and services based on customer validation More personalised and seamless customer experience NPS trending upwards Slide 49
Slide 50: We have enhanced our revenue generation capabilities
We have enhanced our revenue generation capabilities FROM TO Commercial re-org to Legacy processes, focus on key strategic and airline systems areas & build deep domain knowledge Revamped processes & practices for speed- to-market, agility & accuracy Investment in new technology to be ‘Best-in
Slide 51: We have improved our operational excellence
We have improved our operational excellence Higher operational efficiency from integrating pilots and cabin crew planning Achieved 7% productivity gain from better crew planning efficiency 15% reduction in engineering related delays • Predictive Maintenance Slide 51
Slide 52: We have invested in up-skilling and engaging our people
We have invested in up-skilling and engaging our people >70% of Ground staff received ‘digital’ training Enhanced organisational capabilities • analytics, operations • reduce hierarchy + increase empowerment 5%pt improvement in staff engagement score from Organisational Climate Survey 2019 Slide 52
Slide 53: RASK and CASK ex-fuel margins moving towards the right trajectory
RASK and CASK ex-fuel margins moving towards the right trajectory RASK (¢/ASK) 9.0 8.4 8.5 8.5 8.2 8.0 TRANSFORMATION 7.5 7.0 Q4 FY16/17: Q4 FY18/19: Q1 FY14/15: +2.0¢/ASK +2.6¢/ASK +3.6 ¢/ASK 6.5 6.0 6.2 5.8 5.5 5.6 CASK ex-fuel (¢/ASK) 5.0 CASK ex-fuel (¢/ASK) (after IFRS 1) 4.9 (before IFRS 1) 4.
Slide 54: What's next …
What’s next … ‘Digital Ops’ to deliver operational excellence Improve revenue generation and customer Investment & experience through innovation in personalisation product & services Enhance employee Infuse ‘Vibrant experience Innovation Culture’ Slide 54
Slide 55: Thank You
THANK YOU Slide 55