Singapore Airlines to report fourth-quarter loss on fuel hedges

SYDNEY (Reuters) - Singapore Airlines Ltd <SIAL.SI> said on Friday that it would report a material operating loss in the quarter ended March 31 partly because of a collapse in fuel prices that led to major hedging losses and that it would push back aircraft deliveries.

The airline said operating cashflows were expected to remain negative in the quarter ending on June 30 at a time when most of its fleet is grounded because of the coronavirus crisis. Additional fuel hedging losses are expected in that quarter, it said.

"Given the uncertainty in the market, we have taken a pause and plan to monitor developments closely before entering into any additional hedges," the airline said in a statement.

The airline said in February it had entered fuel hedging contracts through March 31, 2025. That includes hedging 51% of its jet fuel at $78 a barrel and 22% of Brent at $58 a barrel in the current financial year. Jet fuel is now below $22 a barrel and Brent is below $30 a barrel.

Broker UOB Kay Hian in March said the airline faced S$2.5 billion in marked-to-market hedging losses by the end of that month.

The airline, which raised S$15 billion of funding underwritten by its biggest shareholder, state investor Temasek, is due to report its fourth-quarter results on May 14.

The airline said with the benefit of strong results for the first nine months, when it recorded a S$813.6 million ($575.55 million) operating profit, it expects to record a small operating profit but a net loss for the full year ended March 31.

Singapore Airlines and regional arm SilkAir have cut 96% of capacity through the end of June, and low-cost arm Scoot has cut 98% because of a lack of demand and travel restrictions associated with the coronavirus pandemic.

"We are in negotiations with aircraft manufacturers to adjust our delivery stream for existing aircraft orders, in view of prevailing market conditions, balancing that with our longer term fleet renewal programme and we are talking with various suppliers to reschedule payments," the airline said.

The company also said it had written the equity value of its 20% stake in Virgin Australia Holdings Ltd <VAH.AX> down to zero as of Dec. 31 and had no further exposure to losses at the Australian carrier, which entered voluntary administration last month.

Singapore Airlines shares were 2.7% higher in early trading on Friday.

(Reporting by Jamie Freed; Editing by Tom Hogue and Gerry Doyle)