Revisit the premium/corporate travel model? SIA will stick with its model of being a premium airline. Capex involved is substantial and the approach cannot be changed day-by-day. However SIA is active in offering promotional fares and encouraging use of frequent flyer points, reducing a key balance sheet liability.
Hedging: The decision to terminate hedging contracts early (for a loss of S$112m) was part of a review of hedging needs. With capacity cuts fuel requirements will fall to c.30m bbl, of which 25% is hedged at US$125-130/bbl. The S$106m 4Q associates loss was largely due to Virgin hedging losses.
M&A: SIA continue to be interested in M&A in the medium term but there are no on-going talks with China Eastern at present.
Demand outlook: advance bookings "leveling off" mean that the %yoy fall (Mar-2009 -21.8%) has leveled off, both passenger and cargo. SIA's traffic may have fallen more than Asian peers because of lack of a domestic business and less exposure to Mainland China that other peers have.
Fleet changes: SIA plan to reduce its fleet to 99 from 103 over FY2010, with 12 new craft (5 A380, 7 A330), 2 disposals (B747) and 13 "surplus" aircraft (9 B777, 4 B747). These are being actively marketed. The 5 A380s are near final production so delivery cannot be deferred. Two (the 7th and 8th A380s in the fleet) are due in May 2009.
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