Asia's aviation post-Covid recovery lags despite Singapore Airlines' third-quarter net profit

Investors are unconvinced that Singapore Airlines’ first net profit since the pandemic is indicative of the start of long-term recovery in Asia’s aviation sector.
Asia's aviation post-Covid recovery lags despite Singapore Airlines' third-quarter net profit

Despite Singapore Airlines posting its first quarterly profit since the start of the pandemic, institutional investors remain hesitant over Asean’s travel sector, although some areas such as airports show more promise than others.

The national carrier of Singapore reported a third-quarter net profit of S$85 million ($62.48 million), its first profit since the Covid-19 pandemic started two years ago. The group cited the 117.1% rise in passenger and cargo revenue as reasons for the rise after Singapore launched vaccinated travel lane (VTL) arrangements. 

Shareholders seemed uncertain that the airline’s turnaround was indicative of a longer-term recovery – Singapore Airlines closed at S$5.07 on February 25, the day after its quarterly results were announced, down from its year-to-date peak of S$5.42 on February 18. Earnings per share trailing 12 months stood at -$0.55. 

Market watchers AsianInvestor spoke to expressed caution about the aviation sector among Asean countries as the region lagged the West’s economic recovery from the pandemic, although some keep a hopeful eye on other sectors in the region such as airports, consumer stocks and financials.

Alexander Treves,
JP Morgan AM

“Beyond the longer-term growth argument for Asean, [the travel sector] is also one of the more compelling Covid recovery plays,” Alexander Treves, head of emerging markets and Asia Pacific equities investment specialist, JP Morgan Asset Management told AsianInvestor.

“The Asean countries are likely to benefit from the post-Covid resumption of travel over the next few quarters, given the significant number of international visitors to the region,” he said.

Treves added that the composition of the Asean investable universe is much more oriented to “old economy” sectors – typically blue-chips such as manufacturing and agriculture – than many other equity asset classes. 

However, the recovery from Covid could “benefit sectors such as transportation (such as airports) and also mobile phone operators which will see roaming revenues recover. There will also be a positive spillover into consumption more broadly, which will help consumer plays and also financials with loan growth which is sensitive to broader economic activity,” Treves said.


Tighter travel and activity restriction policies persist in Asia compared with the US and Europe, causing the delay in recovery, a Hong Kong-based portfolio manager at a single-family office told AsianInvestor.

“I generally think the Asia aviation sector will recover when Omicron cases peak, but the pace will largely depend on how fast cases go down and policies,” he said.

He added that within Asia, the recovery in each country will differ as well “given the timing of the Omicron wave and policy difference, i.e. ‘live with Covid’ vs ‘zero-Covid policy’ in different countries”.

The path to recovery is also unpredictable, as policies continue to shift. “Overnight, there was news about China potentially being more open to consider their own ‘live with Covid’ policy that could be a sign of policy shift,” he cited as an example.

At the National People’s Congress on Saturday (March 5), China’s Premier Li Keqiang hinted that the government might adjust its strict zero-Covid policy, although he did not indicate that China would abandon it entirely.

Generally, travel stock indices in Europe and US have recovered drastically from the stock market plunge of 2020. The Dow Jones US travel and tourism stock market index is up 74.87%, while the Stoxx Europe 600 travel and leisure index is up 60.11% since March 2020.


Several Asian airlines have strong backing from sovereign wealth funds or state investment funds that have injected funds into the airline groups throughout the pandemic.

“We estimate that sovereign wealth fund-owned airlines have been bailed out with over $12.4 billion since the start of the pandemic, and in Asia, those include not only Singapore Airlines (Temasek), but also Malaysian Airlines (Khazanah) and Vietnam Airlines (SCIC),” founder and managing director of research firm GlobalSWF, Diego Lopez told AsianInvestor.

Singapore state investment firm Temasek Holdings owns about 50% of Singapore Airlines, and injected financing to the group several times in the past two years. For instance, in 2020, Temasek contributed to a S$19 billion funding package to the group. 

Additionally, in 2021, the investment firm took up more than half of Singapore Airlines’ undersubscribed second tranche of S$6.2 billion mandatory convertible bonds (MCBs).

Last week, Malaysian sovereign wealth fund Khazanah announced RM670 million ($160 million) in operating profits in 2021, a 77% fall from its RM2.9 billion operating profit in 2020. In 2021, it had injected RM3.6 billion into Malaysian Airlines to keep it afloat until 2025. 

An asset manager told AsianInvestor that high energy prices are likely to also place pressure on the recovery of the aviation sector – an issue that has plagued airlines for decades, but is particularly poignant now as oil prices hit record highs.

READ ALSO: Market Views: Where to invest amid record oil prices?

Aviation groups such as Singapore Airlines are attempting to reduce their reliance on oil by turning to sustainable aviation fuel (SAF)

In February, the firm, alongside Temasek and the Civil Aviation Authority of Singapore, announced that it was launching a pilot to use sustainable aviation fuel produced from used cooking oil and waste animal fats blended with refined jet fuel that would reduce around 1,500 tonnes of carbon dioxide emissions.  

 “The SAF pilot marks an important step in our commitment to operationalise solutions to decarbonise hard-to-abate sectors like aviation. We look forward to learning useful operational lessons from the pilot, and working closely with our partners to advance the frontiers of sustainable aviation through impactful industry-wide decarbonisation strategies,” Frederick Teo, Temasek’s managing director for Sustainable Solutions said in a statement. 

Singapore Airlines in May 2021 announced its net-zero carbon emissions commitment by 2050, which includes improving operational efficiency, adopting low-carbon tech such as SAF and using “high-quality” carbon offsets. 

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