SINGAPORE (THE BUSINESS TIMES) - Singapore Airlines (SIA) flew just 13,900 passengers in June, down from nearly 1.9 million the same period a year ago, and the group is now expecting a material operating loss for the first quarter of its financial year.

The group said in an exchange filing on Wednesday (July 15) that SIA's group passenger capacity plunged 95.1 per cent year on year in June, although this is a marginal improvement over the 96.2 per cent seen in May. Group passenger capacity is measured in available seat kilometres.

The group's flagship carrier clocked a 94 per cent decline in capacity in June, compared to the year-ago period; only a "skeletal network" was in operation, connecting Singapore to 24 cities.

Its subsidiaries fared worse. Low-budget carrier Scoot registered a 97.5 per cent cut in capacity, while regional carrier SilkAir's capacity shrank by 99.3 per cent.

"Our current view is that the recovery trajectory will be slower than initially projected, and will have a material impact on our revenue generation capability in FY20/21," SIA said.

The group noted the gloomy outlook posted by industry experts, including the International Air Travel Association and International Civil Aviation Organization. Industry forecasts are that it will take two to four years before passenger traffic numbers return to pre-pandemic levels.

While Singapore and selected cities in China have established a green travel lane, SIA said the the global lifting of border controls has been slower than earlier expected.

In addition, the lower oil prices are expected to have an impact on the group's profits for the first quarter of FY20/21, which ended in June.

This is because the lower capacity projection has reduced expected fuel consumption, causing more fuel hedges to be deemed ineffective under applicable financial reporting standards, SIA said.

These hedges consequently need to be marked-to-market, and the marked-to-market impact as at June 30 will be recognised in the profit and loss statement for Q1, it said. With jet fuel prices remaining relatively low, marked-to-market losses are expected to be recorded.

"Accordingly, the SIA Group expects to report a material operating loss for the first quarter of FY20/21," it said.

It added that more details will be provided on July 29, when a business update for the first quarter of the financial year will be announced.

SIA shares closed at $3.77 on Wednesday, up $0.05 or 1.3 per cent from the previous day.