SINGAPORE AIRPORT TERMINAL SERVICES 28 MAY 2025_EN

LATEST COMPANY ANNOUNCEMENT

SATS LTD – Singapore Airport Terminal Services.

SG1I52882764

Q4 FY24/25

Associate: Anne Ching

SATS POSTS FULL YEAR NET PROFIT OF S$243.8 MILLION

Highlights of FY25 (YoY)

• Revenue increased 13.0%1 to S$5.82B, driven by volume growth across all core business segments and market share gains in air-cargo
• EBITDA grew 32.7% to S$1.04B with margin expansion from 15.2% to 17.8%
• Free cash flow2 turned around from negative S$48.2M to positive S$228.3M
• Achieved S$103M3 EBITDA integration synergies within two years, well ahead of expectations
• Proposed final dividend for the year of 3.5 cents per share

Singapore, 23 May 2025 – SATS Ltd. (SATS) today reported its financial performance for the three months ended 31 March 2025 (4Q FY25) and the full year ended 31 March 2025 (FY25), showing resilient business growth driven by broad-based demand and continued market share gains. The Group has exceeded its integration target of $100M EBITDA synergies well ahead of expectations, reflecting strong integration execution and enhanced operational efficiency.

GROUP EARNINGS

4Q FY25 (1 January 2025 to 31 March 2025)

In 4Q FY25, SATS Group delivered revenue of S$1.48 billion, representing a 10.4% increase compared to the same period last year, driven by continued business volume growth and rate improvements. Gateway Services revenue rose 10.1% year-on-year to S$1.15 billion, reflecting both favourable market conditions and continued market share gains. Our cargo volumes outperformed IATA's global growth benchmarks, supported by broad-based demand and the redirection of certain ocean freight to air cargo due to ongoing Red Sea disruptions.

Food Solutions revenue increased 11.4% year-on-year to S$331.1 million, propelled by stronger demand for inflight meals amid the continued recovery in global travel. The Group's expenditure (excluding depreciation and amortisation) increased 9.1% year-on-year to S$1.22 billion, in line with expanded business volumes. Operating profit for 4Q FY25 rose by S$19.5 million year-on-year to S$108.3 million, with operating profit margin improving from 6.6% to 7.3%. This enhanced performance reflects scale and operational leverage derived from higher business volumes and improved customer rates.

The share of earnings from associates and joint ventures decreased by 30.7% to S$21.4 million year-on-year, partially due to timing differences in expense recognition, with certain non-recurring adjustments from prior periods being reflected in the current quarter. SATS posted PATMI of S$38.7 million in 4Q FY25, an improvement of S$6.0 million year-on-year, continuing the positive momentum seen in the Group's operating performance. Non-operating expenses of S$7.9 million were recorded in 4Q FY25, primarily related to strategic portfolio adjustments including impairment charges.

FY25 (1 April 2024 to 31 March 2025)

FY25 Group revenue increased 13.0% year-on-year to S$5.82 billion, driven by growth in business volumes and contributions from an expanded network of operations. Gateway Services revenue grew 10.6% year-on-year to S$4.47 billion, reflecting strong air cargo performance across multiple sectors including high-tech shipments and e-commerce. This growth was further supported by volume shifts from ocean freight due to ongoing geopolitical uncertainties. Our cargo volumes have consistently outperformed IATA's global growth benchmarks, demonstrating our ability to leverage our expanded network to secure new contracts.

Food Solutions delivered revenue of S$1.35 billion, a strong 22.0% increase year-onyear, as global aviation travel continued its recovery trajectory, driving higher demand for inflight meals.

The Group's expenditure (excluding depreciation and amortisation) increased by 9.5% year-on-year to S$4.78 billion, in line with the expansion in business activities. SATS recorded operating profit of S$475.7 million for FY25, a 94.8% increase from S$244.2 million in the previous year. As a result, operating profit margin expanded from 4.7% to 8.2%, reflecting favourable operating leverage.

The share of earnings from associates and joint ventures grew by 3.9% to S$114.3 million, bolstered by overall business volume growth across our network, a one-off recovery gain for a long outstanding debt in Indonesia, and partially offset by bonus catch-up in several operating units for good performance.

For FY25, SATS delivered PATMI of S$243.8 million, which has increased by more than three-fold compared to S$ 56.4 million in FY24. This strong performance reflects the benefits of increased scale, integration synergies and enhanced operational efficiency across the Group's expanded business portfolio.

GROUP FINANCIAL POSITION (as at 31 March 2025)

As of 31 March 2025, total equity strengthened to S$2.77 billion, an increase of S$209.4 million compared to 31 March 2024, primarily driven by profits generated during FY25. Total assets rose by S$402.7 million to S$8.88 billion as of 31 March 2025, largely attributable to increased right-of-use assets as the Group expanded its warehouse capacity to support business growth. Total liabilities increased by S$193.3 million to S$6.11 billion, mainly due to higher lease liabilities, partially offset by the repayment of S$200 million in Singapore dollar Medium Term Notes (SGD MTN) that matured in March 2025.

For FY25, operating cash flow after lease repayment strengthened significantly to S$450.0 million, compared to S$137.4 million in the previous year. The Group's free cash flow for FY25 was a positive S$228.3 million, representing a substantial improvement of S$276.5 million year-on-year, primarily reflecting the higher operating profit achieved during the year, balanced with measured financial and liquidity management. In the fourth quarter alone, SATS generated positive free cash flow of S$155.2 million, an improvement of S$36.7 million year-on-year, further demonstrating the Group's enhanced cash generation capabilities.

PROPOSED DIVIDEND

SATS is committed to paying dividends that grow progressively with earnings, which considers the company’s cash flow generation capacity and level of cash and reserves; reinvestment and capital expenditure needs for sustainable growth; and debt repayment to strengthen its balance sheet. In view of the Group’s financial performance in FY25, the Board of Directors has recommended a final dividend of S$0.035 per share. Combined with the interim dividend of S$0.015 per share, this brings the total full-year dividend to S$0.05 per share. The proposed final dividend will be tabled for shareholders’ approval at the forthcoming Annual General Meeting on 25 July 2025 and if approved, will be paid on 15 August 2025. The book closure date is 1 August 2025.

OUTLOOK

In an environment of heightened uncertainty due to tariffs, we are proactively monitoring developments and supporting our clients and ecosystem partners as they evaluate and adjust to alternative routing strategies, providing flexibility and continuity through our global network and extensive warehouse space.

Our global presence and well-diversified capabilities across cargo, ground handling, and food provide resilience to adapt to shifting trade flows and mitigate potential impacts. We have consistently outpaced market growth for five consecutive quarters and expect this momentum to continue, supported by our leadership in air cargo, and excellence in Asia food solutions.

Looking ahead, we remain committed to supporting our Singapore Hub and ecosystem partners worldwide through reliable service, while maintaining strong cost discipline and operational agility to navigate evolving market conditions and capture new growth opportunities. We will continue to pare down debt, reinvest in the business and enhance shareholder returns.

Kerry Mok, President and Chief Executive Officer of SATS, said, “We achieved profitable growth across our business segments in FY25, consistently surpassing industry growth rates. In a time of uncertainty, this performance is a testament to our resilient business model, anchored by a global network with leading, diverse service offerings, and the commitment of our dedicated team. We captured S$103M in EBITDA integration synergies in just two years, driven by the strength of our platform and disciplined execution. Our confidence in sustaining growth is underpinned by long-standing client relationships, and our ability to collaborate effectively to deliver valued services that support their evolving needs. This can be seen through notable customer wins across our network, including multiple new cargo and ground handling contracts secured with key customers such as Air India, Emirates, and DHL in major airports. We delivered on our commitment to reduce leverage and restore profitability, as evidenced by the strong free cash flow generation in FY25. We recently announced a phased investment of over S$250 million for Singapore Hub to upgrade ground operations and cargo handling infrastructure. This reflects our continued focus on operational excellence and our role in strengthening the broader Changi Airport ecosystem. We remain confident in navigating a dynamic landscape and capturing new opportunities in the year ahead.”

Source: SATS 4Q FY25 Media Release 5.23pm v6

COMPANY PROFILE

SATS LTD – Singapore Airport Terminal Services

Incorporated in: SINGAPORE

Incorporated on: 15 Dec 1972

ISIN Code: SG1I52882764

With over 60 years of operating experience and an emerging global presence, SATS – Singapore Airport Terminal Services – is a provider of Airport Services and Food Solutions. Its comprehensive scope of airport services encompasses airfreight handling, passenger services, ramp handling, baggage handling, aviation security and aircraft interior cleaning, while its food solutions business comprises inflight catering, food distribution and logistics, industrial catering as well as chilled and frozen food manufacturing. Today, its network of ground handling and inflight catering operations spans nearly 40 airports in the Asia Pacific region. SATS has been listed on the Singapore Exchange since May 2000.

http://www.sats.com.sg/

BOARD OF DIRCETOR

NAME	DESIGNATION
Irving Tan	Chairman
Kerry Mok Tee Heong	Director
Achal Agarwal Director	Director
Vinita Bali Director	Director
Chan Lai Fung Director	Director
Chia Kim Huat Director	Director
Eng Aik Meng	Director
Mak Swee Wah	Director
Deborah Ong	Director
Pier Luigi Sigismondi	Director
Jessica Tan Soon Neo	Director

Our Leadership (sats.com.sg)

KEY MANAGEMENT TEAM

NAME	DESIGNATION
Kerry Mok	President and CEO
Manfred Seah	Chief Financial Officer
François Mirallié	Deputy CEO WFS, A Member of the SATS Group
Stanley Goh	CEO, Food Solutions
Bob Chi	CEO, Gateway Services and CEO-designate Gateway Services Asia Pacific
Michael Simpson	CEO, Americas WFS, A Member of the SATS Group
John Batten	CEO, EMEAA WFS, A Member of the SATS Group
Tan Chee Wei	Chief Human Capital Officer
Henry Low	Chief Operating Officer and CEO-designate Singapore Hub
Véronique Cremades Mathis	Chief Strategy and Commercial Officer
Ian Chye	Chief Legal Officer

Our Leadership (sats.com.sg)

CORPORATE SOCIAL RESPONSIBILITY

Giving Migrant Workers a Taste of Home

SATS’ five-month journey to feed thousands of migrant workers

Singapore’s COVID-19 Circuit Breaker in early-April 2020 marked the beginning of SATS’ five-month journey to feed thousands of migrant workers, when a growing cluster emerged in one of the dormitories.

SATS prepared over 45,000 meals daily at the peak of this massive undertaking. Teams across its Food Solutions business had less than 48 hours to gather resources to provide three meals a day with snack packs to migrant workers housed in various locations and to several government quarantine facilities nation-wide.

Amidst challenges such as a reduced workforce, tight timelines, and having to reconfigure operations to produce hot food cooked just in time instead of chilled ambient meals, everyone came together for the greater good. Staff from various catering teams, Aero Laundry, Gateway Services, and even management joined the efforts to pack meals.

Providing meals from their homelands is the least we could do for the sacrifices these people have made for us.

Production supervisor Eileen Hoong and duty manager David Ho were instrumental in keeping production running smoothly. Eileen recollects, “it took a lot of cooperation and coordination to get the food delivered safely to residents in a timely manner.” Experienced executive sous-chef Jordi Noguera and chef Jennifer Teo oversaw kitchen operations and menu development alongside executive sous-chef Saravjit Singh, or chef Saini as he is better known, to create new Bengali menus too.

“Food is a staple part of life and good food reminds people of home, their friends and family,” shares chef Saini. To give the migrant workers a taste of home, the team specially brought in Ponni rice and mangoes as a treat. Other ethnic groups also savoured the familiar taste of Sichuan cuisine and celebratory food and drink like dumplings and bandung, amongst others, during the Dragon Boat Festival and Hari Raya.

Source: Giving Migrant Workers a Taste of Home (sats.com.sg)

Trial of Zero-waste Ecosystem Solution

In November 2019, SATS partnered the Singapore Institute of Technology (SIT) to conduct a three-week trial programme at one of SIT’s campus canteens, iEat Café, which turns food and food packaging waste into fertiliser.

Developed by TRIA, a Singapore based company that develops sustainable food packaging, the Bio24 programme (https://triabio24.com) is a zero-waste ecosystem solution that turns single-use foodware, packaging, and food waste into farm-ready fertiliser. By replacing the plastics used in single-use foodware with a plant-based material called NEUTRIA, foodservice waste can be streamlined into a single organic waste stream. This can then be digested by TRIA’s patented biodigester, which turns the waste into fertiliser within 24 hours. The main objective of the trial was to better understand the digestibility of food and packaging waste materials as well as the viability of operational adoption. In addition to iEat Café’s operations, about 600 kg of food waste was collected from SATS Inflight Catering Centre (SICC) 1 and successfully digested into compost in order to test the quality of the resultant digestate. By the end of the trial period, iEat Café managed to achieve zero waste on 91.5% of their foodservice by-products by turning food and packaging waste into nutrient-rich compost.

Advocating sustainable behaviour among our employees

Sustainability is a holistic approach that determines the way we operate as a business and the choices we make as individuals. To build a corporate culture that promotes sustainability through behavioural change, we regularly communicate our sustainability pillars to our employees through many different platforms to encourage the rethinking of individual consumption patterns in our daily lives.

To promote this shift in mindset and serve as a source of inspiration, SATS has started an initiative to feature ‘sustainability champions’, individuals who display sustainable and responsible behaviour. One such champion featured in our internal newsletter was Meng Leyin, a coordinator of our closed-loop plastics recycling programme with Plaslife. Since its inception in September 2019, the programme has enabled SATS to recycle 3,910 kg of our plastic waste materials into new plastic bags and trash bags which were purchased and reused in our production kitchens. Leyin made it her personal mission to ensure the programme’s success, going above and beyond her responsibilities to collect plastic samples from the kitchens and encourage colleagues and cleaners to sort the plastics for recycling.

Source: Trial of Zero-waste Ecosystem Solution (sats.com.sg)

Sustainability Report 2023

President and CEO Statement

Dear Shareholders,

Feeding more people, connecting more communities

This is SATS’ first Sustainability Report following Worldwide Flight Services (WFS) integration in April 2023. Our transformational journey is progressing well. As a larger and more globalised combined entity, we have expanded our reach and significantly enhanced our ability to make a positive global impact across cultures. This is aligned with our purpose of feeding and connecting communities responsibly. We are committed to taking on this role for the benefit of our company, partners, stakeholders, and, ultimately, future generations. To achieve this, we have reaffirmed our commitment to environmental, social, and governance (ESG) and transformed ourselves to take on a greater challenge. We reviewed our sustainability status, re-baselined and set new targets for ESG aspirations. We have also refreshed our Group Sustainability Framework by setting new ambitions and goals.

Delighted people, delighting people

Our business and sustainability ambitions are driven by our people. Our success is built on the knowledge, expertise and performance of every single member of the team. Our people help build strong relationships with our customers, stakeholders and the communities we serve. SATS employs close to 50,000 people representing 45 nationalities who are collectively responsible for the safety of our customers’ passengers and consumers. Our employees are not just instrumental in responsibly and sustainably feeding and connecting communities; they are indispensable to us. Our people are at the heart of our organisation, and we have taken action to reinforce this. We have revamped our values, replacing "Core Values" with "People Values" to underscore our commitment to prioritising our employees. This change reflects our unwavering dedication to placing our people first and embedding this ethos across our entire company.

Building the foundation

In our first year of integration with WFS, we are laying the groundwork for long-term success. We have agreed on the issues that are crucial to our business as a combined company. These critical issues have been integrated into our updated sustainability framework, which includes clear ambitions and targets. We have established a robust governance structure to foster active participation and ensure accountability at all levels of our organisation. To underscore the value of sustainability in the face of evolving societal and business landscapes for building a lasting competitive edge for SATS, we have established the Safety, Sustainability, and Risk Committee (SSRC) at the board level. Furthermore, a dedicated Safety, Sustainability, and Risk Management Committee (SSRMC) has been implemented at the executive management level to reinforce the integration of sustainability into the company's operations and ensure the allocation of adequate resources to support sustainability initiatives. We have strategically restructured the ESG Councils at the operational level to ensure our four business units, Food Solutions, Gateway Asia, Gateway EMEA and Gateway Americas, get the opportunity to share global best practices and develop their specific sustainability initiatives. The combination of sustainability expertise from SATS and WFS has resulted in a substantial and ever-growing knowledge base of ESG. Leveraging our culture of collaboration, we actively promote the sharing of data, knowledge, and best practices at these council meetings. Our aim is to inspire and empower our global teams to utilise our collective insights to drive significant positive impact across our business and industry.

Driving sustainability globally and locally

As a global player, we must do our part to move forward on sustainability development efforts. Our extensive capabilities and expanded network empower us to collaborate with various industry players of different sizes to develop global solutions that will transform our operations and those of our partners, making them more sustainable.

Read more in our Sustainability Report 2024: sats-sustainability-report.pdf

COMPETITORS

SINGAPORE AIRLINES LIMITED(SG1V61937297)

Singapore Airlines Limited (“Singapore Airlines”) was incorporated as a public company with limited liability and a wholly-owned subsidiary of Temasek Holdings (Private) Limited on 28 January 1972. Its history began in 1947 when a twin-engined Airspeed Consul under the Malayan Airways Ltd’s insignia started scheduled services between Singapore, Kuala Lumpur, Ipoh and Penang. Malayan Airways Ltd grew steadily and by 1955, international services were added to its operations. With the formation of the Federation of Malaysia in 1963, the airline was renamed Malaysian Airways Ltd. In 1966 the governments of Malaysia and Singapore acquired joint control of the airline, which was then renamed Malaysia-Singapore Airlines Ltd (“MSA”). In 1971, MSA was restructured into 2 entities: Singapore Airlines and Malaysia Airline System. Singapore Airlines, a full member of the global Star Alliance, is one of the world's premium airlines, with the distinction of operating a young and modern fleet. The Singapore Airlines route network extends across 105 destinations in 37 countries, including those served by its subsidiaries, Singapore Airlines Cargo and SilkAir. The Singapore Airlines Group has over 20 subsidiaries, covering a range of airline-related services, from cargo to engine overhaul. Its subsidiaries also include SIA Engineering Company, Scoot, Tiger Airways, Singapore Flying College and Tradewinds Tours and Travel. Principal activities of the Group consist of air transportation, engineering services and other airline related activities.

http://www.singaporeair.com/

AIRPORTS OF THAILAND TH SDR (SGXE27499115)

Airports of Thailand (AOT) is a leading state-owned enterprise responsible for the operation and management of major airports in Thailand. With a strong presence in the aviation industry, AOT oversees the strategic development and efficient operation of six international airports, including Suvarnabhumi Airport and Don Mueang International Airport in Bangkok. AOT's comprehensive range of services encompasses passenger facilitation, ground handling, retail and commercial operations, and airport infrastructure management. With a commitment to providing world-class airport experiences, AOT continuously invests in modernization and expansion projects to accommodate the growing demand for air travel. As a pivotal driver of Thailand's tourism and transportation sectors, AOT plays a crucial role in connecting Thailand with the world and fostering economic growth.

AIRPORTS OF THAILAND TH SDR | SDR (singaporedr.com)

SIA ENGINEERING COMPANY LIMITED (SG1I53882771)

The company began its business as the engineering division of Singapore Airlines. In 1992, Singapore Airlines transferred its aircraft maintenance, repair and overhaul (MRO) activities into an existing subsidiary to form SIA Engineering Company (SIAEC). SIAEC is a major provider of MRO services in Asia-Pacific, with a client base of more than 80 international carriers and aerospace equipment manufacturers. It provides line maintenance services at more than 25 airports in 7 countries, as well as airframe, engine and component services on some of the most advanced and widely used commercial aircraft in the world. Over 20 subsidiaries and joint ventures with original equipment manufacturers and strategic partners in Singapore, Hong Kong, Indonesia, Japan, Malaysia, Philippines, United States and Vietnam increase the depth and breadth of the Company’s service offerings. SIAEC has approvals from more than 25 national aviation regulatory authorities to provide MRO services for aircraft registered in the United States, Europe, China and other countries.

http://www.siaec.com.sg/

THE INDUSTRY

SATS (S58/SATS.SI)

3.660+0.01 (0.274%)

Industry: Transportation, Airport Services

This company reports in this currency: SGD

Source: SATS – Investor Portal (CDP Internet) – Singapore Exchange (SGX)

Singapore Aerospace Industry Surges Ahead: Economic Survey 2022

The Singapore Aerospace industry has made a strong comeback, with output for 2022 reaching S$13.3 billion and a value-added of S$3.9 billion. This represents a 27.7% and 16.4% growth respectively from the previous year. The industry has surpassed pre-pandemic levels by 2.8%, indicating sustained growth beyond recovery. The industry is expected to continue its growth trajectory, with improvements in aviation- and tourism-related sectors although this may be affected by uncertainties and risks that remain in the global economy.

The release of the Economic Survey of Singapore 2022 by the Ministry of Trade and Industry on 13 February 2023 has shown encouraging statistics for the Singapore Aerospace industry. Preliminary data released by the ministry recorded aerospace industry output for 2022 at S$13.3 billion, and a value-added of S$3.9 billion. This represents a 27.7% and 16.4% growth respectively compared to the previous year (2021).

However, the industry has made a remarkable comeback in 2022, surpassing pre-pandemic (2019) output levels by 2.8%. This is a positive sign for the industry, indicating sustained growth beyond recovery. The achievement also speaks to the resilience of the industry and the effectiveness of the strategies and improvements implemented collectively and independently by Singapore aerospace companies during the pandemic.

The strong showing of the industry in 2022 can be attributed to the ramping up of air travel and aerospace activity with the lifting of travel restrictions in Singapore and around the world. The industry had seen early signs of growth since March 2022, when output exceeded 2019 levels for the first time, according to Monthly Manufacturing Performane reports by the Singapore Economic Development Board (EDB). Output in September 2022 was recorded at a high of 16.6% against the baseline. Aggregated data from MTI also showed steady increase in aerospace activity and output, surpassing pre-pandemic levels from the second quarter through to the last quarter of the year.

Data source: Ministry of Trade and Industry, Economic Survey of Singapore reports *2022 figures are drawn from preliminary data

Data source: Singapore Economic Development Board, Monthly Manufacturing Performance reports

Optimism And Challenges on The Path Ahead

This growth trajectory is expected to continue. Analyses by MTI suggest a further improvement in the aviation and air travel related segments, bolstered by the improved outlook: “The growth outlook for aviation- and tourism-related sectors of the Singapore economy has improved as the ongoing recovery in international air travel and inbound tourism is expected to accelerate following the faster-than-expected relaxation of China’s border restrictions. These sectors include air transport, accommodation, and arts, entertainment & recreation.” Data and analyses from EDB’s Business Expectations of the Manufacturing Sector survey supports this, with a net weighted balance of 36% of aerospace firms projecting a higher level of production in the first quarter of 2023, compared to the previous quarter, in anticipation of an increase in demand for aircraft engine repair work and MRO services from commercial airlines.

The optimism of the aerospace sector is a notable exception, however, as the overall sentiment of Singapore’s manufacturing industry has turned negative due to uncertainties and risks that remain in the global economy. Tighter financial conditions in many advanced economies and continued interest rate hikes by major central banks could lead to disorderly market adjustments and reveal previously hidden vulnerabilities among heavily indebted corporations and households, thereby raising the risk of financial instability. Additionally, further escalation in the war in Ukraine and geopolitical tensions among major global powers could worsen supply disruptions, dampen confidence, and impact global trade.

Despite the challenges, Singapore’s external demand outlook for 2023 has improved slightly. Growth in China is projected to pick up in tandem with the faster-than-expected easing of its COVID-19 restrictions, leading to improvements in the growth outlook of regional economies. Moreover, the global supply situation continues to stabilise amidst softening global demand conditions, resulting in eased global commodity prices from 2022 levels.

To sustain its growth momentum, it is crucial for the Singaporean aerospace sector to remain vigilant and adaptable in navigating the volatile economic landscape. It will also have to address and surmount challenges including manpower tightness in the domestic talent market and intensifying competition in the region. By focusing on innovation, enhancing productivity, developing talent, working collectively and leveraging the policy supports for the industry, aerospace stakeholders can stay ahead of the curve.

Source: Singapore Aerospace Industry Surges Ahead: Economic Survey 2022 | Aerospace Singapore Digital

The Current Landscape of Singapore’s Aviation Market

Post-COVID Recovery of The Local Aviation Market

The local airline industry in Singapore has experienced a robust post-pandemic recovery, driven primarily by a surge in travel demand as Singapore swiftly reopened its borders, but also by the ability of Singapore Airlines to rapidly ramp up its network.

Singapore Airlines and Scoot Surge Ahead with Near and Above Pre-Pandemic Capacities, Achieving Record Load Factors in FY2023-24

Both Singapore Airlines and Scoot have successfully returned to their pre-pandemic capacity levels. By the end of 2023, Singapore Airlines had reached 93% of its pre-pandemic capacity in terms of available seat kilometers (ASKs), while Scoot had reached 104%. In contrast, Jetstar Asia has experienced a slower recovery, only restoring less than half of its pre-pandemic capacity in 2023.

The capacity to ramp up their operations at a much faster rate than their competitors enabled these airlines to capitalize on the pent-up demand for travel, paving the way for high load factors and strong financial performance. Singapore Airlines and Scoot achieved record passenger load factors of 87.1% and 91.2% respectively in the most recent financial year, ended 31 March 2024.

The size of Singapore Airlines’ fleet and network have been key drivers of the local airline industry’s strong performance, following the immediate post-pandemic era. Nonetheless, there were still certain geopolitical factors within key markets which slowed the industry’s recovery, such as the delayed reopening of China. If these issues had not arisen, the recovery back to 2019 levels would have been much faster.

Airlines Grapple with Rising Costs and Intensified Competition as Post-Pandemic Travel Normalizes

It is important to recognize that the post-pandemic travel boom is exhibiting signs of normalizing. As airlines resume operations and expand their capacity back towards, and beyond, pre-pandemic levels, competition in the Singapore market has intensified. Increased industry capacity can lead to constraints on ticket prices as airlines compete for passengers. Globally, IATA expects 2024 yields to decline slightly from 60.6 US cents per ATK to 60.3 US cents.

High operating costs, driven by rising fuel prices, labor costs, and maintenance expenses, are further squeezing profit margins. As a result, despite the initial surge in demand for air travel post-pandemic, without adaptation, the combination of increased competition and escalating costs may cause a decline in profitability from the recent record levels experienced by many airlines.

Local airlines must now determine how to sustain this growth by differentiating themselves from their competitors. This may be achieved through various strategies, including network expansion, product innovation, service enhancement, or cost competitiveness. This current period of profitability provides an opportunity for airlines to invest in preparation for the next stage of post-pandemic growth.

CHALLENGES IN BRIDGING THE MANPOWER SHORTAGE POST-PANDEMIC

The aviation industry is currently facing significant manpower shortages across the board, which are impacting airlines, airports, and maintenance operations. Within Singapore, there are still thousands of vacancies in this sector waiting to be filled, and local aviation companies are hiring extensively across areas such as operations, engineering, and service. This trend has persisted since the easing of border restrictions in 2022, as the surge in travel demand had created an urgent need for the return of essential roles like cargo handlers, cabin crew, and maintenance engineers.

Talent Exodus and Competition from Growing Industries Fuel Workforce Shortages

The COVID-19 pandemic has disrupted the industry’s workforce, with many highly experienced professionals leaving the industry on early retirement packages that were aimed at reducing costs and maintaining operational solvency. As a result, these workers are unlikely to return to the industry after leaving the workforce. Moreover, many individuals who have been retrenched during the pandemic have found opportunities elsewhere in industries that offer greater stability and competitive benefits. It is hence challenging to attract these workers back to the industry, especially given the demanding nature of aviation jobs compared to other sectors.

Furthermore, the aviation industry is facing intense competition for talent from other industries. The pandemic has resulted in significant growth across several sectors, including e-commerce, logistics, and technology, which have been able to attract workers with better working conditions, higher remuneration, and more regular schedules. Some aviation roles have characteristics of variable hours and differing levels of physical and mental stress, which can make a return to the industry less appealing for those who have previously experienced these conditions.

Additionally, the lengthy training periods required for certain roles in the aviation means that, even if individuals were inclined to return to the industry, the time investment required before they can resume their positions may further deter them from doing so. The combined effect of these factors have created a shortage of pilots, technicians, ground handling staff, and other essential personnel in varying degrees of criticality, presenting a significant manpower challenge for the aviation sector.

Singapore’s Aviation Sector Races to Fill Vacancies Amidst Rising Demand and Training Gaps

While efforts are being made to increase hiring, it has been challenging to bring the workforce back to pre-pandemic levels and meet the rising demand for air travel and related services. For example, pilot recruitment was suspended during the pandemic and only resumed a couple years ago. Given that pilot training typically takes two to three years to complete, there is a significant disparity between the availability of qualified pilots and the current demand.

The same is true of technicians, whose specialist skills and lengthy training periods have been unable to keep pace with the surge in maintenance, repair, and overhaul (MRO) demand that has occurred post-pandemic. Additionally, staffing levels for ground handling and other support roles remain below pre-2019 levels, creating operational challenges for both airlines and airports as they strive to expand operations and resume their trajectory of growth.

To help fill the thousands of positions available across the industry, the OneAviation Careers Hub was created in 2022, providing services such as recruitment, job facilitation, and career advisory. It is a tripartite initiative by the Civil Aviation Authority of Singapore (CAAS), National Trades Union Congress (NTUC) Aerospace & Aviation cluster, and NTUC’s Employment and Employability Institute (e2i), and the service aims to attract, grow, and upskill talent to meet the demands of the recovering aviation industry. OneAviation has also hosted two annual career fairs, offering approximately 2,000 vacancies in 2022, and 1,700 in 2023, highlighting the additional requirements from the industry.

With the outlook for the aviation industry remaining positive, the demand for aviation personnel is also expected to follow this trend. The global fleet of commercial aircraft is projected to grow from ~33,000 aircraft in 2023 to ~45,000 aircraft over the next decade. Boeing forecasts that an additional 650,000 new pilots and 690,000 new MRO technicians will be required to operate and service these aircraft, with 40% of this demand concentrated in the Asia Pacific region alone.

SUPPLY CHAIN ISSUES WITHIN THE AVIATION MARKET

Supply chain issues have presented significant challenges for airlines seeking to expand their operations in response to rising demand for air travel. Airlines around the globe have encountered delays in the delivery of new aircraft, limiting their capacity to expand their network and add new routes.

Consequently, they have sought to tap into the leasing market as an alternative source of aircraft capacity, though this too has faced limitations due to the demand for aircraft outpacing the available supply. This has forced some airlines to scale back their growth plans, limiting the potential for even higher revenue and profitability growth.

Additionally, certain technical issues, such as those related to the Pratt & Whitney GTF (Geared Turbofan) engines, have resulted in extended periods of aircraft grounding. Such operational disruptions hinder airlines’ ability to operate planned schedules effectively, causing significant financial impacts due to the resulting flight cancellations and delays.

Supply Chain Issues and Aircraft Shortages Lead to Cancellations and Operational Challenges for Airlines

In May of 2024, 33 flights operated by Scoot were cancelled within five days, along with several other re-timed flights. A significant number of these cancellations were due to supply chain issues, ranging from the shortage of aircraft spare parts, to engine issues on several of Scoot’s A320neos.

The current aircraft shortage can be attributed to three key factors: fewer fit to fly aircraft due to technical and supply chain issues, the retirement of older aircraft because of the pandemic, and the delays in the delivery of new aircraft. During the pandemic, many older aircraft were retired or were parked to reduce costs and to manage the reduced travel demand. As the industry recovers and demand for travel increases, there is a pressing need to reactivate the parked aircraft and to acquire new ones to replace the retired fleet so that airlines can accommodate the growing number of passengers.

However, the delay of new aircraft deliveries, coupled with the necessity for further checks and maintenance of existing aircraft, have restricted the capacity of airlines to expand their operations to pre-pandemic levels and to achieve their projected growth.

These issues are anticipated to continue into the medium term. Despite the efforts of manufacturers and suppliers to ramp up production to address the backlog, the complexity of the aviation supply chain, involving numerous specialized components from global suppliers, will likely prolong the resolution of these issues.

The reactivation of parked aircraft and the fulfillment of new aircraft orders are gradual processes, and any delays in one part of the supply chain can have cascading effects. It is likely that supply chains will not fully stabilize until at least 2025. Unfortunately, this timeline has been affected by the recent safety issues at Boeing, which have resulted in a cap on the production of the popular 737 MAX aircraft.

Boeing’s safety record has attracted significant attention, particularly in the wake of the 737 MAX incidents. This heightened scrutiny has prompted a renewed, more stringent focus on safety and regulatory compliance, leading to stricter oversight and longer certification processes for current and new aircraft production. The resulting overhang on the airline industry, apart from affecting safety perceptions of it, is from the delays in new aircraft deliveries. These delays are set to further constrain the airline industry’s growth.

Further exacerbating the challenges faced by the aviation industry, financial issues such as high interest rates, inflation, and fuel costs have placed strain on airline operations. Increased borrowing costs and operational expenses can lead to a lack of funds for investments in new aircraft, technology, and infrastructure.

FUTURE OUTLOOK

Economic Growth and Market Adaptation Drive Positive Outlook for the Aviation Industry, with Asia Pacific region as a Key Engine of Growth

We have observed that over the past 18 months that global airlines, including the Singapore Airlines Group, have enjoyed record profits. This is an encouraging indicator for the industry, although it is crucial to recognize that these results are largely influenced by the current constrained supply environment, resulting in higher passenger yields. With increased competition and an expansion in industry capacity, it is anticipated that there will be a reversion to the long-term mean in terms of financial performance.

The aviation industry is poised for growth in the near future. Economic expansion, as reflected in GDP growth, is typically accompanied by increased demand for air travel. Airlines are demonstrating confidence by investing in new aircraft and technology, as evidenced by substantial orders placed with manufacturers like Airbus and Boeing in 2023. The Asia Pacific region is expected to be the fastest growing region for the aviation industry, driven by a growing middle class and rising incomes. The expansion of the e-commerce market will also have a positive impact on the air cargo industry in the long term. While the current challenges are significant, they are not permanent. Having weathered the pandemic, airlines are adapting and transforming to become much more agile and operationally efficient.

Airlines that have successfully managed themselves and adapted to changing market conditions have great potential to achieve significant growth in the coming years.

Source: The Current Landscape of Singapore’s Aviation Market | Aerospace Singapore Digital

ACQ_REF: CS/17626/20250528/188014/SGP/23/80

ACQ_AUTHOR: Associate/Anne Ching