Singapore Airlines Limited (C6L) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the Singapore Airlines Media Analyst Briefing for our Half Year Results. My name is Siva, and I'm from the Singapore Airlines Public Affairs Department. Very happy to see everyone here, again. We will follow the usual format, again, this year. We will have our presentations by our CFO, followed by the presentation by our CEO, followed by a question-and-answer session. We also have people joining us online. And if you wish to ask questions, there's a little box in there, where you can key in the questions, and we'll come to that at appropriate time. If I could kindly ask everyone to please switch off your mobile phones or put them to silent mode, that would be really useful. So without much further ado, could I invite our Chief Financial Officer, Jo-Ann Tan to present the half year results. Jo-Ann, please.

Good morning, everyone. Thank you for joining us. I will begin with the key highlights from our results for this half year '23, '24. The SIA Group achieved a record operating performance of $1.55 billion, a better performance compared year-on-year by 25.9%. This came largely on the back of very strong passenger revenue demand, which overcame the drag from weaker cargo. Lower fuel costs was another contributing factor to the record operating performance, this was primarily due to a 26% reduction in net fuel prices after hedging. This first half year record was $96.1 million higher than the previous record, which was just set in the prior preceding second half of last FY. For the first half year, the robust passenger demand led to the group turning in a record first half load factor of 88.8%. SIA and Scoot individually set their own first half load factor record of 88% and 91.3%, respectively. At the net level, the group recorded a half year profit of $1.44 billion. Now moving on to capacity. Passenger capacity was up 29% year-on-year. Including cargo, overall capacity was 19.9% year-on-year. We expect at the group level to return to approximately 92% of our capacity by December of 2023. Looking at the group financials. Let's look quarter-on-quarter, Q2 first. The group delivered a record Q2 operating performance on the back of stronger tax demand, lower net fuel costs, offset by weaker cargo. At $799 million operating profit, this was $44 million higher than the previous record which we set in quarter 3 of the last financial year. Looking at half year, year-on-year. Against year-on-year capacity increase of 19.9%, revenue improved 8.9%. The drag came from cargo. Expenditure increased 5.9% year-on-year, significantly less than the rate of capacity increase. This was mainly driven by net fuel cost being 15% lower despite higher volumes. Excluding fuel, expenditure tracked up 18.7%, almost in line with overall capacity. Consequently, operating profit of $1.55 billion was $319 million higher compared to last year. At the net profit level, $1.44 billion was a net half year record for the whole group. Now let's take a closer look at group first half revenue. Passenger demand was up 26.3%, marginally lower than a capacity increase of 29% at the half year -- comparing half year to half year. We saw a 38% growth of passenger traffic, but this was partially offset by an 8.5% decline in passenger yields as a consequence of increased capacity -- of increased competition. Cargo revenue was lower by almost 50%. This was on the back of weaker market demand, coupled with increased competition from more bellyhold capacity coming back on stream in the in the industry. Passenger demand was very robust over the peak summer season. Compared against last year, passenger traffic growth was most pronounced in the North Asia routes because most of the key markets, Japan, China, Hong Kong had borders that were fully reopened this year compared to last. Breaking down by segments. Both FSC and the LCC segments delivered record half yearly load factors on the back of very strong passenger demand. Cargo has been declining for several quarters now. In quarter 2, cargo demand remained weak for all the reasons I highlighted before. Nonetheless, if you look at the cargo yields, they continue to track above pre-COVID levels in excess of 30%. Moving on to the expenditure line. First half expenditure increased 5.9%, significantly behind the rate of capacity increase. Now the increase, this was actually due to lower fuel prices, but I'll talk more about that later. On this chart, just to highlight, staff costs rose 23%, mainly due to higher pay and allowances because we had increases in staff strength and average regions, variable crew allowances from increased flying activities. Other variable costs rose roughly in line with increase in capacity. The exception is passenger costs, which outpaced capacity expansion. This was because in addition to uplifting more passenger -- more meals. We also saw higher unit cost in our meal cost as a consequence of improvement in our new product. Waterfall of our fuel costs. You can see from this that the lower weighted average fuel price far outweighed the increase in higher fuel uplift and lower hedging gains. And the table below in the chart here shows the fuel price that we experienced in first half, both before and after hedging. This is a snapshot of our fuel hedging status for the next 18 months out, the table on the top. In addition to these open hedging positions, we also have additional gains that we locked in from closeout traits that we will progressively recognize in the rest of this financial year and the next, based on the maturity dates of the original trades. And this is shown in the table at the bottom. Operating profit for quarter 2 was a record $799.3 million stacked together, first half delivered operating profits of $1.55 billion. This is a waterfall chart. Essentially, it shows fairly clearly that the benefit from higher passenger flown revenue, together with the lower net fuel costs more than overcame the drag from lower cargo as well as other expenditure items. Breaking down the performance by the main companies in the group, you can see the bulk of the improvement for group numbers came from better operating performance for the parent airline. Scoot also turned from an operating loss last year to operating gain this year, and this was primarily due to stronger revenue. Last year, many of the markets that Scoot operated to were still not fully reopened. EC also turned from an operating loss to a marginal operating gain this year. Higher revenues from more flying activities more than offset the corresponding increase in the expenditure line. Looking at the net results, net profit for Q2 combined with the record for Q1, brought in our first half net profit record of $1.44 billion. Looking at the waterfall chart, other than the higher operating profit for this year, our record improvement for this year was also aided by having net interest income versus what we had net finance charges last year as our bank deposits were rolled over at higher interest rates. Share of profits this year was also higher compared to a share of loss last year. Amongst our associate companies, we saw a lower share of losses coming from Vistara. For the first half year, the SIA Group is declaring an interim dividend of $0.10 per share. This will be paid out on the 22nd of December. Looking at our financial position. SIA Group continues to maintain a very strong balance sheet. As of 30th of September, we still have $13.5 billion in cash and in bank deposits. We also announced yesterday that we will be redeeming the remaining 50% of our remaining 2021 MCBs. Covering both principal sum and accreted yield, this would result in a cash payout of $1.71 billion. With this payout, we would have redeemed a total of 75% of our 2021 MCBs, leaving $1.55 billion of remaining MCBs that we have not yet paid. This is a picture, a snapshot of the group operating fleet. We expect to take on another 6 aircraft deliveries before the end of this financial year, and we will end the year at 201 aircraft. Sharing with you the projected group CapEx numbers for the next 5 years. Now this picture is very similar to what we had disclosed before in the May results. And this is my last slide. So with this, thank you. Let me invite now our CEO, Mr. Goh Choon Phong on stage to share with you our strategy going forward. Thank you.

Very good morning, and a warm welcome. I see quite a number of familiar faces. So again, welcome to STC for our briefing. Jo-Ann has spoken about the record performance in the first half of this financial year, and that continues from last year's record performance. And so it is actually useful for us to recap what is it that we have done during the COVID years that have led to the strength in our performance. This should be a familiar chart of how -- in the worse depth of the financial -- of the COVID crisis. The plunge in our carriage and capacity, but what we have done during that period, if you may recall, and now I've kind of reorganized it in a different manner was 3 priorities. First, to boost liquidity, and we were very glad and grateful for the shareholders come in and supported us with $15 billion in fund in the forms of MCBs, and we're able to also raise a further $8.5 billion through various schemes sales and leaseback, secured financing and bonds. The good thing, of course, is that for our shareholders, what they have put in, in terms of the rights, for example, at $3 is today more than double. And with the redemption in MCBs, they are also getting the reward of the yield from the MCBs. Plus, as you may recall, last year, we have paid a very good dividend, a yield of more than 6% following the financial end. The other priority that we have -- you would expect SIA to do that, that we have done is really to care for our customers. To start with, immediately following Wuhan's closure, we actually have gone out and the very next day started our crisis management, set up to take care of customers who were affected by that closure. And going forward, as all the borders were closing in rapid succession, I think we are one of the very few airlines that have gone out and told our customers that if you can't travel because we have no flights available, we are on a refund. So we were doing from outset what we deem as right things to do by our customers. And of course, the whole series of things that follow, each of them is focusing on what is convenient, what is sharing to our customers. Going through more than 100 touch points to ensure that each touch points, our customers continue to be comfortable traveling with us, with all the concern about the COVID infections. We will also clear from an outset that we want to preserve our operating capabilities. And that, of course, come in the form of, firstly, our people. We wanted to retain the operational capability of our people in being able to man the flights when they begin to -- when the borders begin to recover to open. And beyond that, we continue to also take delivery of new aircraft. In fact, 36 planes were delivered during that period. Again, to make sure that we have the ability to actually bounce back quickly when the demand returns. Everybody were talking about emerging stronger at a point in time. Again, to us, we know we have to be clear what we mean when we say to emerge stronger. We have 2 focus areas. 2 means we want to be first off the block when demand returns. And we want to also retain our industry leadership as we begin to emerge from COVID. The emphasis on both objectives were communicated to everybody in the organization at a very early stage of the crisis. As you can see here, we begin to talk about the need to be first off the block as early as March of 2020 to the organization. And we started the new leader -- the new transformation program in April of 2020. To be first off the block, we know that we need to be able to continue to keep the skill set of our staff relevant. So upskilling, reskilling and also to keep the resources, the key resources operationally ready, and that means both aircraft as well as our operating crew. The outcome is that throughout the entire period, as soon as the borders are open, we're almost always the first to put in the capacity on the route even up to today. Lead a newer transformation program was successful. It generated a lot of new ways of doing things, work processes, productivity gain, et cetera. And the work process improvement were not just about cost savings. It was about how to improve customer service, how to enhance revenue-generating opportunities, et cetera. The outcome of both objectives really led to the record performance last financial year. You can see here and its continued strength in the first half of this year. I won't belabor because you have seen the earlier presentation by Jo-Ann. But it's not just about financial performance, as I pointed out earlier. The other objective was to come out as continue to be an industry leader. And for that, you can see that in the year 2023, we continue to be recognized by various parties to be the leader. So you have here the 50 most admired company, which is published by Fortune Magazine every year. We were the only company in Singapore recognized on that list. In fact, we were the highest ranked Asia company on that list ahead of household names such as Toyota, Samsung, et cetera. And this lease will actually voted on by executives across all industries, particularly those in the Fortune 500 list. Of course, we will also recognized by our customers to be the best airline, industry leaders with people within the industry, our unions as well as people -- the workers, employees, in general, in Singapore. So various segments, have provided recognitions of what we have achieved. So it's not merely financial. Of course, we didn't do this just on our own. We're glad and very grateful for the support shown to us by our customers, our shareholders, the Singapore government who has been, throughout the whole COVID period, very proactive in opening up borders in a safe, but yet progressive manner. And also our ecosystem partners, such as the Airport, Changi Airport sets as well as engineering company. But I would say that most of all, most of all, it is really the hard work of our people, the dedication and the full commitment from them to make sure the company continues to perform well despite all the challenges. There are, of course, other things that we have done in strengthening the foundation for the future. I'll go through this quite quickly because it hasn't changed very much. And of course, our long-term strategy, it shouldn't change from year-to-year. The focus on continuing to improve on our brand promise, continue to build our network connectivity to be relevant to our customers. You -- of course, you have heard about Brussels coming online. We have just also announced increase in frequency to Australia products. We are -- we will be introducing all brand-new seed products on our 777-9, which was meant to be this year, but unfortunately, it's delayed because of the Boeing. And of course, leveraging both IT capabilities as well as our improvement in terms of continuing to upskill and reskill our staff to make the customer experience even better. It's good and SIA, the network continued to grow, but also in a way that would enhance connectivity through Singapore. Everyone would have heard about Scoot's intention to bring in the new fleet of E2 aircraft, 12 seaters that will enable us to add many new destinations, especially in this part of the world. Commercial partnership continues to be an important area. We continue to enhance, both in terms of the number of partners as well as depth of corporations. And Air India, Vistara merger for which we will have eventually 25.1% of the combined entity. And you're aware that recently, the CCI, which is Competition Commission of India had approved the -- for the merger to take place. Of course, there are other regulators as well as authorities that we have to seek approval for, but the process is on track. Development of new revenue streams. Let me just particularly highlight the KrisFlyer as well as the KrisPass development. As you can see here, where we have almost 8 million KrisFlyer members now. And the revenue from KrisFlyer program. Last year, in the full year, we said it was 900-plus million. This year at a half year point it's about 600 million, and we expect, therefore, the full year to exceed 1 billion. And of course, KrisPass has been getting more and more popular, and this allow our customers to both redeem as well as earn points from micro transactions, transactions other than the flying. We continue to be very focused on our sustainability objectives. You would have heard about the pilot that has recently been concluded for the use of SAF in Changi Airport. And we continue to look at other ways of reducing our carbon footprint, one of which is the installation of solar panel. Digital capability has been something we were very focused on building over the last decade or so. And of course, recently, with the advance of generative AI, we'll be looking at how best to make use of the technology within the organization. Many -- project has started, and some of them have very encouraging results. So in this case, there was one particular initiative that would help us cut down our response to customers by 75% in terms of time. So that particular case, it usually takes about 8 days for us to respond to customers if you cut down to 2 days. So very promising, and this is something that we are putting a lot of focus on. The challenges before us are not very different from what I showed last year, and you are all here. Of course, some of them have intensified such as geopolitical concerns, the tensions in the Middle East, for example. But as you can see from the earlier presentation I have, we are well positioned with all the initiatives that we have put in place, not just over the COVID years, but even before that. And that we are quite confident that we'll ensure, that we'll retain our leadership positions going forward as well.

Thank you, Choon Phong. We will now proceed to the Q&A session. So while we set up for that, maybe I'll quickly go through some of the now familiar house rules, I suppose. We've got quite a lot of people here as well as online. So we really appreciate it if you could keep to one question each, please. [Operator Instructions] So I'd like to invite Choon Phong back in stage and Jo-Ann and joining them will be Lee Lik Hsin Lee, our Chief Commercial Officer as well as Tan Kai Ping, who is our Chief Operations Officer. There'll be people rolling around microphones. So when you're ready, I'm happy to take the first question. Anybody? Yes, over there. Greg Waldron, please. Thank you.

Okay. So this is Greg Waldron from Flight. And questions for Choon Phong. Choon Phong, I noticed with the fleet, you've got this kind of sub fleet of 737-800s and I just wanted to check with what's the long-term plan for those 7 aircraft? And what might be your replacement considerations for that aircraft?

Yes, we do have the remaining older 737-800 that you mentioned. Those will actually be retired over time, probably in the next couple of years. And with that, actually, those -- that particular fleet is the only one that doesn't have WiFi and doesn't have full flat seats for the business class. So with that retirement of that fleet, the entire SIA fleet of planes will all have those features that there is a full fledge on the business class as well as WiFi capabilities.

Thank you. Can we get the next question, please. Maybe this gentleman here, and then we'll hear by Danny, please. Thank you.

My name is Gurdip Singh, I'm from Press Trust of India. With your stake in Air India coming down 25.1%, what is SIA's strategy going to be for the Indian market, new destinations? How are you going to operate? And how you're going to perform with that 25.1% in Air India?

So actually, these are 2 different questions, even though they are somewhat related. So with regard to our investment in Air India, as you know, we started with a joint venture with the Tata setup of Vistara for which we're 49%. And during the Air India due diligence that Tata has done, we were actually supporting them in the due diligence process. So when the opportunity comes for us to consider the Air India involvement and having gone through the analysis and all that, we agreed to be part of that venture. And hence, Vistara is -- the start-up process of holding Vistara into Air India. And the result of that is that eventually, we will look at -- we'll be looking actually 5.1%. Now India is a huge, huge market. It is fast growing. It's going to be the third largest economy in the world. It's already the biggest travel market in the world. And it's got huge potential, as you can see. So our investment in Air India was to allow us to also participate directly in the growth from India. And this hasn't changed because whether it's Vistara initially and this opportunity is to actually be part of the Air India structure. In both cases, we were looking at being able to participate directly in the growth. As regard to SIA's operations, you would expect that when Vistara was operating -- Vistara is still operating -- when Vistara operating, we have been working with Vistara to enhance commercial cooperation between Singapore Airlines and Vistara. You can expect that with the folding into Air India, that kind of discussion will continue.

Thank you, Choon Phong. To Danny here, please.

Danny Lee from Bloomberg News. Can you give some color about how you see forward demand in the fiscal third quarter and into the fiscal fourth quarter, do you see forward bookings at above average levels. And consequently, do you see a benefit from higher airfares as a result?

So we have said that demand is still strong all the way up until the end of the financial year. But of course, there has been increasing competition by way of more airlines putting their capacity back into the market. And so consequently, there is pressure on yields, as you would also note from our most recent results. So I think that is expected to -- that same pressure on yield is expected to continue into the third and the fourth quarter as well. But overall, from a total demand perspective in respect of filling our flights, we still believe that the full financial year will still have a positive picture.

Thank you, Lik Hsin. We'll go to that lady and then in front of her, please.

Naomi from [ Serium ]. My question is mainly on fleet. So with the incoming 6 aircraft deliveries, I mean it's widely publicized that production ramp-up has not been as fast as expected, and airlines are hungry for many aircraft. So how much slower of fuel are you seeing in terms of Airbus and Boeing and Embraer deliveries that will [ carve ] your growth plans? And the other thing is also with AOGs -- sorry, for Pratt & Whitney engines, those inspections are coming up. So I know for engines for Scoot are affected. So any -- is that going to result in any AOGs? And is there any spillover to the planning for E-Jets where the impact is not yet known?

Yes. So on your first question, what Jo-Ann has presented earlier on the fleet delivery is -- has factored in the latest we understand, of any delays. So that's the picture. And as you know, and I mentioned that we were expecting 777-9 to be delivered from this year. It is now looking at 2025. So that particular one is actually delayed by now to 2 years.

Yes. Thanks for the question. So we have 4 engines affected by the PW1100 in the Scoot fleet. That's 2 aircraft. Now working to -- with a partner brand, we need to get the engines service time back online. We are also working closely with Pratt & Whitney to -- obviously, these are multiyear problem. Things are quite well known. So working closely with them on spare engine support and also the shop turnaround for the engines. We have some flags. So I think you mentioned the E2. Now the E2 coming towards brand new. So it does have yet unknown impact, as you said, but the planes are brand new. So engines are brand new. So they'll be fine for a while. So it gives us bit of flags and Scoot also has 320 classics, which are due for lease renewals or lease returns and those provide flags as well. So that's how we always plan our fleet. So I think next year, I don't know yet what the impact is, but we do have some flags.

Tabitha from DBS. Do you see more opportunities for the SIA Group and Vistara, given that peers in the region are more impacted by the engine issues?

Different -- the full impact of the engine issue on various airlines, it's not something that is public. Obviously, the airlines themselves would have to come up and clarify. But we -- the deployment -- because as we emerge from COVID especially, we are actually very agile. And that goes for Vistara as well because we do have our staff, such as the CEO of Vistara is a staff that's second from -- so we do have a job process of responding to market demand and the capacity will be adjusted accordingly.

Kaseedit from Citi. When I look at your forward capacity of the industry on long haul, whether ASEAN to North America, Europe or Australasia, they're approaching 90% to above 100% by summer next year. Do you expect yield to normalize back to pre-COVID level? Or are you seeing structural changes in passenger behavior, such as like premiumization of leisure, for example.

As I said in my answer to the earlier question, the addition and restoration of capacity by the other airlines does put downward pressure on use as we have experienced ourselves in the latest set of financial results that you see, we are not making any projections on where this might finally land, but we will respond to the market situation as necessary.

We'll just take some questions that I've come up virtually. Sean has asked about the impact of the GTF issue. I think we've answered that question already. So maybe we'll go onto the next. Neil Glynn is asking what percentage of corporate traffic recovery have you seen so far? And how much further recovery do you expect?

So I think it is well publicized that corporate travel has not yet fully returned to its level pre-pandemic. On our end, we have been able to substitute for this travel, with additional leisure travel, with additional family travel, and therefore, our load factor is at an all-time high.

Thank you. Perry Yeung is asking 2 questions. Firstly, in Q2, nonfuel cost was actually flat quarter-on-quarter despite increased operating capacity. Can you provide some color on what the company has done to manage the cost during Q2?

Okay. If I can just take the question on quarter-on-quarter costs. Quarter-on-quarter, Q2 was relatively flat, largely on account of staff costs. And staff costs quarter-on-quarter, there was relatively flat because of timings in when we provision for PSB. So if you look at it on a full half year basis, that should even out any of the timing differences. Thank you.

This is [ Tim Vargas ] from Bloomberg Intelligence. A question on fuel. Quite impressive performance to keep fuel costs actually down year-on-year. When you look at 3Q and going forward. Maybe you could just talk a little bit about hedging profile. From your slide, it looked like 10% on brands and maybe 26% on jet. Are those profiles a little bit lower than you typically hedge?

Thank you for the question. Actually, we hedge on a value programmatic basis, we say typically 50% to 40% on a declining range. So in fact, if you look at the Q3 and Q4 numbers, it is actually still in line with our declining range profile. Thank you, Tim.

[indiscernible] from [indiscernible]. A question on your wide-body fleet. I understand there's only 2, 350s left on order books. Is that enough for your long-term, long-haul fleet operation network? And with that being said, with 777-9 still uncertain, are you looking to have backup plans from Airbus?

As you know, [indiscernible], we do have flexibility mentioned also earlier by capping to a different question, which is that a number of our planes are obviously on lease for which we have the flexibility of extending that give us some flexibility. As to future aircraft order, well, you'll hear about it when we do make the order.

[ Mayuki ] from [indiscernible]. First about Air India, I think you have said that you're looking at the share purchase to complete by March 2024? Is that schedule still on, you seem to have quite a number of the permits that you need to have. Can you give us an update? Another is about SAF. After the results of pilot came out, what's next for SIA in queue?

On the merger, as we said, at this point in time, it looks to be on track. So we are talking about by end of the financial year, thereabout, it could be plus or minus. But that particular timeline remains on SAF, we have previously mentioned that we are talking to suppliers on our requirements and so forth. But we do believe that this is not just -- it has to be such a problem of that skill. It has to be tackled at an industry level and not just individual airlines. Of course, individual airlines would have to look at what kind of commitment they have. But given the scale of this issue, many more players have to come in and make sure that there is enough supply.

Last one from me. Just on premiumization of leisure traffic, right? You mentioned that corporate hasn't fully recovered, but we see a lot faster, closer to 90%, which means that the leisure really has moved upfront. In your forward booking, are you seeing the mix staying where they are? Or your frequent flyer moving back to the back seat? For the leisure segment.

So my answer to the earlier question already indicates that we are filling up our business cabin with new segments and some of those segments would include leisure travel. I think there is -- the market is evolving. We came out of COVID not too long ago. And we don't know where the final stable numbers will be. Our objective, of course, ultimately is to fill out flights, all the cabins with any market segment that we can get, and we will adapt our strategies as the market moves to make sure that we fulfill that objective.

Thank you, Lik Hsin. Danny?

Danny Lee from Bloomberg News. Do you have a figure of how much long-term SIA has to spend on SAF to get to the kind of targets you want to and maybe even beyond? Do you have a big number in mind that you could share with us today?

SAF today is 3 to 5, but we expect that as the volume builds up, obviously, the price will be different. That's the reason why I said it's not an individual airline issue. It's not -- it's industry. And by industry, I refer to in a broader sense, it's not just airlines. But the whole aviation partners, everyone, including not -- well, the manufacturers, the fuel companies and the airport, the government, all these have to come in. Obviously, at 3 to 5x is not going to be something that many airlines can bear. But it's [ the chicken you eat ] sometimes in order to produce more, you've got to invest. The people who want to invest, will want to see that there is actually demand. But we are increasingly seeing commitment by at least the airline industry. For example, we -- most airlines, I would say, would have committed to the 2050 target. That's a good starting point. And we have to work from there.

[ Peggy ] from The Business Times. Okay. I'm not sure I understood the fuel costs correctly. There was a decrease -- there was a decrease in fuel costs in the last quarter, Q2, in fact, for the first half as well. But I thought that first -- quarter 2, there was an increase -- quite a significant increase in the industry fuel costs, because I think Qantas actually also mentioned that they might have to impose surcharge if this continues, the fuel cost continues to increase. But for SIA, somehow you managed to bring in the fuel cost. And with SAF pilot, right, I would assume that they will also raise your fuel cost, but contrary to expectations, that has decreased. So maybe -- so could you share with us the secret recipe for that?

Okay. Thank you for the question, [ Peggy ]. Maybe if I can just refer you, we may not have it, but to the chart that I showed around our net fuel costs. Okay. So first half of this financial year, our average fuel price before hedging, as we showed in the chart just now was about USD 105 per barrel. Post hedge, it was USD 95 per barrel. Compared to last year first half. So same period last year. The fuel price before hedge was USD 148 per barrel. Post-hedging was $128 per barrel. So I was making that comparison versus last year. Okay. Second question on SAF. It was a SAF pilot. The quantity that we used for the pilot actually was very little, very low. So it's not material to the cost of fuel in this case. Thank you.

Sorry, I have one last question. SIA Group would have ramped up your group passenger capacity to 92% by December. So -- and it's projected to see full recovery within -- by the end of financial year 2025. So that will be March 2025.

Maybe let me just clarify. We will be 92%. We are planning for capacity at 92% by the end of this year, December of '23. We intend to go back to 100% within next financial year. So next financial year starts from April of 2024 and ends in March of 2025. So sometime within 2024, we are expecting to be 100% of pre-COVID capacity.

Yes. So what is holding back you from increasing that last 8% is going to take like about a year? So is it because of projected demand because of your capacity due to aircraft or what other factors?

So it is, as you noted, a combination of factors. Firstly, aircraft, our fleet at this point in time is still not the same size as pre-COVID. Now there's good reason for that because coming out of COVID, we also took the opportunity to fully modernize the fleet, and we removed some of the older aircraft types. For example, the A330s and some of the B777 classics. And by doing so, we actually improve our product proposition. For example, in business class widebodies, we are 100% lie-flat in business class. I'm not too sure any other airline in the world can claim that. The second reason for not being at 100% is because we also restructured our network as well. Coming out of COVID, there were some points that we decided not to go back to operate in, for example, Wellington in New Zealand. And so that results in your capacity being a bit less than pre-COVID. And the third reason is China. China resumption, as we have said, it's not yet exactly at pre-COVID for a whole host of reasons, one of which, as you alluded to, being demand. And so we have not fully restored our China flex, though we are progressing in that respect. Having restored 23 out of 25 points with capacity at about 3/4 of where we are pre-COVID as a group.

I am Peggy from Phillip. I've noticed your sales in demands of carriage is still a very strong in number. Could you tell us -- give us the idea how is the -- in terms of regions, which ones are stronger ones, which are the weaker ones? And if because for first half of this year, we saw there was some weakness in European in the Americans routes. Is there any particular reason there? Or anything that you noticed that has changed the operating landscape for the airline industry?

Across all regions, we are experiencing good and high load factors. I mentioned China just now, so that would be one area where perhaps we can get better load factors. We would continue to work towards that. But there are -- aside from that, there aren't any other standouts. We are achieving -- managing to achieve our objectives of high load factors across the rest of the globe.

Thanks, Lik Hsin. We've got one more question online from Sean. The question is, do we have a target timeline to redeem the remaining MCBs and introduce a dividend payout policy? Does SIA have any minimum cash availability liquid that we need to -- we would like to maintain to balance aircraft CapEx and operating needs?

We do not have a dividend policy. And there is -- as regard to remaining MCBs, if there is any development on that front, we will certainly announce it. So something that you can't wait for the announcement.

Just a question on cargo. I mean, I understand that it's sort of now starting to pick up slowly and is still above 2019 levels. So do you have any sort of thing you can share with us in terms of the outlook? Like are you slowly seeing sort of a return to increase -- increases and stuff.

Well, as you note, we are still above 2019 levels, but of course, very far below the COVID years. I think the -- it remains to be seen how it pans out. Obviously, there is a lot more capacity in the market because airlines are restoring their passenger flights, so there's a lot more bellyhold capacity and the overall macroeconomic situation across the globe is also quite uncertain at this point. We will simply respond as necessary to the changes in the market.

A question on operations. I understand from the MRO sector that there's a labor and skills shortage. Has that affected your operation -- day-to-day operations, for example, getting planes back from [ agents ] and things like that?

Yes, the labor shortage is affecting not just MRO. It's actually affecting everything, whether it's ground handling, back handling or aircraft maintenance. Yes, you're correct. I think one of the defining features of SIA Group's response to COVID has been make up our core capability. And so in our recovery, as Choon Phong mentioned just now, we were quite focused on being first of the blocks retaining experience. Now we are, to be clear, managing difficult supply chain situations. We are managing manpower shortages. But I think we are doing as well as can be, given we have a view on leg-up because really, we kept talented people.

Great. Thank you, Kai Ping. We probably got time for one more question if anybody has got one? All good. Great. Well, thank you, everyone. That brings an end to the proceedings today. Thank you for your time. We'll see you during our full-year meeting analyst briefing. Thank you, panelist. Thank you, everyone.