SIA Engineering flags provision for lower hangar revenue, parked aircraft

All segments of the Singapore Airlines group took a hit from the outbreak during the first half of the financial year. ST PHOTO: JASON QUAH

SINGAPORE (THE BUSINESS TIMES) - SIA Engineering will recognise a non-cash impairment provision against its base maintenance unit's assets, and is working on finalising the quantum.

This is expected to have a material impact on the group's financial results for the first half of its fiscal year, said the aircraft maintenance, repair and overhaul (MRO) arm of Singapore Airlines in a profit guidance on Wednesday morning (Oct 28).

Reasons for the impairment were a significant decline in hangar revenue projections brought about by lower flight hours, the large number of aircraft taken out of operations and parked, and the likelihood that some of the parked older-generation aircraft will not return to operation.

SIA Engineering noted that it carries out periodic reviews to assess the recoverable amounts based on expected future cash flows of cash-generating units with indication of impairment.

"The Covid-19 pandemic continues to have an unprecedented adverse impact on the aviation industry and consequently on the MRO business," the company added.

All segments of the group took a hit from the outbreak during the first half of the financial year, with low flight activities resulting in low work volume.

SIA Engineering is in the process of finalising its unaudited consolidated financial results for the half year and second quarter ended Sept 30, and expects to release them in early November.

Separately, the company on Monday announced it had agreed to buy out Cebu Air's interest in SIA Engineering Philippines Corp for some US$7.7 million (S$10.5 million), as well as to sell its stake in Aviation Partnership (Philippines) Corp to the budget airline for about US$5.6 million.

In August, SIA Engineering increased the pay cuts for senior management, such that its senior vice-presidents, executive vice-president and chief executive officer would take 20-30 per cent reductions, up from the previous 15-20 per cent.

SIA Engineering shares fell two cents or 1.2 per cent to trade at $1.71 as at 9.04am on Wednesday.

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