Singapore Airlines warns full impact of Middle East fuel shock still to come

Singapore Airlines Group has warned that the full impact of the Middle East fuel shock will weigh on its earnings in the next financial year, as elevated jet fuel prices are billed on a delayed basis and broader macroeconomic conditions could affect demand amid a prolonged crisis.

The remarks come even as SIA posted strong FY2025/26 results for the year ended March 31, when its fuel hedging resulted in a S$218 million (US$170 million) gain in the second half of the year, compared with a S$13 million loss in the same period the year prior, according to exchange filings on May 14.

Fuel costs stood at S$5.03 billion for the financial year, accounting for 27.7% of total annual expenditure.

Jet fuel prices "have more than doubled since the conflict began," SIA said, noting that the impact was only partially reflected in March because of lagged fuel pricing mechanisms.

"The full impact is expected to feed through in FY2026/27," it said.

While the national air carrier of Singapore and its low-cost subsidiary, Scoot, have raised air fares across their network, the adjustments do not fully offset the rise in jet fuel prices, which is the group's single-largest expenditure item.

"Depending on the duration and how the situation in the Middle East develops, there could be broader implications for supply chains and macroeconomic conditions affecting demand patterns," the group said.

Platts, part of S&P Global Energy, assessed the FOB Singapore jet fuel/kerosene cargo outright price at $151.92/barrel on May 14, down $7.88/b on the day, with healthier regional supply pressuring spot premiums lower. The benchmark averaged $200.42/b in April and $195.40/b in March, more than double pre-crisis levels of $89.03/b in February.

SIA's comments echo analysts' warnings that fuel costs will materially compress margins next year, despite higher fares and resilient premium demand.

Jason Sun, analyst at DBS group research, said in a note May 15 that despite Singapore jet fuel prices having stabilized at around $150-$160/b over the past few days, materially below the peak disruption levels where prices surged more than 100%, it still represents a 70% increase from pre-conflict levels.

Sun noted that "price-sensitive regional markets" are likely to face margin pressure ahead, as yield resilience is tested amid the full impact of the fuel shock.

"Air India also remains a significant drag, as its recovery continues to be constrained by higher exposure to the Middle East and weaker pricing power, amid ongoing operational and FX challenges," Sun said.

SIA holds a 25.1% stake in Air India after the Indian national carrier merged with SIA's co-owned Vistara in 2024. Tata Group owns the remaining 74.9% of Air India.

SIA noted in its filing that Air India faces headwinds, including industry-wide supply chain constraints, airspace restrictions, and operational constraints to its key Middle East markets, on top of high fuel costs. "Nonetheless, it continues to make progress in its fleet renewal... and improve its operational performance."

SAF commitment

In the results briefing, SIA reiterated its commitment to decarbonizing group operations, with sustainable aviation fuel "a key lever in the journey towards achieving net zero carbon emissions by 2050." It underscored the importance of diversifying SAF sources, as well as scaling global production and adoption.

Both SIA and Scoot aim to source 5% of total fuel requirements from SAF by 2030.

"Since 2024, we have purchased 2,000 tons of neat SAF from Neste and around 2,500 tons of CORSIA-eligible SAF (emissions reductions) from World Energy and SkyNRG," it said in a May 15 results briefing.

"In February, SIA and Scoot -- together with CAAS, the Singapore Sustainable Aviation Fuel Company (SAFCo), and seven other companies -- signed an MOU to trial SAF purchases in Singapore," it noted. The trial SAF purchases have continued as planned despite the delay in Singapore's SAF levy.

Platts-assessed SAF (HEFA-SPK) FOB Straits averaged $281.65/b in April, down from $289.06/b in March but up from $245.56/b in February.

Capturing sustainable demand

SIA also highlighted its ongoing moves to capture growth opportunities for the long term despite a challenging operating environment, including prompt adjustments to frequencies and capacity.

A SIA official told Platts last month that the group has been increasing services even as some global airlines have been cutting capacity or trimming outlooks, including ad hoc supplementary services to London Heathrow and Frankfurt in Germany, and an additional three-times-weekly service to London Gatwick.

The group is also capturing "more high-value, time-sensitive cargo" across key sectors such as healthcare and perishables, with tonnage up 26% in March 2026.

In the last quarter of FY2025/26, cargo operations strengthened, with the load factor rising to 55.9% from 51.2% over the year.