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Singapore Airlines VTL flights spark renewed optimism for Asian jet fuel demand

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Singapore Airlines VTL flights spark renewed optimism for Asian jet fuel demand

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SIA's VTL flights see 7 times rise in bookings since VTL announcement

SIA Group expects to operate 43% of pre-COVID passenger capacity by Dec

Carrier takes steps to meet its net-zero carbon emissions target by 2050

The Singapore Airlines Group, or SIA Group, is set to ramp up its passenger capacity as the vaccinated travel lanes, or VTL, scheme boosts air travel demand while cargo demand stays strong amid global supply chain disruptions and is forging ahead with its sustainability initiatives despite various COVID-19 related hurdles.

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SIA has been utilizing its freighters at a higher level than pre-COVID-19, to take advantage of the strong demand in the freight market, Lee Lik Hsin, executive vice president commercial, said during the company's latest financial results conference call for the half-yearly period ended Sept. 30. "We continue to see strong demand for cargo into this upcoming peak season."

"As the passenger capacity ramps up, we will also have the additional bellyhold space to similarly take advantage of the market situation," he said.

The Group continues to move nimbly to seize opportunities in a challenging environment, company CEO Goh Choon Phong said in a presentation.

The expansion of VTL destinations represent a meaningful restart of travel, with VTL flights seeing a seven-times increase in bookings since the announcement, SIA said.

Under the VTL scheme, vaccinated travelers can enjoy quarantine-free access to Singapore from those countries.

The SIA Group is expected to operate 43% of pre-COVID passenger capacity by December, and it plans to deploy 135 SIA and Scoot aircraft in November to support network plans, including three A380s, it said.

The airline has already activated 92% of its pilots and 86% of its cabin crew as of November, it said.

More border re-openings are expected as increasing number of countries attain high vaccination rates and move to 'live with COVID-19', Goh said.

On Nov. 15, Singapore's Ministry of Health announced that it will extend its VTL scheme to five more countries. It plans to launch VTLs with Indonesia and India from Nov. 29 and with Qatar, Saudi Arabia, and the United Arab Emirates from Dec. 6.

Air travel optimism

"The race to reopen borders ahead of the upcoming tourism high season is accelerating in Asia, with an increasing number of economies announcing plans to welcome vaccinated foreign tourists without having to serve quarantine," said ANZ Research Economist Krystal Tan in a Nov. 12 note.

A Singapore-based trade source echoed a similar sentiment, adding that heating oil requirements during the peak winter season in the northern Hemisphere is likely to maintain a floor for prices.

"We are entering winter... the market [jet fuel/kerosene] is typically strong during this season. It has been so in the past, it should [be] this year."

The upbeat momentum propelled the cash differential for jet fuel/kerosene spot barrels loading from the main trading hub of Singapore to hit a 21.5-month high at plus 42 cents/b to Mean of Platts Singapore jet fuel/kerosene assessment at the Nov. 12 Asian Close.

A resurgence in COVID-19 infections in China and Europe clouded demand optimism slightly, pushing the premium to back-pedal to plus 21 cents/b on Nov 15. Still, industry sources were confident that jet fuel/kerosene prices will regain ground in the coming weeks given the overall positive outlook.

The pickup of air travel in the region as countries started to allow fully vaccinated visitors, together with seasonal heating demand, will likely see Asian kerosene/jet fuel demand up by some 650,000 b/d on the quarter to 2.3 million b/d in Q4, JY Lim, advisor oil markets at S&P Global Platts Analytics said on Nov. 15.

The recovery will continue in 2022, and Asian kerosene/jet fuel demand is expected to rise 30% year on year next year, though demand will remain lower than pre-pandemic levels by about 15%, he said.

SIA's sustainability commitment

Meanwhile, the SIA Group is committed to net-zero carbon emissions by 2050. It joined the SAF Users Group, an international action group to promote sustainable aviation fuel, in 2011.

In 2017, it undertook the world's first green package flights from Singapore to San Francisco powered by SAF blend and is currently actively exploring options on local SAF production and delivery, it said.

SIA also supports the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA, as the only global market-based measure to achieve carbon-neutral growth beyond 2020.

Launched in June, SIA & Scoot passenger and cargo customers can offset their carbon footprint on high-quality projects, and further enhancements are planned to enable use of KrisFlyer miles and HighFlyer corporate points for offsetting, SIA said.

In addition, it is also adopting new aircraft technology and holds one of the world's youngest fleets.

It has taken steps to enhance its infrastructure and operational efficiency including reducing fuel burn through air traffic management initiatives and installing solar panels in its Singapore offices, as part of its sustainability commitment.

SIA has also partnered with the Civil Aviation Authority of Singapore and Singapore-headquartered global investment company Temasek to pilot the use of SAF in Singapore, with the pilot program scheduled to commence in 2022 and expected to run for a year.