Singapore Airlines latest to get massive rescue amid coronavirus crisis
SINGAPORE/SYDNEY (Reuters) – Singapore Airlines (SIAL.SI) said it had secured up to S$19 billion ($13 billion) of funding to help see it through the coronavirus crisis and expand afterward, in a sign of confidence travel demand will eventually return.
It is the single biggest financing package announced by an airline since demand plunged because of the pandemic, forcing carriers around the world to ground planes, put staff on unpaid leave and scramble to raise more cash to ensure their survival.
American Airlines (AAL.O), a much larger carrier, said on Thursday it would be eligible for $12 billion of U.S. government aid as part of a $58-billion loan and grant package for the industry. That plan still needs U.S. government approval.
Singapore Airlines’ majority shareholder, state-fund Temasek Holdings [TEM.UL], said it would underwrite the sale of shares and convertible bonds for up to S$15 billion.
Singapore’s biggest bank, DBS Group (DBSM.SI), will provide the airline with a bridge loan of S$4 billion until it gets the funds from the rights issue.
“This transaction will not only tide SIA (Singapore Airlines) over a short term financial liquidity challenge, but will position it for growth beyond the pandemic,” Temasek International Chief Executive Dilhan Pillay Sandrasegara said.
“The delivery of a new-generation aircraft over the next few years will provide better fuel efficiencies as well as meet its capacity expansion strategy.”
For now, the airline, a major customer for Airbus (AIR.PA) and Boeing (BA.N), has cut capacity by 96% and grounded almost its entire fleet after the Singapore government banned foreign transit passengers, the lifeblood of the hub carrier.
Some other financially strong carriers are also banking on a return to more normal times once the pandemic has passed, such as Australia’s Qantas Airways (QAN.AX), which is continuing with costly plans to refurbish the interiors of its fleet of 12 grounded A380 superjumbos.
Brendan Sobie, an independent aviation analyst, said normal commercial financing arrangements such as credit lines or the sale and leaseback of planes were unlikely to be enough to help most airlines survive the crisis and thrive afterward.
“When these airlines raise cash privately, they won’t get the kind of terms Singapore Airlines got from Temasek,” he told Reuters.
“They may be able to get the cash to pay bills such as monthly leasing bills at a time of virtually no revenue but later on, the cost of the capital is very high – and that in turns limit what they can do,” Sobie said. “That in turn slows the potential recovery of air transport in some markets.”
Singapore Airlines shares dive 6pc despite S$15b fundraising plan backed by Temasek
Saturday, 28 Mar 2020 08:15 AM MYT
SINGAPORE, March 28 — Singapore Airlines (SIA) may be getting a S$15 billion boost, largely supported by state investment firm Temasek Holdings, but its share price still fell when trading resumed yesterday, closing 6.46 per cent lower at S$6.08 (RM18.43).
The national carrier called a rare trading halt on Thursday. It then announced in the early hours yesterday that it was issuing shares and bonds to raise S$15 billion to fund its capital and operational expenditure, with Temasek, which owns about 55 per cent of SIA, backing its plans.
Despite the weak reception from investors, Brendan Sobie, independent analyst of Sobie Aviation, said the capital boost would put SIA in a “strong financial position”.
Greg Waldron, the Asia editor of aviation magazine Flight Global, said the S$15 billion would serve as a “war chest” that will see SIA through the economic slump brought about by the Covid-19 outbreak.
Analysts said SIA was in a good position before the crisis and this financial injection would help cover its running costs even during this shutdown period.
“It is an overwhelming figure that would cover even the worst-case scenarios,” said Sobie, who highlighted that other airlines who are also suffering have not been able to get this amount of funding as SIA.
SIA’s move to raise funds comes amid earlier cost-cutting measures of cutting its executives’ pay and requiring its staff to go on no-pay leave as the Covid-19 pandemic wreaks havoc in the aviation sector.
The carrier also decided to ground almost its entire fleet as demand for international air travel has skidded to a halt, with countries shutting their borders to curb the spread of the virus.