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Singapore Airlines group increases network cuts to 90% and secures US$13 billion in additional funds to navigate COVID-19 crisis
March 27th 2020
Yesterday the Singapore Airlines Group (SIA) announced it had secured S$19 billion (US$13 billion) in funding to see it through the COVID-19 crisis from the country’s sovereign wealth fund ($15 billion) and Singapore's largest bank, DBS Group ($4 billion). Read More »
Temasek International chief executive, Dilhan Pillay Sandrasegera, said: “This transaction will not only tide SIA over a short-term financial liquidity challenge, but it will position it for growth beyond the pandemic.”
Temasek International is the management and investment arm of Temasek Holdings, a 55% shareholder in the airline group. The press statement said the support package would underwrite share sales and convertible bonds to the value of $15 billion. DBS Group would top up the deal with a $4 billion loan, it said.
Earlier yesterday the government announced an US$33.7 billion aid package for the country, tapping its huge resources to stave off recession. The only other time it has turned to its reserves for funding support was in the year following the global financial crisis of 2008.
“This is a landmark package and a necessary response to a unique situation,” deputy prime minister and finance minister, Heng Swee Keat, said in a speech to Singapore’s parliament.
Singapore Airlines Group (SIA) has grounded all but 11 of its aircraft, a 96% capacity reduction, until the end of April as it battles the collapse in air travel from COVID-19.
The airline group said this week it would operate 4% of its originally scheduled capacity, with 138 aircraft from the SIA and regional wing SilkAir fleet of 147 aircraft grounded. Its low-cost carrier (LCC), Scoot, will park 47 of its 49 aircraft.
The 72-year-old company said the situation was the "greatest challenge the SIA Group has faced in its existence".
"It is unclear when the SIA Group can begin to resume normal services, given the uncertainty about when the stringent border controls will be lifted," SIA said at the beginning of the week.
"The resultant collapse in demand for air travel has led to a significant decline in SIA’s passenger revenues."
The announcement is an increase of the 50% reduction previously announced by the airline group.
SIA said it is in discussions with aircraft manufacturers about deferring aircraft deliveries, is implementing salary cuts for management and directors and is speaking with unions about additional cost-cutting measures.
The operational reductions at SIA and Scoot were announced in the same week the Singapore government banned non-residents and long-term pass holders from travelling to or transiting through the country. Singaporean citizens, permanent residents and long-term pass holders are being issued with 14-day stay home notices.
Separately, the governments of Australia, Brunei, Canada, Chile, Myanmar, New Zealand and Singapore have signed a joint statement which affirmed their commitment to maintaining open and connected supply chains during the COVID-19 pandemic.
Signed on March 25, it said the seven nations "would work closely to identify and address trade disruptions with ramifications on the flow of necessities”.
