The future of Singapore Airlines (SIA) amidst the COVID-19 outbreak looks assured with a successful rescue package being put in place, headed by state investor Temasek Holdings, amounting to SG$19 billion. The figure represents the largest aid package to date for any airline struggling with the dramatic decrease in air travel.
The package comprises SG$5.3 billion in equity and up to SG$9.7 billion in convertible note portions, all of which will be underwritten by Temasek, which owns a 55% stake in SIA. According to Reuters news agency, SIA has also secured a SG$4.0 billion bridging loan from Singapore’s biggest lender, DBS Group Holdings Ltd which will cover short-term liquidity requirements until money is raised from a rights issue at SG$3 per share, a 53.8% discount on SIA’s last traded price of SG$6.5, the company’s share price having fallen by over 10% on the announcement of the rescue package, the value now standing at a twenty-two-year low.
Temasek International Chief Executive Dilhan Pillay Sandrasegara said the deal would not only tide SIA over a short-term liquidity challenge but would position it for growth beyond the pandemic. SIA confirmed that it would use the funding from the rights issues to shore up its capital and operational expenditure needs while the carrier also said it would cut capacity by 96%, ground almost its entire fleet and impose cost cuts affecting about 10,000 staff.
To quote from a blog post by Shukor Yusof, head of aviation consultancy Endau Analytic: “Under the current dire circumstances, the rights issue is the best tactical move for SIA. It underscores the carrier’s strategic importance to Singapore and the island state’s position as both a financial center and aviation hub.”
