Singapore Airlines swings into record S$4.3 billion full-year loss

Singapore’s national carrier says it will be issuing more mandatory convertible bonds (MCBs) in a bid to shore up liquidity.

  • Singapore Airlines Ltd (SGX: C6L) share price closed 3.3% lower on Wednesday (19 May 2021)
  • The airline saw net loss ease to S$662 million for the fourth quarter of FY2020/2021
  • However, with passenger traffic shrinking 98%, full-year net loss widened to a record S$4.27 billion
  • The group expects passenger capacity to return to 32% pre-Covid levels by July 2021
  • With air travel recovery still uncertain, it has decided to raise an additional S$6.2 billion via the issuance of a new batch of MCBs
  • Buy and sell SIA stocks with an IG account

SIA calls 2020/2021 ‘toughest year in history’

Singapore Airlines (SIA) reported a net loss of S$662 million for the fourth quarter ending 31 March 2021, easing from the S$732 million recorded in the same period a year prior.

Across the full 2020/2021 financial year, the group suffered a net loss of S$4.27 billion, a deterioration of S$4.06 billion from the previous year, following its ‘toughest year in history’.

Full-year revenue fell by 76.1% year-on-year to $3.82 billion due to the plunge in passenger flown revenue across the group’s three passenger airlines - Singapore Airlines, SilkAir and Scoot.

This was partially offset by higher cargo flown revenue, which rose 38.8% year-on-year to S$2.71 billion.

Group expenditure came down 60.2% to S$6.33 billion, thanks to capacity cuts, cost-saving initiatives, staff-related measures, and government support schemes.

Mark-to-market fuel losses of S$497 million, meanwhile, were recognised on ineffective fuel hedges. However, this was partially mitigated by a S$283 million fair value gain on fuel hedges after a rise in fuel prices in the second half of the year.

Due to the Covid-19 pandemic, the group’s passenger traffic shrank 97.9% from the last financial year.

Looking ahead, the group expects passenger capacity to be around 28% and 32% of pre-Covid levels by June and July, respectively. The group is also hoping to serve around 49% of the points that were flown before the crisis.

SIA to raise an additional S$6.2 billion

However, with international air travel remaining ‘severely constrained’ and recovery ‘still unclear’, SIA Group said it will undertake a further issuance of a second tranche of mandatory convertible bonds (MCBs) to raise an additional S$6.2 billion.

Temasek, SIA’s largest shareholder, has provided an undertaking to subscribe to its pro-rata entitlement and any remaining balance of this issuance.

Entitled shareholders will be offered on a pro-rata basis the rights to subscribe to 209 MCBs for every 100 existing shares that they hold at the record date. The MCBs will be treated as equity in the company’s balance sheet to help ‘fortify’ SIA’s financial position.

‘The issuance will allow the SIA Group to maintain a strong equity base and provide it with additional options moving forward to raise further debt financing as necessary,’ the group said in a press release.

‘It further strengthens the group’s financial foundation to navigate the crisis, and enables it to make the necessary investments to secure its industry-leading position.’

Since 1 April 2020, SIA Group has raised S$15.4 billion in fresh liquidity.

During the fourth quarter, SIA issued its first US dollar-denominated bond, raising US$500 million (S$668 million). A further S$1.2 billion was raised through aircraft sale-and-leaseback transactions, excluding an additional S$0.8 billion raised in April 2021.

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