SIA Lost $3.5 Billion in First Half of the Year; Plans to ‘Borrow’ $6.2 Billion & Focus on Cargo Business

By
Ashley Seek
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The travel industry did not have a good look in 2020, no thanks to COVID-19.

And by extension, companies like Singapore Airlines (SIA) were badly affected.

On 10 September, around 2,400 employees were let go which could’ve easily ended up to be 4200 people instead.

To make matters worse, pilots who stayed also took huge pay cuts in order to keep their jobs.

And now, we have some data that, honestly, doesn’t make the situation look any better.

Losing S$3.5 Billion

Even the sub-header was painful to type.

The SIA Group said in a report on 6 Nov that they’ve suffered a net loss of S$3.5 billion in the first half of the year.

A news release mentioned that passenger counts fell by 98.9% due to many travel restrictions.

Group revenue has declined S$6.69 billion year-on-year to S$1.63 billion in the first half of the financial year.

That’s more than an 80% loss!

Reader: Jialat, but how is SIA still surviving?

Luckily, SIA doesn’t just fly people.

Revenue From Cargo

There’s always a backup plan.

Some of the financial pain was offset from the revenue earned from flying cargo.

Which went up by S$274 million, by the way.

They even maximised this by using some passenger aircraft for cargo-related flights as well.

SIA with the big-brain strategy.

Group expenditure also decreased S$4.41 billion year-on-year to S$3.5 million. The drop was largely attributable to lower non-fuel expenditure and net fuel cost.

Removing Old Aircraft and Stopping Nokscoot

Sadly, most of the upsides pretty much stop there.

The SIA Group was also charged S$127 million for the liquidation (i.e. closing down) of NokScoot.

NokScoot is a joint venture between Scoot and Thailand-based airline Nok Air, and the liquidation saw around 450 employees let go.

They also lost another S$1.33 billion, part of it from having to get rid of 26 old aircraft.

The loss of NokScoot also had them let go of seven more.

Currently, SIA Group’s fleet has 222 passengers and cargo aircraft.

39 are active for the passenger network and a total of 40 aircraft are deployed on cargo-only services.

The remaining are split between Changi Airport and Alice Springs, with the former having 114 parked there and with 29 stored.

Yah, those are indeed the most expensive parking lots in the world.

Raising Extra Money Through Bonds

Even in this pandemic, the SIA Group fights back.

Mothership reports that the group now has permission from shareholders to raise up to an extra S$6.2 billion.

This option will last until July 2021.

This would be through the issuance of Mandatory Convertible Bonds.

But what exactly is a bond?

It’s basically a loan between an investor and a corporation, the latter in this case being the SIA Group.

The investor agrees to give a certain amount of money for a set time period. In exchange, the investor receives periodic interest payments.

In some cases, this interest is actually lower than borrowing from a bank.

Sounds like a huge risk on paper, but SIA just might be able to do it.

The demand for their cargo business has also gone up, especially from the pharmaceuticals and perishables areas.

The SIA group also expects demand boosts from big e-commerce sale days and when new products come out.

Not to mention the introduction of things like the Hong Kong-Singapore travel bubble will likely help the process as well.

Now let’s just hope that those COVID-19 tests are ready by then.

You can help by…erm, shopping online more often, because someone needs to fly your Christmas gifts over.

Featured Image: Fedor Selivanov / Shutterstock.com

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Ashley Seek
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