Singapore Airlines secures $13 bln to survive coronavirus and grow after
By Anshuman Daga and Jamie Freed
SINGAPORE/SYDNEY, March 27 (Reuters) - Singapore Airlines Ltd 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.
As many carriers around the world look for cash to weather the crisis, 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 Holdings Ltd DBSM.SI provided a S$4 billion loan.
"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 the time being, the airline, a major customer for Airbus SE AIR.PA and Boeing Co 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 Ltd QAN.AX, which is continuing with costly plans to refurbish the interiors of its fleet of 12 grounded A380 superjumbos.
Others including Air New Zealand Ltd AIR.NZ and Virgin Australia Holdings Ltd VAH.AX, have warned they expect to be smaller carriers in the future. South Korean low-cost carrier Eastar has begun returning some of its Boeing 737 planes to lessors.
Nearly one-third of the world's aircraft fleet is now in storage, data provider Cirium said.
BATTLE FOR SURVIVAL
"Nobody can survive this for more than a few months," independent aviation analyst Brendan Sobie said at a briefing held by airline schedules provider OAG on Thursday.
"You can draw down your cash reserves, you can sell some assets if some of your aircraft are owned, sale and lease back, new bonds, new loans," Sobie said. "But at some point you just run out and you also sacrifice your future and if you have raised all this new capital, you limit your ability to expand and flexibility later on."
U.S. airlines are preparing to tap the government for up to $25 billion in grants to cover payroll, even after the government warned it may take stakes in exchange for bailout funds, people familiar with the matter said.
After the U.S. House of Representatives approves the airline bailout and President Donald Trump signs it as early as Friday, airlines are to receive initial payments within 10 days.
European lawmakers overwhelmingly agreed on Thursday to suspend until Oct. 24 a rule requiring airlines to use at least 80% of their flight slots to keep them the following year.
China, which had been showing some early signs of a recovery in flight capacity, on Thursday ordered airlines to sharply cut the number of flights in and out of the country out of concern that infected travellers from overseas could reignite the coronavirus outbreak that paralysed the country for two months.
The Civil Aviation Administration of China (CAAC) said it had directed Chinese airlines to maintain only one route to any country and limit the number of flights to one per week, effective March 29.
CAAC also ordered foreign airlines to reduce their international routes to China to one per week and only operate one route into the country.
($1 = 1.4305 Singapore dollars)
(Reporting by Anshuman Daga and Jamie Freed; additional reporting by Joyce Lee in Seoul, Stella Qiu in Beijing, Tracy Rucinski in Chicago, David Shepardson in Washington, Alexander Cornwell in Dubai and Marine Strauss and Philip Blenkinsop in Brussels; Editing by Lincoln Feast.)
((Jamie.Freed@thomsonreuters.com; +61 2 9321 8174;))
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