Singapore Airlines to Cut Capacity Until April End

COVID19 pandemic forces Singapore Airlines to implement capacity cuts and other measures to counter the loss in passenger revenue
Singapore Airlines  will cut passenger capacity to counter loss in revenue
Singapore Airlines will cut passenger capacity to counter loss in revenue

Singapore Airlines (SIA) has announced that it is adopting various measures, from grounding aircraft to salary cuts, to ensure that the company stays afloat in these trying times. The Covid19 pandemic has forced many countries to impose bans on international flights as part of measures adopted to contain the spread of the virus. Therefore, airlines companies, already faced with enormous losses, are now cutting down on capacity, grounding aircraft and looking towards measures that will provide liquidity.

Singapore Airlines recently announced that it will be cutting 96 per cent of the capacity that had been originally scheduled up to end-April, given the tightening of border controls around the world.

According to the company, this will result in the grounding of around 138 SIA and SilkAir aircraft, out of a total fleet of 147, amid the greatest challenge that the SIA Group has faced in its existence.

The group&rsquos low-cost unit Scoot will also suspend most of its network, resulting in the grounding of 47 of its fleet of 49 aircraft.

The SIA Group diversified its network and set up Scoot to spread its risks and cater to a wide range of passenger and market segments.

However, according to the company, without a domestic segment, they become more vulnerable when international markets increasingly restrict the free movement of people or ban air travel altogether.

Like other airlines companies, SIA Group too is also not sure when they can resume normal services, given the uncertainty as to when the stringent border controls will be lifted.

Prior to this, the company had already announced that it is actively taking steps to build up its liquidity, and to reduce capital expenditure and operating costs. The resultant collapse in the demand for air travel has led to a significant decline in SIA&rsquos passenger revenues.

On March 17, 2020, the company announced that SIA will continue to aggressively pursue all measures to address the impact of the Covid-19 outbreak on the company.

The company has been in discussions with aircraft manufacturers to defer upcoming aircraft deliveries. If agreed, this will consequently defer payment for those aircraft deliveries.

The company has also announced salary cuts for the group&rsquos management, white its directors have agreed to a cut in their fees. There will be a voluntary no-pay leave scheme up to certain management positions.

On March 26, the company announced that Singapore Airlines Limited will offer all shareholders S$5.3 billion in new equity and up to a further S$9.7 billion1  through a 10-year Mandatory Convertible Bonds (MCB). Both will be offered on a pro-rata basis via a rights issue, and both issuances will be treated as equity in the company&rsquos balance sheet. SIA has also arranged a S$4 billion bridge loan facility with DBS Bank, supporting the company&rsquos near-term liquidity requirements.

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