Airline industry likely to remain highly competitive even after Covid-19: SIA

SINGAPORE Airlines (SIA) has proclaimed the Covid-19 pandemic as the greatest challenge ever faced by the aviation industry, but said that the industry is likely to remain highly competitive even after the crisis blows over.

Its chief executive Goh Choon Phong said this on Wednesday in a dialogue with the Securities Investors Association (Singapore). He was asked if the industry landscape, where margins are generally thin, will change post-Covid-19. 

Mr Goh replied: "Post-Covid-19, it is likely to still remain competitive for the airline industry. 

"Ours is a very highly competitive industry, as you are aware. How it will look like and how competitive it will be really depend on a few factors. For example, which airlines manage to find liquidity to survive and emerge as stronger players after the crisis, how long the global economic recovery will take, and what changes we will see in terms of travel habits and value drivers of our customers." 

However, he added that SIA's rights issue will provide the group with the resources to "capture opportunities from a position of strength" once the crisis is over and air travel returns. The group is also preparing for different scenarios, and has "detailed" long-term strategies and recovery plans in place.

Mr Goh was also asked how long the funds raised will last, especially if the outlook does not improve, and whether the group will consider boosting its reserves. 

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He replied that SIA will press on with cost-cutting measures and beefing up its finances, even as its rights and convertible bonds issues will put up to S$15 billion at its disposal to cope with the hit from the Covid-19 pandemic. 

"We were decisive, for example, in implementing wage cuts, varying no-pay leave schemes, deferral of non-essential projects and capital expenditure, and these measures will continue for the foreseeable future," he said. SIA is also talking to aircraft manufacturers such as Boeing and Airbus to restructure aircraft deliveries.

On financing, Mr Goh noted that up to S$6.2 billion of additional mandatory convertible bonds may be issued within 15 months of the extraordinary general meeting. "This will provide us with additional liquidity if the crisis extends for a prolonged period," he said. 

But the national carrier has also been working with banks for additional facilities, and will continue to explore other sources of funding, including secured financing, and the sales and leaseback of aircraft, he added.