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Singapore Air burns through half of cash raised in two months

This photograph taken on March 16, 2020 shows Singapore Airlines planes parked on the tarmac at Changi International Airport in Singapore. - Singapore Airlines announced on March 23 that it was cutting 96 per cent of its capacity till the end of April due to the COVID-19 novel coronavirus. (Photo by Roslan RAHMAN / AFP) (Photo by ROSLAN RAHMAN/AFP via Getty Images)
Singapore Airlines planes at Changi International Airport, 16 March 2020. (PHOTO: Roslan RAHMAN/AFP via Getty Images)

By Kyunghee Park

(Bloomberg) -- Singapore Airlines Ltd. has burned through half of the S$8.8 billion (US$6.4 billion) it raised through share sales in just two months even as it cut costs and grounded most of its fleet, highlighting how carriers can keep incurring expenses even when planes are left idle.

Of the S$4.4 billion spent since mid-June, S$1.1 billion was used for operating expenses, maturing fuel-hedging trades and ticket refunds from canceled flights due to the coronavirus pandemic, the airline said in an exchange statement Wednesday. About S$900 million was spent to service debt and S$200 million to buy aircraft.

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The airline also used some of the the proceeds to repay a bridge-loan facility of about S$2 billion that it had taken earlier to cover expenses from March until the fundraising was completed.

Singapore Airlines raised the funds in June after the outbreak and resulting border restrictions decimated travel demand. The airline industry is unlikely to recover fully before 2024, the International Air Transport Association said last month.

The carrier said it is “transparent in how it is spending the proceeds of its rights issue and has made regular announcements to the stock exchange in this regard.”

Extremely Careful

“Since the start of the Covid-19 pandemic, Singapore Airlines has taken steps to significantly reduce its monthly expenditure,” a spokesperson said in an emailed statement. “This includes the deferral of non-essential projects and discussions with aircraft manufacturers to defer the delivery of aircraft.”

He added the company has “always been extremely careful and judicious about its expenditure, and continues to be especially so during this time.”

The proceeds spent during the two months to Aug. 14 are almost equivalent to the combined net losses made by Singapore Airlines, Cathay Pacific Airways Ltd. and Qantas Airways Ltd. in the first half. To curb costs, the Singaporean carrier has slashed salaries and put staff on unpaid leave as it operates at less than 10% of capacity.

Singapore Airlines posted a first-half loss of S$1.85 billion as the pandemic wiped out passenger traffic. Cathay Pacific lost HK$9.9 billion (US$1.3 billion) and Qantas A$1.96 billion (US$1.4 billion).

(Adds with SIA statement from fifth paragraph.)

© 2020 Bloomberg L.P.