On this, the airline’s 9MFY2021 core net loss of $1.9 billion came “broadly in-line” with the brokerage’s full-year loss forecast of $2 billion. To this end, Yap foresees another quarter of narrow losses in the 4QFY2021 due to the rise in Brent crude oil prices. As at Feb 5, the price of oil has rallied to US$58 per barrel due to the global destocking of oil inventories. However, the road to recovery remains “long and uneven” despite the aircraft impairments and rollout of Covid-19 vaccines around the world. The way Yap sees it, “for a pure international airline that is heavily reliant on transit traffic and on business travel, SIA’s recovery may lag other airlines that have domestic networks, a larger proportion of leisure and/or origin-and-destination traffic”. As such, he has estimated a higher core loss per share of 3% for the FY2021, but lower core loss per share of 1-2% for FY2022 and FY2023 on various offsetting housekeeping adjustments. “For SIA as a whole, we are forecasting that it achieves only 33% of its pre-pandemic available seat kilometre (ASK) capacity in FY2022, up from 11% in FY2021, and surpassing its pre-pandemic level only in four years’ time,” he adds. “With $13.3 billion in equity and debt capital already raised, upcoming aircraft sale and leasebacks, and the option to issue $6.2 billion of convertible bonds, SIA is in a very strong financial position.”
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Since April 2020, the airline’s quarterly non-fuel operating costs, including depreciation of some $500 million has implied a monthly cash burn of between $233 million and $277 million, or an average of $250 million. SIA says its target is to reduce that to $200 million per month. The airline is also mulling the option to raise another $6.2 billion from mandatory convertible bond (MCBs) on top of the $3.5 billion MCBs issued in June 2020, and $10 billion from its aircraft. “SIA will make its final decision in early-April as the MCBs cannot be issued later than July 31. In addition, SIA said that it has $10 billion of unencumbered aircraft assets, against which it has the option to raise new secured financing and/or sell and leaseback (SLB),” notes Yap. “After raising $2 billion in new financing collateralised against aircraft assets in 2020, SIA has the headroom to collateralise up to an additional $2 billion of its aircraft assets without breaching its negative pledge on its Medium Term Note (MTN) programme.”