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Singapore Airlines
27-03-2020, 11:33 PM. (This post was last modified: 27-03-2020, 11:58 PM by CY09.)
Post: #331
RE: Singapore Airlines
Hi davidoh,

Its because the gulf airlines have the backing of their state to compete against SIA. SIA is positioned as a premium airline serving the slightly more wealthy customers- Their tickets are slightly more expensive but they attempt to differentiate themselves through quality service.

However in the late 2000s till now, the gulf states decided to make themselves aviation hubs to the world and along with it the need to create their own flagship airlines. Unlike Singapore-SIA, the Gulf-Emirates-Qatar had an advantage, their fuel cost is much lower compared to SIA and they did not have to worry about P&L. So Qatar Airways took the mass market route connecting Asia to Europe through cheap flights, while Emirates did the same but also provided premium quality flights which infringed into Singapore-SIA target audience. Furthermore being new to the game, they were able to begin their airlines with rather new modern fleet. In Emirates case, they ordered a tremendous amount of Airbus A380 which boosted first class/business class product which rivals SIA. In the first class product segment, Emirates is already better than SIA in both the Boeing 777 and Airbus A380 planes. Qatar's new business class product has similar review rating to SIA's business class product.

As a result, SIA had to to compete with gulf airlines by lowering its margins but not service as as well as modernising the fleet; resulting in an delivery order of about US$18 billion over the next 10 years. Unlike the US airlines, SIA does not have a domestic airlines route to protect itself. Its current "domestic routes" are serving the Indonesian and Malaysian cities which are getting challenged by budget airlines

That said, SIA is still able to churn profits unlike other airlines who make losses due to extremely good direction. This was down to good management. However the luck of decision by a great management can never always be "right", in recent times, the wrong hedging of fuel will cause a massive cash outflow. Worsened by the need to pay for Boeing and Airbus deliveries with little revenue or cash inflow, it points to a potential cash crunch

With revenue coming in, SIA could have still held on but revenue is now gone due to the virus, an equity issue has to be raised to supplement the quarterly 4 billion loss in revenue which translates to cashflow. With a 15 billion injection in equity, it acts as the substitute to revenue lost. However if this virus fear still lingers as it is now until mid 2021, SIA will need another cash raising.

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31-03-2020, 08:55 AM.
Post: #332
RE: Singapore Airlines
(27-03-2020, 10:15 AM)Squirrel Wrote: 1) all goes well and the MCBs gets redeemed after a few years,
2) all does not go well the airline goes belly up within the ten year period and you are holding onto unsecured debt
3) the airline survives and trundles along but never to reach back above $4.84 and you get mandatory converted to shares. For example, if shares were trading at $2.42 in ten years time, every $1 of your MCB will be worth $1 * 1.75351 * $2.42 / $4.84 = $0.876755.

At Maturity Date the conversion is 1.806.11.

Even if the share price were to trade above $4.84, SIA may not want to fork out cash to redeem the MCB before maturity. 
The MCB are treated as equity to begin with. 
The potential overhang from conversion will create an artificial ceiling price.

I give a very low probability to the MCBs getting redeemed.

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31-03-2020, 10:59 AM.
Post: #333
RE: Singapore Airlines
(27-03-2020, 11:33 PM)CY09 Wrote: Hi davidoh,

Its because the gulf airlines have the backing of their state to compete against SIA. SIA is positioned as a premium airline serving the slightly more wealthy customers- Their tickets are slightly more expensive but they attempt to differentiate themselves through quality service.

However in the late 2000s till now, the gulf states decided to make themselves aviation hubs to the world and along with it the need to create their own flagship airlines. Unlike Singapore-SIA, the Gulf-Emirates-Qatar had an advantage, their fuel cost is much lower compared to SIA and they did not have to worry about P&L. So Qatar Airways took the mass market route connecting Asia to Europe through cheap flights, while Emirates did the same but also provided premium quality flights which infringed into Singapore-SIA target audience. Furthermore being new to the game, they were able to begin their airlines with rather new modern fleet. In Emirates case, they ordered a tremendous amount of Airbus A380 which boosted first class/business class product which rivals SIA. In the first class product segment, Emirates is already better than SIA in both the Boeing 777 and Airbus A380 planes. Qatar's new business class product has similar review rating to SIA's business class product.

As a result, SIA had to to compete with gulf airlines by lowering its margins but not service as as well as modernising the fleet; resulting in an delivery order of about US$18 billion over the next 10 years. Unlike the US airlines, SIA does not have a domestic airlines route to protect itself. Its current "domestic routes" are serving the Indonesian and Malaysian cities which are getting challenged by budget airlines

That said, SIA is still able to churn profits unlike other airlines who make losses due to extremely good direction. This was down to good management. However the luck of decision by a great management can never always be "right", in recent times, the wrong hedging of fuel will cause a massive cash outflow. Worsened by the need to pay for Boeing and Airbus deliveries with little revenue or cash inflow, it points to a potential cash crunch

With revenue coming in, SIA could have still held on but revenue is now gone due to the virus, an equity issue has to be raised to supplement the quarterly 4 billion loss in revenue which translates to cashflow. With a 15 billion injection in equity, it acts as the substitute to revenue lost. However if this virus fear still lingers as it is now until mid 2021, SIA will need another cash raising.

Thank you for providing the other side of information. 

Strangely, as of today, there are a wide-spectrum of argument whether to pick the rights issue or not.

It is difficult to see how SIA can go forward to claim their former glory even with Temasek's support.

It is an expensive exercise for the man in the street if they fear dilution and the current economic deterioration. It would be expensive especially with 3 rights shares for 2 existing shares.

That meant if you have 2000 existing SIA shares, you have to fork out $9000 for the 3000 rights. 

For those who buy regularly as a "saving plan" may even have more and suppose if they have 4000 existing SIA shares they would need to be out of pocket of $18000 for 6000 rights. 

It is a lot of money for the average family and the fact that no one is sure if SIA would head towards NOL destiny or become a penny stock eventually. The latter is unthinkable and unlikely. The airline industry profits are often razor thin hovering between 5-10%.

Hence, would there be an expected a flood of excess rights that is not taken up?

Then for those who have existing SIA shares and are able to afford to buy the right, should they subscribe to the right issues and excess if allowed OR should they NOT subscribe and buy when the rights are traded in the market?


It is extremely sad that SIA had to come to this stage. It does remind me though not identical, past greats like Kodak, Sony, JVC and etc. 


Hope some experts here can be generous enough to share their opinion. 


Thank you very much for providing a platform which is very much revered by many.

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31-03-2020, 11:51 AM. (This post was last modified: 31-03-2020, 11:52 AM by opmi.)
Post: #334
RE: Singapore Airlines
Probably in the future, only SQ and PRC Airlines flying the skies....just kidding...

Surely air tickets prices will be more expensive...
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"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster

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31-03-2020, 01:02 PM.
Post: #335
RE: Singapore Airlines
(31-03-2020, 11:51 AM)opmi Wrote: Probably in the future, only SQ and PRC Airlines flying the skies....just kidding...

Surely air tickets prices will be more expensive...

Depend very much on whether countries allow their national airlines to go down. Tickets will be cheaper when lot of planes flying whether make money or not.

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31-03-2020, 02:46 PM.
Post: #336
RE: Singapore Airlines
national carrier is a sovereign right issue... especially SIA.... temasek has already pump in 15b and ready to pump in more, national service is compulsory already... Tongue Tongue Tongue

As a retail investor, i won't buy SIA at all! :O :O :O
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2) Do NOT SELL in BEAR, BUY-BUY-BUY! invest in managements/companies that does the same!
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