Temasek: Singapore Airlines to have ‘huge advantage’ post-pandemic

Singapore Airlines aircraft taken from terminal windows in August 2018.Singapore Airlines aircraft taken from terminal windows in August 2018.

Singapore Airlines will have a “huge advantage” over competitors in the post-pandemic world, Naji Hamiyeh, investment group chief for Temasek’s investment group, said Tuesday.

He added that was a key driver of the around S$13 billion Singapore’s state-owned investment company ploughed into the carrier alongside other investors. Temasek held 55 percent of SIA as of end-March.

“SIA starts with an iconic brand. It’s one of the best global airlines in the world. It was, like every other airline, hit by the perfect storm last year,” Hamiyeh said at a press conference for Temasek’s annual report.

Airlines globally were badly hit by travel restrictions to stem the spread of the Covid-19 pandemic. In May, SIA posted an annual loss of S$4.27 billion, according to a Reuters report.

“Obviously, we’re a majority shareholder,” Hamiyeh noted when asked about the reasoning for the commitments to the carrier.

But he added, “We are a commercial institution and everything we do has to pass the value test. In the case of SIA, specifically, we were fairly excited about the transformation plan that the company has embarked on three years ago before they were hit by Covid.”

Hamiyeh pointed to SIA’s ability to sharply reduce its cash burn, and the carrier’s expectation it wouldn’t need to raise further funds for two years, as well as the plans to take delivery of more planes.

“When it came to the fleet renewal, they pushed with it, because it will provide them a huge advantage going forward in a post-Covid world, where their the fuel efficiency of their fleet will be 25 to 30 to 35 percent more efficient than the rest, and will provide them with a huge advantage, a comparative advantage over the others,” Hamiyeh.

According to the Reuters report in May, SIA had reduced its cash burn to around S$100 million to S$150 million a month, down from around S$350 million in 2020.

The carrier planned to add a net 19 planes, plus eight Boeing 737 MAX jets, as newer models, such as A350s and 787s would bring down fuel and maintenance costs, the report said.

The switch to newer, more fuel-efficient planes also fits with Temasek’s decarbonisation push, Hamiyeh said.

For its sustainability efforts, Temasek said it plans to reduce the net carbon emissions of its portfolio to half of 2010’s levels by 2030, and reach net zero carbon emissions by 2050.

In May, the carrier said it would raise S$6.2 billion via mandatory convertible bonds, while in March 2020, it said it would issue S$5.3 billion in new equity and raise S$9.7 billion via mandatory convertible bonds.