Airlines around the world are facing their greatest challenge due to the Covid-19 pandemic. Airports are as good as shut. Aeroplanes are parked and not flying.
Singapore Airlines (SIA) is not spared. In fact, it has taken drastic steps to survive. Management has taken paycuts, pilots and other crew are on no-pay leave (voluntary or compulsory), capex are postponed or cancelled entirely.
Airlines have never been good investments. It is a cutthroat industry with heavy capex requirements and razor-thin margins. It is also very sensitive to oil price, disasters, business sentiments and now a virus.
Think about it. How is it that more people can afford to travel now? Cos tickets are cheap. When did anyone pay more than $2k for an air ticket (other than super long haul, peak period, business class)? The competitive pressures are unrelenting for the business. When consumers win, the business and the investor suffer. Even Warren Buffett gave up and sold all his airline investments at a huge loss.
For me, I am going to stick with SIA and subscribe to the right shares and bonds in full. I don’t have a big exposure to begin with – SIA is less than 5% of my portfolio even after the rights issue. In ten years’ time, I expect to make some $ (not a lot) if SIA is still run well. I believe Temasek and the Singapore government will give SIA all the support it needs and this is very important – to have a buyer and backer of last resort.
After the Covid-19 situation, I just have to fly more with SIA. Sorry Emirates…