Asian airline fundraising hits record as Covid-19 brings travel to standstill

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HONG KONG (May 28): Airlines in Asia are tapping the market and existing shareholders for new funds at the fastest pace as the Covid-19 pandemic has almost brought international travel to a standstill.

So far this year, regional airlines have announced they will sell a total of US$7 billion (RM30.49 billion) in new shares to existing shareholders, the most annually on record, data compiled by Bloomberg show. In addition, China Southern Airlines yesterday got approval to sell as many as 2.45 billion A-shares in a private placement that could raise as much as US$1.7 billion based on its last closing price.

The pandemic has effectively wiped out travel demand this year, causing airlines to ground fleets and slash jobs, with a slow recovery in sight. The International Air Transport Association (IATA) predicted that airlines globally could require as much as US$200 billion in government aid and bailout measures this year to survive, while CAPA - Centre for Aviation warned the pandemic will bankrupt most carriers by the end of May if they do not get support.

Singapore Airlines Ltd announced a US$6.2 billion rights offer in March in what is the largest such deal this year. The carrier is struggling because it doesn’t have a domestic market to fall back on and lost money on fuel hedging. Other airlines to have announced rights offers include Korean Air Lines Ltd and Jejuair Co for US$815 million and US$138 million respectively.

Rights offers across all industries have been pushed to a six-year high by Covid-19, underscoring the economic damage brought about by widespread lockdowns. Share sales have also picked up in the last couple of months as countries from India to China have loosened rules around capital raising to help companies get cash, keeping equity capital market bankers busy.