Singapore takes measures to support aviation sector

Credit: Singapore Airlines

The COVID-19 pandemic has forced almost every nation to implement various forms of stringent border control measures, minimizing entry for noncitizens. This unprecedented black swan event has proved to be an extremely challenging period for network airlines and air hubs like Singapore Airlines (SIA) and Changi Airport.

With no domestic network, SIA is especially vulnerable to border closures. The group, including the parent airline and regional arm SilkAir, announced a 96% capacity cut through April and grounded 138 of its 147 aircraft. Its LCC Scoot is not spared, grounding 47 of 49 aircraft. Changi Airport, meanwhile, has seen passenger volumes drop 90%.

SIA described this as the “greatest challenge the airline has faced since its existence.”  

The Singapore government has responded with sweeping and aggressive measures. First announced in mid-February, when China was still the pandemic epicenter and the virus was relatively contained in Asia, Singapore announced a S$112 million ($79 million) stimulus in the form of ground handling and airport tenant rebates. At that point, SIA still had most of its long-haul network intact.

However, as the outbreak worsened in all markets and the entire industry was brought to a standstill, the government announced a second S$48 billion stimulus to help the country at a national level. Of that, S$750 million was earmarked for the aviation sector.

To help its airlines afford to keep employees, the government also rolled out a S$400 million Job Support Scheme, which provides a 75% wage offset for the first S$4,600 of monthly salaries for every worker in the aviation industry. 

Another S$350 million was announced in the form of an aviation support fund that includes rebates for landing and parking charges, and rental relief for airlines, ground handlers and cargo agents. This has increased financial support for its aviation industry by more than three times as much as the first measures introduced in February.

Aviation at heart

At the heart of this is a national philosophy that helped create one of the world’s best-known and highly regarded airlines and a top-ranked airport. Singapore has always tied aviation to its economy and growth.

“Our aviation sector has significant linkages to the rest of the economy. If it collapses in a crisis, it will be very hard for the aviation industry to rebuild after the crisis is over, and the recovery of the rest of the economy will be impeded,” financial minister Heng Swee Keat said. “We must therefore ensure that this temporary shock to our air hub does not become a permanent one.” 

The Singapore approach is based on keeping aviation workers employed by having their salary subsidized directly by the government. 

For SIA, it will also raise S$5.4 billion in new equity and up to S$9.7 billion through 10-year mandatory convertible bonds. Both will be underwritten by the government-owned investing firm Temasek Holdings, which has a 55.46% stake in SIA. Another $4 billion will be lent from DBS Bank, also a shareholder and linked to the government. 

The Singapore Business Times reported that S$3.7 billion will also be used for operating cashflows, and S$3.3 billion for aircraft purchases and related payments, while the rest will be applied to debt servicing and payments. 

Meanwhile, Jetstar Asia is the only Singapore-based carrier not linked to the government and was the first airline there to halt all service. But while Jetstar will not get direct financial assistance from the government, its employees will still benefit from the Job Support Scheme. In addition, the government’s ability to “nationalize” a private company’s assets and manpower enabled over one-third of Jetstar Asia staff to be temporarily re-employed by government agencies, such as the Singapore Food Agency and National Environment Agency, as ambassadors to communicate the country’s safe-distancing requirements. Raffles Medical Group also employed some as passenger health care assistants at Changi.

SIA is also rolling out measures to allow staff volunteers to contribute to national efforts to combat the pandemic while keeping them on the payroll. 

Chen Chuanren

Chen Chuanren is the Southeast Asia and China Editor for the Aviation Week Network’s (AWN) Air Transport World (ATW) and the Asia-Pacific Defense Correspondent for AWN, joining the team in 2017.