SIA share price in darkest chapter

It is a battle that SIA cannot afford to lose. Currently, SIA share price is fighting for its life as COVID-19 completely razed air travel to the ground. With numerous airlines expected to file for bankruptcies in the coming months, many analysts claim that the aviation sector may never recover to the pre-crisis level. This is indeed the darkest chapter for SIA share price.

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For sure, the coming announcement of the full-year financial result and the mega rights issue will be a massive baptism of fire for SIA share price. Indeed, the next two weeks will be critical as the national carrier navigates through this crazy storm. In view of this, expect plenty of volatility for SIA share price.

The current crisis completely dwarfed previous crises such as the Asian Financial Crisis of 1998, the dotcom bust in 2000, 9/11 terrorist attacks of 2001, the SARS of 2003 and Great Financial Crisis of 2008. In each of those crises, SIA share price had always managed to bounce back in impressive form. But this time round, things are not so straightforward.

On 10 March 2020, all hell broke loose for SIA share price as the counter collapsed from $7.88 to an abysmal low of $5.36 on 23 March 2020. The crash of SIA share price was largely due to the implosion of oil price war between Saudi Arabia and Russia. The face-off caused global oil prices to fall by a stunning 30%. Typically, the fall in oil price bodes well for airlines because fuel component makes up the second largest expense after staff costs. But the problem for SIA is that it had over-hedged its fuel in 2017, with a view that oil prices would go up. But the reverse actually happened.

SIA used to hedge only for a maximum of 24 months but it appears that the company had changed strategy in extending the fuel hedge maturity for 46% of the fuel consumption to 2024/25, at average prices ranging from USD58 to USD63 per barrel. This costly mistake is going to cause significant hedging losses for SIA Group, right up to the year 2025. Given that crude oil is trading at USD15 per barrel, SIA’s hedging losses for 2020/21 may even eclipse Cathay Pacific’s fuel hedging loss of $1.6 billion in 2016. Against this backdrop, it is difficult to envisage light at end of tunnel for SIA share price anytime soon.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in SIA before. Whether SIA share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

SIA share price to tumble with cash call?

The billion dollars question among investors must be whether SIA share price will fall off the cliff with the impending rights issue. Make no mistake, the cash call is [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: April 19, 2020 — 11:31 pm

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