Saudi Arabia’s main airline said it is planning to sell as much as 5 billion riyals (US$1.3 billion) of Islamic bonds, or sukuk, in the second quarter to refinance loans and buy airplanes, becoming the latest issuer in the kingdom to tap debt markets for cash amid an oil slump.
The carrier known as Saudia is in negotiations with local banks to oversee its first-ever bond offering, Saudi Arabian Airlines director-general Saleh al-Jasser said in an interview at the Sakhir Air Base during the Bahrain International Airshow on Friday.
The plans are part of a wider Islamic bond program the company would turn to “as and when needed” for funding, he said.
“We will be initiating a sukuk program for the purpose of refinancing some of our existing loans and also to help finance our growth plans, to finance the acquisition of fleet,” al-Jasser said.
Borrowers in the oil-exporting nation are turning to debt markets in greater numbers amid a slump in crude prices that is worsening the nation’s budget deficit. Brent crude oil has fallen 36 percent in the past 12 months to US$31.63 per barrel as of 3:26pm in London.
Saudia’s bond sale comes as the airline, which bought 50 Airbus SAS aircraft at the Paris Airshow last summer, seeks to boost its fleet to 200 airplanes by 2020. The carrier is following Dubai-based Emirates airline and flydubai in issuing sukuk.
The airline is to take delivery next week of three Boeing Co 787-9 and one 777-300ER, which are to be used for flights to Paris; Guangzhou, China; Casablanca, Morocco; and Dubai, in addition to domestic routes, al-Jasser said.
Saudia plans to add domestic and regional flights this year and next year, after announcing the start of services to Algeria; Ankara; Munich, Germany; and the Maldives, he said.
Saudi Arabia plans to raise as much as 20 billion riyals at a debt auction next week to finance its budget deficit, two people familiar with the plan said this week. The IMF predicts the country’s fiscal shortfall will reach 14 percent of GDP this year.
Meanwhile, Saudi Arabia’s low-cost carrier Flynas is talking to Airbus, Boeing and Bombardier Inc about a potential order for 100 new aircraft, after the carrier posted a profit last year for the first time in its history.
The airline is considering buying 60 new airplanes in the next five years with an option for 40 more, Flynas CEO Paul Byrne said in an interview in Bahrain. It is considering the Airbus A320neo, Boeing 737 MAX and Bombardier CS300 aircraft and expects to decide on the order this year.
“We’re talking to Airbus, Boeing and Bombardier about purchasing or leasing depending on which is the best deal for us,” Byrne said. “If we were to change from Airbus to Boeing or Bombardier, that will be a big move for us, but it’s not as dramatic as it sounds.”
The leases on Flynas’ 26 aircraft are to end within six years and it will require additional aircraft for replacement and growth. On top of that, it will need more aircraft to cope with demand for pilgrimages to the country’s holy sites, increasing frequencies to some destinations and catering to Saudi Arabia’s large domestic travel market, he said.
“No one really knows the bottom of the Saudi market yet. There’s room for competition and expansion,” he said.
The airline is exploring different options for financing new aircraft, including bank loans and sale and leaseback, Byrne said.
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
O2O BICYCLE SHOW: The Taiwan Bicycle Show next year is to be online to offline, with forums, audio-visual conferences and livestreaming of the offline events Local bicycle makers expect demand to continue outpacing supply due to orders triggered by the COVID-19 pandemic, with some companies seeing orders back up through next year. “Next year is all full in terms of orders. Our lead time on components is one year,” Giant Manufacturing Co Ltd (巨大機械) chairwoman Bonnie Tu (杜綉珍) told a news conference in Taipei organized by the Taiwan External Trade Development Council (TAITRA) to announce next year’s Taipei Cycle Show. The pandemic has reduced bicycle supplies and increased demand around the world, Robert Wu (吳盈進), chairman of KMC (Kuei Meng) International Inc (桂盟國際), one of the world’s