Earnings Call: H1 2021

Nov 9, 2020

Ladies and gentlemen, thank you for standing by and welcome to Singapore Airlines Media and Analyst Briefing for the first half of twenty 2021 Financial and Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your first speaker today, Mr. Siva Govindasamy, Vice President, Public Affairs, Singapore Airlines. Thank you, sir. Please go ahead. Thank you, Rishi. Good morning, everyone. I'm Simal from SAU Public Affairs. I hope everyone as well. Welcome to our half year median analyst briefing. Given the COVID-nineteen measures that are currently in place, we are unfortunately unable to meet everyone in person once again. However, we hope that today's virtual session will be useful. Today, we have 2 presentation First, Mr. Steven Barnes, Senior Vice President Finance, will present the group's first half results. Next, our Chief Executive Officer, Mr. Ghoshan Phone, will talk about the outlook and strategy for the group. Following that, we will have a short Q and to the Vas, please. Thank you very much, Shiva. Good morning, CEO, EVPs, and good morning to all of you who have taken the time to join us. This briefing. It falls to me to take a look back at SIA Group's financial performance in the first half financial year. We recorded a large first half net loss of coming in at $3,500,000,000. 1st half operating result swung into a deep loss of 1.86 $1,000,000,000 a swing of $2,300,000,000 as revenues collapsed following the slump in traffic. The reduction in passenger flown revenue was partly mitigated by the reduction in expenditure as capacity was cut and by growth in cargo revenues. The operating loss included a charge of $462,000,000 for fuel hedging ineffectiveness. And this is why the group is working hard to support all efforts to reopen borders and rein safe passenger operations. Hurrying charges of $1,700,000,000. The major items are noted here. Note, in particular, the 1,300,000,000 aircraft impairment, which comes about upon completion of the network and fleet review. We anticipated that this review may conclude that some of our older generation aircraft may be surplus to our future requirements and alerted the market to the possibility the decision to write down the goodwill that we recorded when the group gained control of Tiger Airways in 2014. With so few flights being mounted and many aircraft grounded, it is prudent to write down the goodwill asset. A highlight is the 80% drop in revenue during the first half. As already mentioned, this comes about from the collapse in passenger traffic, partially mitigated by growth in cargo revenue Total expenditure on the other hand fell in the second quarter. This is because many of our costs are fixed or at least fixed in the short term. As a result, expenditure cannot fully adjust to the 80% drop in revenue. At the end of the first quarter, following a downward reassessment of the pace at which we expect to be able to recover our capacity. We recognize that our future fuel consumption is likely to be lower. And that means that more of our fuel hedges are ineffective. Therefore, we had to recognize in our P and L, the $462,000,000 revaluation losses that had been sitting in our reserves. In addition, fuel prices fell between 30th June 30th September. And so we booked $100,000,000 revaluation loss in the second quarter on the fuel derivatives that have been de designated as hedges. The overall impact result for a first half operating loss of $1,860,000,000. I will talk about I'll talk more about the decline in the net results shortly. So I'm on to On to Slide 6. The main reason for the 80% drop in revenue, as I've mentioned, was the color in passenger flown revenue due to travel restrictions. On Slide 7, we The pie chart shows that the dominant source of revenue is now cargo flown revenue, contributing over 75% of the total Cargo flow and revenue was up $274,000,000 as you can see. It was driven by stronger cargo yield performance, partially offset by a decline in loads carried Loews were in fact constrained by the drop in capacity caused by the reduction in belly hold capacity with the drop in passenger flights. Therefore, great efforts have been capacity by flying passenger aircraft that only carry cargo and even removing seats to make more room. However, passenger flown revenue was down by nearly 98%. All three airlines operated networks to provide essential connectivity only since April 2020. This means that passenger capacity was cut dramatically, which you can see in the far right column. Carriage fell even more so that the passenger load factor across the three airlines fell from 85% to 16%. With fewer than 1% of last year's passenger numbers, the increases in yields could only mitigate the effect on revenue so much. Let me also highlight the drop in engineering services revenue which was mainly attributable to flight cancellations by all other airline customers, which caused chart reductions in airframe and line maintenance revenue and engine and component revenue. Group Expenditure I apologize. Yeah. Group expenditure also fell dramatically, but it lagged the drop in revenue. Let me focus on Slide 9, on fuel hedging ineffectiveness and the fair value loss on fuel derivative The ineffectiveness was $462,000,000, as I mentioned earlier. This arose from the slower than expected recovery of passenger capacity, resulting in more fuel derivative contracts in both the current and the next financial year being designated as hedges. In addition, There was a fair value loss on fuel derivatives of $102,000,000, which arose from revaluation of fuel derivative contracts that had have already been de designated as hedges. Fuel costs itself after hedging decreased by nearly $2,000,000,000, reflecting the cuts in passenger capacity offset only partially by the increase the increased utilization of freighters and mounting of passenger aircraft carrying cargo flights. Star costs fell $939,000,000. Came mainly from 3 sources: Firstly, lower pay and allowances and actually a substantial source that reduction came from grants received under the Singapore budget 2020 to aid businesses affected by COVID-nineteen. But there have also been a significant contribution from other staff cost management measures such as salary cuts no pay leave, furlough, and others. One of the consequences of the steep drop in flying hours due to capacity cuts is a substantial drop in crew allowances. There is no provision for a profit sharing bonus for this year aircraft, relates to an enlarged aircraft fleet over the prior 12 months. Partially offset by the return of a number of aircraft to lessors. The reduction in other cost items was tied to the reduction in flying and the reduction in carriage. Take a look at the fuel costs and see that the dominant feature here is the reduction in fuel consumption, supported also by a lower weighted average fuel price which was offset contributing overall to an 84% reduction in our fuel bill. I'm sure you will recall that we recorded a large operating loss in the 4th quarter of the last financial year as the effects of the pandemic began to spread across the globe. Similar losses have continued through the first half of this financial year due mainly to the reduction in revenue and partly to the impact of ineffective fuel hedges. So if we look at the overall impact or the various impacts on operating performance. The Domino's impact is the reduction in passenger flown revenue. Partially offset by the improvement in cargo flown revenue and lower net fuel cost an additional charge relating to, fuel hedging ineffectiveness but then reductions in many other costs, including start costs, handling charges, landing, parking and overflying, and others. You can see the large reductions in sales costs and passenger costs and AMO costs as a consequence of the reduction in flying. Leading to an overall 2,300,000,000 reduction in operating performance. The narrative is similar as we moved from the group to the key operating entities We see a drastic drop in the amounts of flying across all three airlines, causing a collapse in revenues. Expenditure was also cut significantly, but fixed costs mean that cost reduction was less than the revenue reduction. And this applies to SIA Engineering company also, whose revenues are largely tied the amount of flying by its airline customers. Moving to Slide 14. Take a look at the group's net loss for the first half. I'm sure you will agree that this $3,500,000,000 net loss is very sobering. And the swing from net profit to net loss will be explained on The net loss in the first totaling $1,700,000,000. The largest of these related to surplus aircraft The overall impairments of aircraft, was taken in 2 parts In the first quarter, we announced that we would take an impairment of 7 aircraft, that were returned from Knox Goose, where they to which they have been leased, but they will no longer fly for SIA. And the balance $1,330,000,000, relates to surplus aircraft identified during the fleet and network review. Impairment of the goodwill recorded when the group gained control of Tiger Airways in 2014. As I noted earlier, incurred rationalization costs in connection with manpower, which were announced just a month or 2 ago. SIA Engineering company, in carried its hangers and other base maintenance assets. And we had a small increase in our net finance charges, all of which was partially offset primarily from tax credit and against tax expense last year. And that's the waterfall chart. My current slide shows the group per share data. I don't think I will linger on this slide, which simply reflects the losses recorded during the first half. I'm very happy to, hand over to, go to the I'll see you. Thank you very much. Thank you, Steven, and good morning, ladies and gentlemen. Welcome to our verge of media and analytics briefing. I'll take through the, I'll talk through 4 points for key topics in today's briefing. Firstly, financial position, I believe you are our view of you will disagree that liquidity is today one of the most important survival factors for businesses and especially for airlines. And in this area, SIA Group has raised $8,800,000,000 from our shareholders through rights rights MCBs issuance. We've raised an additional $2,000,000,000 to secure financing of our aircraft and we have increased our committed line of credit by another 500,000,000. All together, in the last 6 months or so, we have raised an additional $11,300,000,000 in liquidity for the group. And to bear in mind that this is on of the 1,700,000,000 in committed lines of credit that was pre existing before the COVID crisis And the $11,000,000,000 of the $1,700,000,000 pre existing lines of credit is largely unutilized at this moment. But we are not stopping here. We are increasing We are increasing our efforts to look at more sources of raising liquidity we've entered into discussion in fact at an advanced stage to do more sales and leaseback transactions we are also looking at capping the debt equity market or rather the is that capital market? And with all these, we are confident that we will have very strong liquidity and that we believe that we have one of the strongest, if not the strongest liquidity position among airlines. Of course, it's not just about raising liquidity. It's also about cost management, and Steven have earlier mention about some of them, I just want to touch on 2 of them. 1 is the painful exercise that we have to go through in September And in that exercise, we have to cut to a queue of 4 1300 positions from the group and released 2000 of our staff from employment. We are we have completed our negotiation of advance. We're at an advanced stage of negotiation and discussion with Boeing I believe we are making good progress in those areas. And in part, we're able to make those progress. Because we have strong, liquidity to ensure that a survivor, so our partners are aware of that. And we have started those negotiations very early in that as far back as in February. But we're not just talking about managing costs as liquidity. We are also talking about going out and try to seize revenue opportunity, any revenue opportunity in the market that we can pursue But we know that in this private environment, our customers are very concerned about health safety So from the start, we pay a lot of attention on how to ensure a safe journey for our customers end to end from pre flight all the way to full slide. And some of this and all the comprehensive actions and measures that we've taken on the slide. I want to highlight that because of our modern philosophy All our planes all the planes who are operating are equipped with HIPAA Futures. And as you know, This future of 99.97 percent for viruses and bacteria in the end, And the air in the cabin, I'll change out every 2 to 3 minutes. So very clean air. On top of that, and many of our customers have asked that question about high touch surfaces, especially in the laboratory, and that's understandable to concern. We want to assure everyone that we have quoted all high touch services in and around our laboratory onboard the plane and that includes the school plane with long lasting NT Microbyn Coatings, which basically will kill bacteria's interfaces and effect will last at least for a month. The efforts we have put in in ensuring a strong digital capability have also produce good results by allowing us to very quickly introduce digital solutions to ease the travel of our customers when they fly with us. It also allows them to have contactless, interaction, for example, on what plane they are able to use their personal devices to control the ISE rather than having to touch, the surfaces, the of the screen or the handset I think everybody will agree that Singapore is probably among the most proactive nations in the world when it comes to looking at ways to open up and reduce travel restrictions in a safe manner for our customers. I believe everybody know about the 3 schemes, the unilateral opening Resuboker, Greenlanes, RGL, and the latest being the air travel bubble that we are in the process of finalizing with Hong Kong. In particular for the air travel bubble arrangement, This will actually facilitate and allow general travel and not just travel for essential businesses. And we believe that this will serve as a very good pilot and example of how we can actually open up travel in a safe manner for everyone. Of course, all these travel arrangements, travel teams are also supported by advances in testing, regimes and protocols as well as availability of your infantile test in the market, we believe that the continuous investments in all these test schemes as well as test, approaches would further ease travel going forward. For example, the gradualizer that we're talking about has been experimented in Singapore. As a consequence of all of these schemes that we introduced, as well as the strong demand for cargo in the value pool, we are seeing increasing Demand for the flight and therefore our ability to step up on our capacity. We project for a lead, our capacity will reach about 16% of pre corporates by the end of the year in December. We will continue to be very nimble and flexible to see how what are the opportunities the market may bring or for that matter any adverse environment that the market could, could have in the future and adjust our capacity in a nimble and flexible manner, up or down. Cargo is a bright spot for the industry and certainly for us as well And we've been taking practice steps to operate, for example, passenger Airlines, passenger aircraft for cargo missions. And we've gone a step further to actually convert some of existing passenger planes by removing the seats onboard the plane. Actually, for example, for the 777 trainer ER, we removed the seats on this premium economy, I thought it's economy class cabin, which will allow us to actually carry more cargo invest in that case about 9.5 tons more to capitalize on the demand for cargo shipment and operating this aircraft to bring us more revenue. 1 of the planes have already been flying have restarted its operation last week, and we have set the other place, the other Triple 7 trial ER, which have been converted into pseudo, freighter with that operation this week. Halo continues to build out its capabilities in perishables and pharmaceutical. The growth in cargo during this year is primarily, stimulated because of demand for perishables as well as pharmaceutical movement, as well as ecommerce for that metal and enhancing our capabilities to carry more of such goods will allow us the ability to participate more in the opportunities. Partly for pharmaceutical, we are all expecting vaccines to come onboard starting perhaps next year. And our cargo division is really to carry such shipments. Some of the strategy we have pursued even before COVID continue to Benefit us in ensuring that we have a nimble and flexible way to respond to such a crisis Our integration to S integration back into SIA is one such initiatives. So we can begin to see we can begin to expect SIA to operate its first narrow body planes, sometime by the first quarter of next year. And this will give us the flexibility of deploying white body or narrow body operations on the roads depending on the demand in a similar manner. Similarly, for scoots, you will allow us to deploy the right vehicle on the right market to the right market, depending on the demand profile of that market. As you all know, we invested in Vistarra in India because it allowed us to participate in the growth of another major market, which I cannot directly participate in. And as you can see here, we start out today it's already operating 55% of its pre COVID domestic capacity and expect to reach 60% by the end of the year and by the end of March or rather April of next year, Vistarra is expecting to recover and operate 100% of its pre COVID capacity. Of our subject to regulatory approval. Jisara has also grown Internationally. As you can see there, London, Dubai, Dakka Doha. And we expect Vistar to continue to seize any opportunities in the market to grow. COVID has been difficult for airlines and especially for airlines such as SIA because we do not have a domestic market, but even in this difficult time we have not forgotten, and we have not let up in our engagement with key stakeholders. We continue to participate In community projects and initiatives, our cargo division together with the MasTec and Whirlpool program has been transporting needed goods and 8 to Countries in nature, humanitarian aid in particular, Our ambassador programs have been well reported. Many of cabin crews participate in them, and we are proud to be contributing to the nation's fight against COVID 19. And of course, we want to ensure that when our employees begin to come back to work in bigger numbers, that they come back to a safe environment. Customers, the engagement customers are very important for us. COVID, of course, means that we will not be with operate very few clients. And therefore, the opportunities for us to interact and engage our customers ask more. Therefore, we have come up with various schemes for us to reach out and for us to still interact with our customers. I think everybody is quite aware of the Discover your Singapore Airlines experiences that we have been launching, all of which We see overwhelming response and we thank all our customers and also the Singapore public for your support and also your encouraging words to our staff as when we interact with you. But it's not just about managing the crisis itself. In parallel, we have been preparing ourselves and ensuring that we are on a strong foundation to emerge further from this crisis. We have not forgotten about sustainability. It is still it will remain an important focus for us. I just want to highlight a few of them. When you talk about sustainability for airlines, you kind of run away with talking about covered emission from operating the claim. And to be absolutely frank, the most effective way for any airlines to reduce your covered emission when you're operating your plant is to ensure that you have still efficient flame. So for the same mission that we are operating, we can actually reduce the amount of emission. In this case, our, as we mentioned earlier, our modern fleet philosophy allow us to keep the plane currently at six year old, on average, which is less than half of what the average age of the fleet is of airlines in the world which is more than 15 years. And our experience has been that for especially for long haul flights, We can achieve with this modern planes, with this modern technology, engines in particular, and also aircraft materials and design, we're able to have a few efficiency of more than or close to 30%, which will give us a substantial savings in terms of carbon emission We reported also that we were implementing installing solar panels on our building I'm glad to say that those installation has been done and we are with those installation. Having savings of 2300 tonnes of carbon emissions per year. In flight, we have not forgotten to see what else you can do. By the end of this year for our economy class, passengers in the regional flight, where the we instead of using the traditional, containers, we'll be using paper boxes as well as bamboo calories, And those can actually be incinerate, not incinerated. Those actually be converted into energy pallets to, echo a digester and which then can be consumed for energy. So it is a contributing to a circular economy. And on top of that, we are, as a result of using those containers, those paper containers as well as bamboo cutlery able to reduce the weight that we carry on board a plane by almost 60%, which again contribute to lower fuel burn and a savings of more than 300 tons of carbon emissions per year. We continue to push the boundary and grow new businesses get adjacent to what we are doing. Most of them have been reported before and you're aware. I just want to touch briefly on 3. CRISS plus is an evolution from the CRISS pay app that we have launched, but with more functionalities in it. We added more merchant relationships. We have also put in the boarding pass privileges and improve the user interface. Telangol is a brand new business unit that's been set up within SIA, it is really a trip planning platform So customers can go in and telago help them to plan the trip. And as they interact more, can personalize those trip planning There are many interesting ideas in there, many hidden gems, even for Singapore, So I urge you to go in and take a look. If any, for anyone booking on Telago until the end today, until the end of November, you'll be eligible for five times to increase prior points. We announced the SIA or Singapore Airlines Academy early last week, and we are very happy that as of today, more than 50 organizations have reached out and express their interest to work with us. We strongly believe that SIA will be able to be much stronger and better from this crisis. We have 4 key foundations that are not common among all airlines. We have a strong and trusted brand, and we mentioned earlier about strong liquidity and therefore balance sheet. Our people our people are very committed, very passionate, talented and highly skilled. And over the last few years, as a result, our previous transformation, we have established ourselves to be one of the leading Digital Airlines in the world. With that, we are launching a new transformation chapter focusing on how we can ensure that we much continue to be a leader in product and services although those could be defined differently post post the pandemic, we will achieve the financial sustainability needed in order for us to reward our shareholders as well as continue to reinvest for our growth and future and of course we'll continue to ensure that the SIA spirit remains high and alive and to ensure that all our people have the necessary skills that for the future. Thank you. Thank you, Mr. Co. We will now move on to the question and answer segment. For this, Mr. Goa and Mr. Palms will be joined by Mr. Mark Suiwa, Executive Vice President Operations Mr. Eliickson, Executive Vice President, Commercial and Mr. Tan Kaiping, Executive Vice President, Finance And Strategy. We have around 30 minutes. So as we have many participants, So as always, I would like to request that each participant limit themselves to just one question. If you could identify yourself before you ask a question, that'll be very useful. For us. Rishi, please could we have the first question? The first question is from the line of Luis Chua from Credit Suisse. Your line is now open. This year. So my question is on the capital expenditure projections. Would you be able to share with us the numbers? That you last had, I think, in the full year results, the projected CapEx, for aircraft and others for FY 2021 and beyond Thank you. Louis, this is Stephen. We certainly had anticipated and hoped that we would be able to provide an update to our capital expenditure numbers. And but as I've mentioned earlier, we have not quite concluded negotiations, with Boeing. So that remains outstanding. My intention would be to appraise the market at the right time, but we're not yet ready to disclose where we've got Thank you, Mr. Barnes. Richard, can we have the next question please? The next one is from Chin Huang from Air Transport. Your line is now open. Hi. Thank you. Good morning. It's Brandon from Metro. You have mentioned that you're looking to increase revenue from your ancillary products such as, Chris Fire, even, aviation academy. What is the ideal revenue or percentage contribution of these segments to SIA's income in the near future? Thank you. As you are aware, we are these are relatively new ventures and we're kind of in a midst of crisis, the COVID pandemic. So therefore, it's probably premature for us to provide any guidance or projections what kind of revenue we can expect. But obviously, we think that going forward, as the market recovers and the business come back, that we will be able to look forward to at least something that is more material. Thank you, Mr. Gold Rishi. Next question please. The next question is from the line of Raymond Yap from CIMB. So my question is on the cargo space, the 2 A320 CEOs network have their seats taken out. When did they actually start flying? I'm not sure whether they just now may have missed it. And also, what's the payment period for the cost of actually removing the seats and then later putting seats back on and whether there's a cargo uptick in the fourth quarter as usual? Thanks. Yes, the A320s were done quite some time that they were the first to experiment with this modality whereas the 777s were more recent. In terms of payback for both of the aircraft types of the cost of taking out and putting back the 6 later is all expected to be within a very short time frame within a period of a year, and that's why we are so confident to go ahead with it. To the final question of the uptick in the year end cargo, repeat period. Yes, we continue to see, growing demand and we expect that to be a PT and for the year end. Thank you, Mr. Lee. Rishi, could we have the next question please? And the next question is from Adrienne Schauffel from Aviation Week. Thanks a lot. Yes. It's Adrian here from Aviation Week. Just have a 2 part question, if I may. During, how are you planning your connecting banks differently due to the severe reduction in flights and city pairs? And also, how do you think the role of connecting hubs will change in the immediate post COVID environment? Hi. This is Rick Finn again. So obviously, we would not be able to have a similar, complexity of connecting banks that we had pre COVID given the big reduction in services but we have made sure that the key connecting corridors do are able to to flow through the passengers and we have made provisions for that in our network planning. To the second question of half development in the future. We believe certainly that, half activity will still be important and that is a cornerstone of our strategy and we would want to remain one of the preeminent hub in the world for global channels. Thank you, Mr. Lee. The next question is from Ian Wong from UBS. You may now proceed with your question. Hi, guys. Can you hear me? Yes. Good. Thanks. Thanks for taking my question. Two questions, if I may. Given the about 1.3 impairment losses being recognized for the 26 or the aircraft, is it safe to say that this is probably it for the near term in terms of impairment of the aircrafts? Secondly, if I may, can you please get an update on the cash burn rate at the moment given the outlook of a 16% capacity of pre COVID levels by December? Thanks. Thank you for the question. This is, I think. Payment of RMB 1,300,000,000 in respect of RMB 26,000,000 for the generation aircraft was a result of the network as we look at the trajectory post COVID. So that's our best view of the world right now. Yeah, on the cash burn, it has reduced compared with the first quarter. We are currently seeing below $300,000,000 cash burn on a monthly basis. Could we have the next question? Thank you. Certainly. The next question is from Tanjaq Lang from Xiamen Deli Muse. Your line is now open. Hi. This is for Xu Lei. I wanted to ask, because the Discover NIA associated restaurant physio and the Insight has been very popular. Is there any decision to make it a more constant offer, make it more profit offering more regular offering? As you know, this is again. As you know, we recently concluded our restaurant at A380 series. As we are now putting all of our efforts into the next series of activities, which is the insight SII experience, an insight looked at our training center. I think at this time, we would want to concentrate on making that as big a success as our restaurant at A380 before we make any further consideration. Next question is from Brandon Telby from Sylvia Aviation. Your line is now open. I have a question about the ULRs and the future of the ULRs. Has there been any review of those and decision on whether you're going to keep all 7 or maybe convert some of them to non ULRs. Just take into account, obviously, the U. S. Market is going to be a bit slow in coming back. It's segment, which these aircraft are very heavy on is going to be slower to recover and also your, the fact that there's improvements to the non ULLAR maximum payload and experience with the non ULR on LAX since April. So keeping all those in mind, I was wondering what your thoughts are on the ULR going forward. Hi, Brandon, Jun Pong here. The simple answer to your question is no. There is at this point in time, no decision on the EORR that we are at this point in time still keeping those URLs and we look to be able to deploy them when the opportunity comes. Next question is from Tan Zijit from CNA Digital. Your line is now open. Hi. Thank you so much for taking my question. So, I have one on the company's ability to continue raising liquidity I know you said that you're exploring various options, but I was wondering, how feasible are they in terms of these options actually materializing and being announced to support the company's expenses given how air travel limits will likely remain in place for some time? Or does the company see the need to ask the government for financial support at some point Thank you for the question. It's hyping. Stephen mentioned that we are flooring the sale leaseback market. Sorry, Tupanga mentioned, we exploring the theory spend market and the tech capital market, both at a very advanced So, we are confident of the assets to those markets and the liquidity. Thank you, typing. And Rishi, next question please. Next question is from Azit from UOB. Your line is now open. Yes, hi. I just got one question. This is regarding potential cargo conversion of passenger aircraft to cargo. You have, I, 2, 777,300s you have, quite a number of, triple 7300 ERs and even in HVATs. You know, fleet. So what is the scope for for converting some of these aircrafts to, you know, to to cargo, I e, by removing the passenger seats? Yes, this is the lifting. We normally would enter into this conversion only when we have secured the business or are very confident of the business on a particular route, which is what we did in the case of all of the aircraft that have been shown to be conducted. So we will continue to explore with our business partners with the freight forwarders, on whether there are additional such routes, which can take the operating cost of that conversion where it will make a positive business case for us. Thank you. Certainly. Next question is from shuriya Vazan from Goldman Sachs. Your line is now open. Hi, sure, if I'm going in. Thank you for taking my question. So I have 2 quick ones for you. It's on financing, basically. So can you let us know on the MCBs What is it that you're looking for when you decide to raise them? So is it like a certain net debt to equity ratio that you're looking for or some other metrics before you raise for the capital there? And secondly, you mentioned some other sources of financing. Are you also looking to sort of monetize your card business like Crest Fire or something like something where the U. S. Airlines have done? And any chance you can give us like a ballpark as to what your internal estimate of the value of Chris Flyer Businesses? Thank you. Thank you for the question. This is Kai Singh. I don't think we are ready to discuss the financing side further than what we have spoken about at this briefing. So I think they are the cause of the recovery and the pandemic it's really a simple uncertainties and what we are doing right now is making sure that we are proactive and ready to seize our opportunity and be in a position to seize on the opportunity to cover. Rishi, next question please. Next question is from Ayuko Tani from Nikkei. Your line is now open. Yes. Hi. Thank you for taking my question. About the surplus aircraft, you said that the this is, so far it, this is it. But, may I know, what's going to happen to those aircraft how does the aircraft market look like when, how long it's going to take if you are to sell? And with the negotiation with Airbus going at ever concluded and then going at the advanced stage. What's the number of the fleet that we can at the end of the year and at the end, at in 2021. The aircraft that have been repaired, so the 26 aircraft that have been impacted. A lot of them are actually already due at some state in the near future to leave the fleet. So, the reason why we are impairing them is because we don't see them taking good to the skies. These are the least efficient aircraft, if you like, stack them up. We don't see them taking to the skies again. And therefore, we have taken the investments. In respect of the A380s, the 7 that we have impact. They have reached basically certain maintenance windows maybe maintenance windows, that's, makes sense for us to ground them and take them out of service rather than spend more money on them because we also don't see them taking those guys in again. So that's how we came around to those 26 ethylene. And what they will basically dispose to the most economic needs. Hey, your other questions on Boeing, we as what Stephen said, we will when we completed we have completed the negotiation, be able to share more. Rishi, next question please. Next question is from Cassidy from Citibank. Hi, good morning. Thank you for your time. Just a very quick follow-up questions on the CapEx and aircraft plan. I appreciate that. You cannot disclose too much at this point in time. Can you reconfirm that it's just heal the deferral and there's no cancellation? Thank you. I think, we are not ready to disclose at this point because the negotiation is at one stage. So, So these are very difficult for us to talk about it at this point until it is concluded. Okay, that's fair. Thank you very much. Yes, thank you. Thank you. Thank you, Justice. Next question please. Next question is from Pankajan from Lianyu Zalbaou. Your line is now open. Hi. I'm Tania from you have the option to exercise, the NCB to raise another 6,200,000,000 rand or when we will exercise this option. And would that be for the next 12 months or you have to complement it with other options like coming on the debt market? Hi, this guy, I think, I know this issue has been made yet on the 6,200,000,000 of additional CPs for the is available, or to call upon it necessary up to the next annual general meeting. At the same time, we are taking a proactive posture in rest of our liquidity as I mentioned before. Thank you, Betting. Next question please, Sushi. Next question is from Lorraine Tan from Morningstar. Your line is now open. Yeah. Hi. Good morning. Just to follow-up on the CapEx. So first off CapEx, significantly below that of the first half of the year ago. Just wondering whether we can use this figure to represent what it might be in the second half pending your negotiations with the aircraft makers? Thanks. I think, you should just wait for when we conclude the discussion and we will disclose what the effect profile is Yes. So I just want sorry, can I just ask, so what were the drivers for the what were the main things that were spent on in the first half that The by value, the largest, the largest expenditure is certainly still aircraft? The, yeah, I mean, by a long way, really all of the other projects that could be stopped were stopped. So it's really dominated by, by aircraft per is and a certain amount of capitalized maintenance expenditure as well. Thank you. Next question please Next question is from the Good morning. This is Piggick from the business times. Given your current liquidity, how long do you say you were last? Hello. So we currently expect that we will have we'll need to make a decision relating. It's really tied to the question of the MCB decision. So currently expect that we'll need to make a decision relating to the MCB. Towards the end of the first quarter, calendar quarter. And so, I think that's really the indicator in terms of the expected liquidity? I think this is jongppong here. As you know, the market is very dynamic at can you hear us? Because a lot of actual Yes. I could hear you. Yes. Can you hear us? Yes. Yes. We can hear you. Yes. Because on old sites. It seems to be a lot echo. Anyway, I'm so sorry. Yeah. No problem. Really, the key is, as I was mentioning in my presentation earlier, the market is going to change. The market is going to have because, you know, the testing regimes and protocol that we put in could be further improved as new tests are available and that could stimulate the market. On the other hand, as you can see over the world that there are also possibilities of resurgence, second wave, third wave and all the So there are all kinds of dynamics and we just have to be very nimble and flexible in responding to this. And how that response and how do how the market evolves would obviously also affect our operations and our cash flow. And they are just too many variables at this point in time to do any meaningful projection. Thank you. Rishi, next question, please. But if you could ask participants for the the mute after they've asked the questions so that we prevent that. Thank you. Sorry. And if I may, we just have probably time for There are three more questions. So the next three, please. Next question is from Paul Young from DBS. Thanks. You've guided that we expect to be at about 16% of pre COVID capacity by end of the year. Could you provide a little bit more color on the longer term, like, where do you think we could be by the middle of the year of next year? Of course, I understand it's very but could you share with us, for example, what's underlining, what's underpinning your, sort of assumptions for, for example, the in effective fuel hedging up, going forward. Thanks. Sorry. Can you repeat your question? So where do you expect, your capacity to be by, say, the middle of next year or any guidance or where you expect capacity restoration to be like beyond end of this year? Yes. So I think that we are As pointed out, by our CEO, there are many variables in the market, both positive as well as potentially in terms of staying in terms of, detergent. And so it would be premature for us to really talk up next year. We are, as you note, increasing our capacity towards the end of the year from where we are today. That's because we do believe that some of the things we have mentioned the various opening of the green lanes and potential edge level bubbles and improvements in testing technology, all day we do believe has a positive effect and that's why we have increased capacity. But too early to talk about what it's going to be like next year. Thank you. But what's sorry, just to follow-up, but what's underpinning, you know, the fuel hedging ineffectiveness, charge. Like, you know, we have to assume a certain capacity, right, beyond December in order to take that, that $560,000,000 charge for the first half. Okay. So by way of guidance, the assumed recovery in capacity takes us to close to 50% by the end of calendar 21. Okay. Thanks, Steven. Thank you. Thanks, gentlemen. So I just want to add that, of course, as you correctly pointed out, in order to arrive a number for fuel hedging effectiveness, we need to have some underlying assumption, but that's not to say that that's the way we will operate because of how dynamic the situation is out there. You can rest assured that we'll seize all opportunities, of course, but we got to be very nimble. Thanks, Mr. Dror. Thank you for the explanation. Thank you. Rishi, next question please. The next question is from Gregory Waldron from Flight Global. Your line is now open. From flight, can you hear me? Yes, we can. Go ahead, Greg. I'd like to ask about the Hong Kong travel bubble has any thoughts been given to the aircraft that will be deployed in that bubble? And is there any thought to perhaps putting the A380 onto that route when the bubble opens? Thank you. Yes, this is Lexin. We are obviously, very keen to make the bubble a success. But of course, we do have to take into account serious consideration that the government, the regulator will have, in approving such a bubble. And being experimental, we can expect some level of conservatism. So I think the ability to put our biggest passenger aircraft onto that bubble route, I think you can be sure that that will not be the case you'll be using one of our smaller aircraft. Thank you. Thank you, Richard. Rishi, the next question, which will be the last one for today, please. Yes. The last question is from the line of Chiu Peng from OCBC. Your line is now open. Hi, understand that cash burn is 300,000,000 on a monthly basis now. I know the level before COVID-nineteen and are we expecting for the reduction on cash burn. Thank you. Okay. So the cash burn is a 300 bills on a monthly basis. When was the level before COVID-nineteen and other backing for the reduction on cash burn? We were profitable before COVID 19, so it was positive cash generation. So would you like to clarify your question? Just now, I think, you mentioned that, the cash burn is $300,000,000 now. A monthly basis. So I was just wondering also level before 2019, the cash burn level. And also, are we expecting a further reduction on cash burn Yes, sorry. Apologies for us. Just wanted to make sure we had the question correct. And our operating cash position pre COVID, was that we were in positive territory and had surpluses. But the in this first quarter, we actually provided some updates or in August, I think, as to where we were. But sort of the in the May, June, July period, our cash burn was in the region of $350,000,000 monthly. And the indication that we gave most recently is that our cash burn is $300,000,000 and reducing. Thank you, Steven. And thank you, everyone. We have now come to the end of our media and analyst briefing. We hope to see everyone in person at our full year briefings, hopefully, if things get better. Well, I'd like to thank our participants. Have a good day everyone and good week and good luck. Stay safe. Thank you.