Travel and Entertainment Space: Latest with SKC, AIA and Travel Demand

  • Jun 17, 2020 AEST
  • Team Kalkine
Travel and Entertainment Space: Latest with SKC, AIA and Travel Demand


  • International borders expected to remain closed in 2020. Intra and inter-state travel in the coming months would be a breather for the travel industry.
  • SkyCity Entertainment Group announced a broad funding plan to bolster its balance sheet and ensure liquidity in the business.
  • As an effect of the eased restrictions in NZ, Auckland International Airport saw a lesser decline in the airport traffic during May 2020.
  • Global travel organisations are conducting a survey that highlights the unwillingness of the people to travel through air modes.

As border restrictions across several countries are easing, there are anticipations for a recovery in the tourism industry of Australia. Subsequently, airports are reporting increased traffic, and tourism-related companies are preparing for funding and liquidity requirements to meet their investment obligations.

On the other hand, tourism organisations are predicting a slower demand for travel and tourism services as the situation of COVID-19 has not been entirely under control across several countries. There is a likelihood that international travel remains suspended for the remainder of the calendar year. However, domestic travel should ease the pain for the travel and entertainment industry.

INTERESTING READ: Is there Light at the End of Tunnel for International Flights in Australia?

Here we will discuss the vital developments from the travel, tourism, and leisure space in Australia.

SkyCity Announces NZ$230 Million Equity Raise

As a part of its comprehensive finding plan, SkyCity Entertainment Group Limited (ASX:SKC) has launched an equity raising plan comprising of a fully underwritten NZ$180 million institutional placement and a share purchase plan worth NZ$50 million to secure additional funding and fortify its balance sheet to navigate through the uncertainty surrounding the COVID-19 scenario.

Along with equity raising, SKC also ensured existing lenders support through covenant waivers, additional debt facilities, and an extension to the forthcoming debt maturities. This reflected efficient reset to the capital structure of SKC and offers adequate funding capacity and sufficient headroom for the medium-term.

Key highlights from the funding plan include:

  • Covenant waivers secured from current lenders for a testing period of 31 December 2020 and 30 June 2021.
  • Anticipated to retain investment-grade credit rating: BBB with S&P Global Ratings
  • Early redemption of NZ$125 million worth of NZ bonds in September 2020.
  • After the equity raising, pro-forma adjusted liquidity worth NZ$586 million shall be available to satisfy its funding obligations in the future.
  • Future dividends have been suspended until at least 30 June 2021.

Notwithstanding the impact from the COVID-19, SkyCity has been maintaining ample liquidity to endure the short-term disruption. Moreover, the funding plan announced has considered encouraging performance of NZ properties since reopening and is designed to ensure sufficient level of equity capital for the medium as well as long term to finance its investment commitments in the two critical project in Auckland and Adelaide.

SKC stock remains suspended on ASX, pending an announcement to be released by the Company.

Auckland Airport Traffic Takes off

Auckland International Airport Limited (ASX:AIA) reported a decline of 97.5% in its total passenger volumes for April 2020 compared to last year reflecting the impact of the travel restrictions imposed by the New Zealand Government in response to COVID-19.

In addition to this, International passengers (not including Transits) were down 96.5%, transit passengers were down 98.5%, and domestic passengers were down by 98.6% during April as it was the first full month impacted by the closure of the New Zealand border.

The fall in the total passenger volumes during May 2020 reduced to 94.7% in comparison to the previous year as New Zealand entered Alert Level 2 on 14 May 2020 and Air New Zealand began extending domestic capacity towards its target of 20% of pre-COVID-19 level during Alert Level 2.

The NZ Government had imposed border, and travel restrictions on 20 March 2020 and the same had a significant impact on domestic as well as international travel services.

New Zealand has now moved to Level 1 restrictions after defeating COVID-19 pandemic in the country. New Zealand had reported no new cases of COVID-19 for 24 straight days till 15 June 2020. This has led to significant optimism in the market as Australia also remains strict in controlling the further spread of the disease and gradually opening the economy.

On 17 June 2020, the company highlighted that it had received a waiver for its covenants with US Private Placement investors that would provide further financial flexibility. AIA also announced that it received an A- corporate credit rating from S&P, with a stable outlook.

The AIA stock closed the day’s trade at AU$6.340, up 3.934% from its previous close.

Travel and Tourism Stocks might get some breather next year

The COVID-19 situation might be improving in Australia, but many countries are undergoing tough times. This makes sense to reopen domestic tourism to keep the hopes alive for the country's pandemic-hit tourism industry.

The coronavirus pandemic has already cost a pretty penny to the Australian tourism industry, and a delay in opening the international travel to Australia can result in a significant hit for the early recovery of the tourism industry.

However, a lot depends on the breakthroughs in vaccine development and how early it is available. Additionally, fresh, and innovative approaches toward the management of the pandemic in the country can help to change the unfavourable circumstances for the tourism industry.

In the present scenario, stringent border restrictions in place are the imminent force that has significantly helped in navigating and suppressing the spread of COVID-19 in the country. Therefore, the restrictions on borders curbing the travel are expected to remain for some time, especially during 2020. It is highly likely that the opening of the borders shall be deferred to the next year 2021.

Even if the restrictions are lifted, and borders are opened, there is huge uncertainty surrounding the demand for the travel services amid the health crisis. Due to the severe health implications and contagious nature of the disease, people have become increasingly cautious about their health and well-being.

Passengers not Willing to Travel

The International Air Transport Association (IATA) confirmed the lifting of most border restrictions within Europe on 16 June 2020, and the passengers have started to travel. The IATA further mentioned that the reopening of borders is a long way off from a return to normal flying as fewer travellers are planning for an early return to the skies and only 40% of the total people surveyed are willing to fly within a few months of the pandemic subsiding.

Adding to the worries of the tourism industry is the 82% decline in forward bookings into the autumn period on normal levels.

Current times also pronounced as extraordinary times full of uncertainty are weighing much more burden on the domestic as well as international travel and leisure companies. The travel and tourism-related industry like entertainment and leisure have been undergoing testing times for quite some time now, and the future also remains uncertain seeing the decline in forward bookings and unwillingness of the people to travel.


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