Fiji Airways, the national airline of Fiji, had to issue additional shares at a significantly reduced price of $4.22 each due to the challenging market conditions caused by the COVID-19 pandemic. In its recent 2023 annual report presented to Parliament, the airline noted that this price represented a 74% discount compared to share prices at the end of 2019. The capital raising effort was essential for the airline’s survival, as it faced a dramatic drop in revenue from $1 billion to nearly zero, along with limited cash reserves, a monthly fixed cost of $39 million, and uncertainties surrounding border reopenings and travel demand.
The newly issued shares were acquired by the Fiji National Provident Fund and the Unit Trust of Fiji after most existing shareholders, apart from the Fiji Government, opted out of the capital raise. The airline detailed in its report that it faced significant challenges as financiers were skeptical about its chances of survival during the pandemic.
With assistance from BNP Paribas, a French bank specializing in aviation financing, Fiji Airways developed a comprehensive seven-year financial model that included monthly income statements, cash flows, and balance sheets. This model was crucial for assessing the airline’s ability to meet its debt obligations and the types of funding required, considering various border reopening scenarios and operational ramp-ups, providing valuable insights for raising $561.4 million through a Sovereign Government Debt Guarantee to enhance its cash reserves.
To remain operational, Fiji Airways implemented several key financial strategies, such as deferring aircraft lease payments and securing new loan facilities exceeding $380 million from the Asian Development Bank. Furthermore, the airline raised capital by issuing new shares.
During a special general meeting on August 16, 2021, shareholders approved an equity capital raise of FJD 200 million by issuing up to 47,393,365 ordinary shares at the aforementioned discount price. The Fiji Government contributed FJD 101.9 million in October 2021 for nearly 24.2 million new shares, while other shareholders decided against participating, prompting the board to offer shares to the Fiji National Provident Fund and the Unit Trust of Fiji. By June 2022, the Fiji National Provident Fund had acquired over 22 million ordinary shares for FJD 93.1 million, resulting in a 30.02% shareholding, while the Unit Trust of Fiji purchased 1.16 million shares for FJD 4.9 million, representing 1.58% of the total shares issued.