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SCFlyer
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Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 10:06 am

I don't think SQ would be interested in buying any further stakes in VA anytime soon on the back of the 81% profit downturn at SQ, despite the past news articles claiming otherwise in regards to SQ/VA. In addition, SQ has been hands off in regards to VA, and been focusing on Vistara in India (also loss making).

I would not be surprised if SQ probably wants out of VA (in addition to the ongoing EY and HNA asset sell-offs).

SINGAPORE (Reuters) - Singapore Airlines Ltd (SIAL.SI) on Tuesday reported an 81 percent plunge in second-quarter earnings, hurt by higher fuel prices, lower airfares and non-cash losses at its part-owned Virgin Australia Holdings Ltd (VAH.AX).

Source: https://www.reuters.com/article/us-sing ... SKCN1NI11T
 
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LAX772LR
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 10:12 am

Will be interesting to see if this is the moment that DL has been waiting for.
I myself, suspect a more prosaic motive... ~Thranduil
 
Obzerva
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 11:01 am

LAX772LR wrote:
Will be interesting to see if this is the moment that DL has been waiting for.


Are you saying that one virgin isn’t enough for Delta?
 
smi0006
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 11:22 am

I’ve said it in a few threads - if ground ops is any example they are horrifically inefficient and labour intensive. They need some serious cost cutting and modernisation- none of which would impact their service standards. The SQ way is to simply through resource at a problem and hope it goes away.
 
travelhound
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 11:48 am

SIA's Australian operations represent a significant part of the entire group.

Although VA has been a financial disaster, the strategic long term benefits of owning a significant stake in the airline probably outweighs the short term non-cash profit impacts they are currently experiencing.

If the VA stock had more liquidity I would have them as a buy. There are a lot of good things about this airline that are currently emerging.
 
Noshow
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 12:09 pm

SIA is some most impressive airline by service quality and organisation including their economy class. I hope they don't stop to develop their main airline product and better stop spending their income on low cost affiliates. I want to fly SIA brand not somebody else. I actually prefer mainline SIA over other carriers whenever there is a choice.
When they developed the original concept labour had been cheep down there. Now Singapore is some expensive place and their well educated young people have many more options.
 
MIflyer12
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 12:13 pm

Just a few months ago there's was talk of buying a bigger stake. Buy one's way to bigger losses?

https://www.ausbt.com.au/singapore-airl ... -australia

The linked article on SQ profits is five weeks old. That doesn't count as news in this forum - things move quickly.
 
UAEflyer
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 12:21 pm

So SQ is another EY !!
 
Noshow
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 12:31 pm

Bit of a brutal statement but true in some way.
 
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lightsaber
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 12:48 pm

UAEflyer wrote:
So SQ is another EY !!

Ouch!

But unless reform is implimented, so true.

What this is showing is that buying a less than controlling stake just isn't wise.

Lightsaber
IM messages to mods on warnings and bans will be ignored and nasty ones will result in a ban.
 
zakuivcustom
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 1:16 pm

UAEflyer wrote:
So SQ is another EY !!


Umm...not close. To start, SQ didn’t buy, let say, a stake in Air India (the Indian equivalent of Alitalia) or something like Tarom (or Adria, since the latter is in *A, aka something similar to Air Serbia), etc.

Plus SQ is still making a profit, something that I can’t say for another carrier based in an Asian financial center (CX).

VA is just a mess even with a duopoly, though.
Free Hong Kong! Free China!
 
Ryanair01
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 5:05 pm

UAEflyer wrote:
So SQ is another EY !!


Dubai pretty much copied Singapore's city state model, Changi hub and SIA; then of course Abu Dhabi copied Dubai and Qatar the UAE.

Noshow wrote:
When they developed the original concept labour had been cheep down there. Now Singapore is some expensive place and their well educated young people have many more options.


SIA recruit heavily from India, Indonesia, Malaysia and PRC now - although it is discrete due to negative Singaporian attitudes to people from these countries.
 
blooc350
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 5:27 pm

UAEflyer wrote:
So SQ is another EY !!



The understatement of the century. I dont recall SQ losing $1.87 Billion and axing routes left and right like EY..............
 
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Erebus
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 5:37 pm

blooc350 wrote:
UAEflyer wrote:
So SQ is another EY !!



The understatement of the century. I dont recall SQ losing $1.87 Billion and axing routes left and right like EY..............


Under? Or Over?
 
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SuperTwin
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 5:46 pm

blooc350 wrote:
UAEflyer wrote:
So SQ is another EY !!



The understatement of the century. I dont recall SQ losing $1.87 Billion and axing routes left and right like EY..............


*overstatement

And yes, hard to match the level of EY's pet project management incompetence.
SuperTwin
 
CRJ900
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 6:25 pm

Aren't fuel expenses supposed to drop with more and more fuel-efficient B787s and A350s entering the fleet?
Come, fly the prevailing winds with me
 
travelhound
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 6:30 pm

SIA's initial stake in VA was almost gifted to them with a share swap for Tiger Airlines Australia. I think the transaction amounted to approximately $80 million.

If I also remember correctly SIA generate approximately 40% of their revenues from the Australian market.

Having the ability to fly an Australian passenger in regional Australia to a city in Mainland China through the VA code share agreement would have many market opportunities associated with it.

As such, I suspect the agreement and shareholding SIA have with VA is beneficial to their long term operations.
 
dtw2hyd
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 9:37 pm

SIA has only two things going for them.
1) FAs, the entire brand image is built around them.
2) Ability to switch routes quickly between FSC and LCCs within the group,

Rest all is PR fluff. I know we are not supposed to use the PR word, but it is a fact. Their CEO?? once said, their ULH routes never made profits in 9 years, yet they are the best. Even now they are not able to sell Premium Economy on ULH.
 
airbazar
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 11:51 pm

We've seen this before a few times. One quarter of profit reduction (Not a loss), and the naysayers come out of the woodwork. It's 1 quarter. It's still a profit. Moving on.
 
peterinlisbon
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Tue Dec 18, 2018 11:59 pm

So they didn't actually lose anything. And fuel costs are down now, so their profits should increase in the next quarters.
 
questions
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 12:14 am

Obzerva wrote:
LAX772LR wrote:
Will be interesting to see if this is the moment that DL has been waiting for.


Are you saying that one virgin isn’t enough for Delta?


Can VA be saved? What would it take?
 
downdata
Posts: 554
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 12:23 am

travelhound wrote:
SIA's initial stake in VA was almost gifted to them with a share swap for Tiger Airlines Australia. I think the transaction amounted to approximately $80 million.

If I also remember correctly SIA generate approximately 40% of their revenues from the Australian market.

Having the ability to fly an Australian passenger in regional Australia to a city in Mainland China through the VA code share agreement would have many market opportunities associated with it.

As such, I suspect the agreement and shareholding SIA have with VA is beneficial to their long term operations.


If Aus-China/Asia is the main reason for their investment then they must be thrilled by the ever expanding tie up between VA and HU/HX... and 20 other chinese airlines subs of HU...
 
travelhound
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 12:40 am

downdata wrote:
travelhound wrote:
SIA's initial stake in VA was almost gifted to them with a share swap for Tiger Airlines Australia. I think the transaction amounted to approximately $80 million.

If I also remember correctly SIA generate approximately 40% of their revenues from the Australian market.

Having the ability to fly an Australian passenger in regional Australia to a city in Mainland China through the VA code share agreement would have many market opportunities associated with it.

As such, I suspect the agreement and shareholding SIA have with VA is beneficial to their long term operations.


If Aus-China/Asia is the main reason for their investment then they must be thrilled by the ever expanding tie up between VA and HU/HX... and 20 other chinese airlines subs of HU...


Sorry, I probably should have inlcuded Europe, UK and the rest of Asia.

In short, you can't under estimate the importance of the Australian market for Singapore Airlines.
 
NTLDaz
Posts: 349
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 12:40 am

downdata wrote:
travelhound wrote:
SIA's initial stake in VA was almost gifted to them with a share swap for Tiger Airlines Australia. I think the transaction amounted to approximately $80 million.

If I also remember correctly SIA generate approximately 40% of their revenues from the Australian market.

Having the ability to fly an Australian passenger in regional Australia to a city in Mainland China through the VA code share agreement would have many market opportunities associated with it.

As such, I suspect the agreement and shareholding SIA have with VA is beneficial to their long term operations.


If Aus-China/Asia is the main reason for their investment then they must be thrilled by the ever expanding tie up between VA and HU/HX... and 20 other chinese airlines subs of HU...


Pretty hard of them not have a relationship with a shareholder.
 
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SCFlyer
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 12:58 am

questions wrote:
Obzerva wrote:
LAX772LR wrote:
Will be interesting to see if this is the moment that DL has been waiting for.


Are you saying that one virgin isn’t enough for Delta?


Can VA be saved? What would it take?


VA's domestic division is 'profitable' (per last financial year report).
It's their other divisions (e.g Short Haul International & Tigerair) that are not. Long Haul International went from "Small Profit" to "Small Loss" in the same report.

Considering the last article on DL and 'VA stake' was in mid 2016 in the SMH (which mentioned the VA/DL TransPacific JV started in 2009), The same article also mentioned that DL hadn't 'ruled out' a stake in VA in the future (around the time of NZ's exit).

It's a matter of wait and see on what DL does.
Blue Swan Daily (Sept 26 article) also mentioned NH as a dark-horse for HNA's stake.
 
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RyanairGuru
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 1:16 am

SCFlyer wrote:
questions wrote:
Obzerva wrote:

Are you saying that one virgin isn’t enough for Delta?


Can VA be saved? What would it take?


VA's domestic division is 'profitable' (per last financial year report).
It's their other divisions (e.g Short Haul International & Tigerair) that are not. Long Haul International went from "Small Profit" to "Small Loss" in the same report.

Considering the last article on DL and 'VA stake' was in mid 2016 in the SMH (which mentioned the VA/DL TransPacific JV started in 2009), The same article also mentioned that DL hadn't 'ruled out' a stake in VA in the future (around the time of NZ's exit).

It's a matter of wait and see on what DL does.
Blue Swan Daily (Sept 26 article) also mentioned NH as a dark-horse for HNA's stake.


I sincerely doubt that Delta has any appetite to buy into Virgin Australia. They already have all that they could want out of that partnership, namedly domestic (and Tasman) feed onto their LAX-SYD route and ensuring that VA's passengers flow onto DL metal for domestic North America feed.

The situation with Virgin Atlantic was very different as there was no established partnership between the airlines and what Delta acquired was a sizeable LHR slot portfolio and some UK based frequent flyers/corporate contracts.

Australia is clearly not a priority market for Delta. Since launching LAX-SYD 9 years ago they have never increased capacity, whereas both United and Qantas have grown in that time (plus AA entering the market).

Virgin Australia have flip flopped in and out of MEL, and ultimately ended up back on MEL-LAX after terminating AUH as the 'least bad' option to place 77W capacity they arguably don't need. Reading between the lines that their Longhaul International routes went from "small profit" to "small loss" (noting that coincides with the launch of HKG) I'd say that VA's LAX routes are profitable, but not very. So what does Delta gain by investing in this airline?

Both airlines are probably satisfied with their current arrangements for feed etc, but beyond that it is difficult to see what strategic value VA offers DL.
Worked Hard, Flew Right
 
jbs2886
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 1:22 am

RyanairGuru wrote:
SCFlyer wrote:
questions wrote:

Can VA be saved? What would it take?


VA's domestic division is 'profitable' (per last financial year report).
It's their other divisions (e.g Short Haul International & Tigerair) that are not. Long Haul International went from "Small Profit" to "Small Loss" in the same report.

Considering the last article on DL and 'VA stake' was in mid 2016 in the SMH (which mentioned the VA/DL TransPacific JV started in 2009), The same article also mentioned that DL hadn't 'ruled out' a stake in VA in the future (around the time of NZ's exit).

It's a matter of wait and see on what DL does.
Blue Swan Daily (Sept 26 article) also mentioned NH as a dark-horse for HNA's stake.


I sincerely doubt that Delta has any appetite to buy into Virgin Australia. They already have all that they could want out of that partnership, namedly domestic (and Tasman) feed onto their LAX-SYD route and ensuring that VA's passengers flow onto DL metal for domestic North America feed.

The situation with Virgin Atlantic was very different as there was no established partnership between the airlines and what Delta acquired was a sizeable LHR slot portfolio and some UK based frequent flyers/corporate contracts.

Australia is clearly not a priority market for Delta. Since launching LAX-SYD 9 years ago they have never increased capacity, whereas both United and Qantas have grown in that time (plus AA entering the market).

Virgin Australia have flip flopped in and out of MEL, and ultimately ended up back on MEL-LAX after terminating AUH as the 'least bad' option to place 77W capacity they arguably don't need. Reading between the lines that their Longhaul International routes went from "small profit" to "small loss" (noting that coincides with the launch of HKG) I'd say that VA's LAX routes are profitable, but not very. So what does Delta gain by investing in this airline?

Both airlines are probably satisfied with their current arrangements for feed etc, but beyond that it is difficult to see what strategic value VA offers DL.


What an acquisition does offer DL is assurance that the JV will remain. Say, for example, NH acquires part the SQ share and pushes DL out to do a bigger JV with UA and NH (i.e., an entirely TPAC JV). That being said, I'm not convinced its necessary or even worth it for DL. Although I think a KE/DL acquisition of Virgin Australia could be interesting.
 
tullamarine
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 1:23 am

questions wrote:
Obzerva wrote:
LAX772LR wrote:
Will be interesting to see if this is the moment that DL has been waiting for.


Are you saying that one virgin isn’t enough for Delta?


Can VA be saved? What would it take?

VA's domestic operations are very profitable. Its int'l operations are more break even but valuable given the approved JV with DL; the Asian services are still in start-up; the status of Tasman services is unclear as we haven't seen how the split with NZ has affected the profitability of trans-Tasman for everyone. Tiger hasn't been profitable in recent years but is recovering with a revised strategy and a fleet renewal to align it more closely with the mainline operation. Regional ops have been a problem since the end of the mining boom but there has been some recovery as well as a JV with Alliance.

It is important to note that VA's loss was the removal of tax losses as a balance sheet asset. It was a non-cash item and the losses are still accessible going forward and could be returned to the balance sheet as a gain in the future if the business is consistently profitable and auditors have some certainty that the losses will be utilised.

I'm not too sure why the book loss of VA impacted SQ so significantly given a 20% share wouldn't need to be consolidated.
717, 721/2, 732/3/4/5/7/8/9, 742/3/4, 752/3, 762/3, 772/E/W, 788/9, 300,310, 319,320/1, 332/3, 359, 388, DC9, DC10, F28, F100, 142,143, E75/90, CR2, D82/3/4, SF3, ATR
 
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Velocity7
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 1:24 am

Obzerva wrote:

Blue Swan Daily (Sept 26 article) also mentioned NH as a dark-horse for HNA's stake.


Now NH is interesting, hadn't heard that.
Japan is a bit of a 'black hole' in VA's current partnership lineup. Not being a fan of their Chinese carrier partners, it only gives me SQ with a connection in SIN which is just a bit too far west when flying from the AU East Coast to Japan. It turns a ~9 hour direct into a ~15 hour indirect.
 
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LAX772LR
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 3:50 am

Obzerva wrote:
LAX772LR wrote:
Will be interesting to see if this is the moment that DL has been waiting for.

Are you saying that one virgin isn’t enough for Delta?

DL already has an immunized joint venture with both of them... but I'm wondering if it'd seek the chance to increase its financial interest in (or exposure to, depending on your perspective) VA, in similar regard to what it was eventually able to gain in VS.
I myself, suspect a more prosaic motive... ~Thranduil
 
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LAX772LR
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 4:22 am

RyanairGuru wrote:
Australia is clearly not a priority market for Delta. Since launching LAX-SYD 9 years ago they have never increased capacity, whereas both United and Qantas have grown in that time (plus AA entering the market).

DL and AA don't have much need to grow their metal into Oz, seeing as they have immunized Australian partners that have expanded.

UA doesn't have that luxury, and so it's no surprised that they've chosen to grow their own metal.

The positioning of their ultra-powerful SFO hub, and their enormous IAH hub, helped as well.
I myself, suspect a more prosaic motive... ~Thranduil
 
aerokiwi
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Re: Singapore Airlines profit sinks 81% on fuel costs, Virgin Australia losses

Wed Dec 19, 2018 6:50 am

tullamarine wrote:
questions wrote:
Obzerva wrote:

Are you saying that one virgin isn’t enough for Delta?


Can VA be saved? What would it take?

VA's domestic operations are very profitable. Its int'l operations are more break even but valuable given the approved JV with DL; the Asian services are still in start-up; the status of Tasman services is unclear as we haven't seen how the split with NZ has affected the profitability of trans-Tasman for everyone. Tiger hasn't been profitable in recent years but is recovering with a revised strategy and a fleet renewal to align it more closely with the mainline operation. Regional ops have been a problem since the end of the mining boom but there has been some recovery as well as a JV with Alliance.

It is important to note that VA's loss was the removal of tax losses as a balance sheet asset. It was a non-cash item and the losses are still accessible going forward and could be returned to the balance sheet as a gain in the future if the business is consistently profitable and auditors have some certainty that the losses will be utilised.

I'm not too sure why the book loss of VA impacted SQ so significantly given a 20% share wouldn't need to be consolidated.


Thank you. A nicely reasoned post to counter the weird hysteria from some earlier posts. Basketcase, whatever.

Especially on your last point, what loss is SQ booking attributable to its VA shareholding? They haven't sold out, there are no dividends and no further capital injection. Is this an accounting game or a genuine realused loss, somehow?

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