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Clipped Wings

Ailing Aussie economy sparks warning from Singapore Airlines
THE AUSTRALIAN SEPTEMBER 26, 2014 12:00AM

Steve Creedy

Aviation Editor
Sydney
FIRE FLY OVER
Singapore Airlines remains bullish about the long-term demand for full service carriers and premium services. Source: News Limited
SINGAPORE Airlines has become the latest overseas carrier to warn that the weakened domestic economy and lower dollar are combining to create difficult times for international airlines flying to and from Australia.

The Singaporean carrier joins its low-cost offshoot, Scoot, and AirAsiaX in observing that the shine has gone off Australia for international airlines.

Singapore Airlines executive vice-president commercial Mak Swee Wah said the “less than robust Australian economy’’ was a major factor affecting outbound travel and the market had also been affected by big capacity ­injections by offshore carriers in recent years.

But he said there was good news for the Australian tourism industry because weaker outbound travel due to the currency change was likely to be offset by stronger inbound travel as Aust­ralia becomes a cheaper ­destination.

There were also signs that international airlines were trying to adjust their Australian services, a comment that appeared to back Qantas estimates that capacity growth on international markets would fall significantly this year.

SIA announced earlier this year that it would replace one of its Airbus A380 services to Sydney with a smaller Boeing 777-330ER and it would not offer a daily A380 service to Melbourne from October 26.

It is one of the airlines Qantas has cited when discussing cuts in international capacity growth, but Mr Mak said SIA did not expect to make any capacity cuts this financial year beyond those it had already announced. He also noted that the Singaporean carrier was putting on supplemental flights during peak periods.

This is a strategy a number of airlines, including Qantas, are now taking and Mr Mak expects it to become more common as carriers grapple with high aircraft operating costs.

“With fuel where it is, you can’t afford to fly half empty planes so I think it makes sense,’’ he said, noting that high fuel costs had changed the economics of the industry “quite a bit’’. “In the past aircraft costs ­used to dominate and you would keep (planes) running even though you may not achieve the load factor.

“But … with fuel costs so high, the operating costs are very high now so up to a point it’s better off to maybe adjust downwards during the off-peak and put more in during the peak.’’

The Singaporean executive’s comments came as the latest International Air Transport Association report on premium ­travel showed that July global growth in international air passengers remained weak for a second consecutive month and was up just 2.6 per cent on the previous year. Premium seats were up 3 per cent.

The report also blamed the Thai military coup in May and the loss of two Boeing 777s at Malaysia Airlines for a 2.4 per cent fall in premium passenger numbers in the Asian region and a 0.5 per cent increase in economy seats.

But Mr Mak remained bullish about the long-term demand for full service airlines and premium services, despite the huge growth in Southeast Asia of low-cost ­airlines.

“Our business class carriage is still quite healthy,’’ he said. “Of course, just like the others, we are now trying to go into this premium economy segment so that we cover the whole spectrum.’’

Steve Creedy travelled to Singapore courtesy of Virgin Australia and Singapore Airlines.

SIA seems losing ground, I am able to get fares with SIA on a bargain which is cheaper than comparable lines like Cathay, Qantas.

http://www.valuebuddies.com/thread-1053-...l#pid97207

Troubling times for GLCs it appears... so soon after Capland...

Hope SIA doesn't need to be rescued one day. Looking at P & L of SIA , its margins are on the decline.
Many including me have stopped flying with SIA due to their customers serving culture . There are many airlines with cheaper fares but provide similar or even better services than SIA.

BUT..but.. airline biz is not about who has the cheapest tickets nor whose's services are the best!
It's about who has the right authority to fly from Point A to Point B... when you have that authority, you already have an indisputable advantage in this biz...

imho of cos!

Hi Brattzz,

This is true, often its the national carriers which gets to fly between point A and point B; When two countries sign such agreement, their respective national carriers are usually granted the authority to fly this route. This is why we have to take transit flights from say Singapore to London if we do not take SIA or BA. Technically, SIA has a monopoly over direct airline routes for all destinations from Singapore. However, this moat is weak.

Since many countries sign such airline routes agreement with one another, they can offer indirect routes involving transit at their home country. As a result, the airline industry becomes a competition in pricing as most airlines have routes from point A to point B. This is because if transits flights are cheap enough, Singaporeans will switch to take the cheaper indirect flight instead of SIA despite having to spend transit time. Next to be able to offer low pricing and yet survive, an airline has to maintain its cost to the lowest. A few factors are important here such as if the home country's industry regulation benefits/favors the airline, the support of the govt for the airline etc. For the gulf states, the government is rather supportive of their airlines in policies and other funding aspects. Unions are neither that strong. These are things which SIA lacks

Patiently waiting for Open Skies to be in effect.... I think this is also what SIA is waiting for.
Think about it, this is a temporary setback. SIA in the first place should not even be this successful.
We have no domestic destination at all. With the Open Skies agreement, SIA suddenly has alot more destinations to fly to.
A whole host of "domestic" market now.
I hope I am right...slightly optimistic

Less is more could apply to SIA as well?

http://www.businesstimes.com.sg/transpor...ategic-mro

SIA back in hangar for strategic MRO
Efforts include US$325m cabin upgrades, intensified codeshares, premium economy seats, new JVs and turning around weak units

By
Nisha Ramchandaninishar@sph.com.sg@Nisha_BT
SIA211014.jpg IT'S tough being Singapore Airlines (SIA). Faced with arguably one of its most trying periods yet, SIA has its work cut out to position itself on a stronger footing for the long-haul, and its efforts may take time to bear fruit, analysts say - PHOTO: SIA
21 Oct5:50 AM
Singapore

IT'S tough being Singapore Airlines (SIA). Faced with arguably one of its most trying periods yet, SIA has its work cut out to position itself on a stronger footing for the long-haul, and its efforts may take time to bear fruit, analysts say.

The group - which has never

(19-10-2014, 11:36 AM)kagemusha Wrote: [ -> ]Patiently waiting for Open Skies to be in effect.... I think this is also what SIA is waiting for.
Think about it, this is a temporary setback. SIA in the first place should not even be this successful.
We have no domestic destination at all. With the Open Skies agreement, SIA suddenly has alot more destinations to fly to.
A whole host of "domestic" market now.
I hope I am right...slightly optimistic

Yes and no. I don't think this is temporary. SIA was successful because they focused on software and value proposition, when competitors were focusing on cost. Now it's about hardware and bragging rights.

Until management "total recall" they are in service industry, and not just short term reactive or bottomline, I would steer clear of their cluelessness. It is scary when management does not understand their real business or strategic purpose. The frustrating part is that they are strategic to our tourism industry so their cluelessness has extended reach

We are in the phase where Buffett said sooner or later an idiot will run the company. But like I said before, unlike Buffett I won't bet on the moat.

(18-09-2014, 02:23 PM)specuvestor Wrote: [ -> ]Probably instructive to reread our discussion 20 months ago and see in real time how management missteps can take years to grind a good company into mediocrity

http://www.valuebuddies.com/thread-261-p...l#pid46224

Time is the friend of the wonderful company, the enemy of the mediocre. I do hope for Singapore's sake they get better calibre management that understands what our formula was.

Actually when I last looked at SIA financials last year, I noticed the biggest loss making bleeding operation was their cargo department. It lost almost as much as the passenger department made.

Not sure if this is still the case but it was this freight department that was really dragging on the business.

When global economy turns around or this cargo department gets sold off, earnings will definitely become good again. Not sure if they still have the big pile of cash sitting around though..