Singapore Airlines

Outlook for Asia's full-service sector dims as Singapore Airlines reports rare quarterly loss

The outlook for the normally buoyant Asian market has further dimmed following a rare quarterly loss for Singapore Airlines (SIA). The SIA Group’s first net loss since the global economic crisis of 2008 could be seen partially as an indication of its weakening market position. But in reality it is probably more indicative of the broader challengers facing Asia’s full-service airline sector.

SIA has reported for the three months ending 31-Mar-2011 (4QFY2012) a group operating loss of SGD5 million (USD4 million) compared to an operating profit of SGD166 million (USD132 million) for the same period last year. The group’s net loss for 4QFY2012 came in at SGD38 million (USD30 million), compared to a profit of SGD171 million (USD136 million) the previous year. SIA was widely expected to report a decline in profits for the sixth consecutive quarter, but the small loss – the first since 2QFY2010 – came as an unpleasant surprise.

End of line carriers increasingly relying on partners to serve China

Air New Zealand's decision to end Auckland-Beijing services in favour of a one-stop service on its Shanghai flight with onward connections by partner Air China is the latest example of the difficulties 'end of line carriers' in Australia and New Zealand are having serving China, which is a top trading partner for both.

Ending services to Beijing is not a light decision given how coveted Beijing slots are, but Air New Zealand's move is not unprecedented. Qantas in 2009 made the exact same move, ending Beijing service in favour of a one-stop partner connection. Qantas also bolstered its Shanghai schedule, which Air New Zealand is doing too with progressive daily service.

A380 operators finding configuration sweet spot as value halo persists

When the latest A380 delivery to China Southern occurs at the beginning of March, there will be 70 Airbus A380s criss-crossing the globe. With close to 30 more expected to be delivered over the year, the in-service fleet will approach 100 by the end of 2012.

This year, two new operators – Thai Airways and Malaysian Airlines – will join the existing seven airlines family of A380 operators. Airlines are still finding the sweet spot in terms of A380 seating but more and more configurations are edging above 500 seats, after much experimentation.

In selecting Gold Coast over China as its second destination, Scoot again goes with low risk option

New Singapore Airlines (SIA) low-cost long-haul carrier Scoot announced today Gold Coast as its second destination after Sydney and confirmed its intention to launch services in Jun-2012. Scoot has decided to launch with two routes to Australia because the process of securing authorisations for China, which Scoot has said will also be served within its first year, is longer and more unpredictable. Gold Coast was selected over two other Australian airports on Scoot’s short list, Adelaide and Brisbane, because of Gold Coast’s excellent track record of success with LCCs, including Asia’s two existing low-cost long-haul carriers – AirAsia X and Jetstar. Gold Coast is also the largest airport in Australia currently lacking a link with Singapore.   

Gold Coast is the fifth largest international airport in Australia behind Sydney, Melbourne, Brisbane and Perth (see Background information). Among Australia’s top airports it has by far the highest LCC penetration rate. Currently LCCs account for 98% of total capacity (seats) at Gold Coast, including 90% of international capacity and nearly 100% of domestic capacity.

Why Singapore Airlines is reducing Houston to less than daily service

Singapore Airlines (SIA) decided earlier this week to reduce capacity to Houston, which in late March will become the carrier’s only US destination without daily service. The decision to drop two of the seven weekly Boeing 777-300ER frequencies SIA currently operates on the Singapore-Moscow-Houston route is a response to low demand. Houston has been the worst performing US destination for SIA since the carrier began serving the Texas city in 2008.

Malaysia Airlines new business plan targets premium sector, following strategies of Cathay and SIA

Malaysia Airlines (MAS) has unveiled a new business plan aiming to restore profitability by significantly cutting capacity and increasing focus on the premium sector, which includes the launch of a new regional premium carrier in 1H2012. Several business units including maintenance, cargo and ground handling are to be spun-off, most likely in 2012, as part of a bid to free up capital required to fund rapid fleet renewal and the reinvigoration of MAS’ core business. MAS will swiftly phase out its B747-400 and A330-200 fleets over the next year, leading to a 12% reduction in total capacity.

The decision to draft yet another new business plan at MAS, which has made multiple turnaround attempts over the years, hardly comes as a surprise following the landmark partnership agreement forged in Aug-2011 with long-time rival AirAsia. The agreement, which included an equity swap and the appointment of AirAsia Group CEO Tony Fernandes to the MAS board, inevitably required MAS to downsize and abandon its attempt to compete with AirAsia at the low end of the market.