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Based at Singapore Changi Airport, Singapore Airlines is the national carrier of Singapore. Using a fleet of wide-body Boeing and Airbus aircraft, including the A380 of which Singapore Airlines was the launch customer, Singapore Airlines operates an extensive network across Asia, North America, Australasia, Europe, Africa and the Middle East. Singapore Airlines joined the Star Alliance on 01-Apr-2000.
Location of Singapore Airlines main hub (Singapore Changi Airport)
Singapore Airlines share price
2,554 total articles
Virgin Australia 'was one purchase Singapore Airlines really needed' but now relegated to a also-ran
399 total articles
The past month has been, as the Chinese might say, an interesting time for Virgin Australia. Two major new Chinese shareholders, HNA and Nanshan Group, an aggravated departure by one shareholder and now the announcement of a major restructuring, delivered to an unsuspecting world at 30 minutes’ notice, seemingly leaving behind its (previously) largest shareholder, Etihad – this has all occurred in a blur.
A financial restructuring has been in the wind for some time, but there was little to explain the breathless announcement of a one-for-one share issue on 15-Jun-2016. This involves a fully underwritten AUD852 million equity raising; together with a previously announced proposed AUD159 million placement to HNA Innovation, the total amount raised will slightly exceed AUD1 billion.
It sounds like good news for a cash-strapped Virgin Australia, but working out the winners and losers is more challenging as the dust settles.
Southeast Asia’s airline sector experienced a further improvement in profitability in 1Q2016, boosted by lower fuel prices and more favourable conditions in most of the region’s main markets. However, profitability in Southeast Asia remains at a much lower level than in most other regions due to intense competition and overcapacity in some markets.
A sampling of 20 Southeast Asian airlines recorded approximately a 50% increase in operating profits in 1Q2016. Among the 20 airlines, 14 reported year-over-year improvements, including all seven of the AirAsia-branded airlines.
The increase in profits to nearly USD700 million in 1Q2016 follows a significant improvement in profitability in 2015. The same group of 20 Southeast Asian airlines swung from a collective operating loss of over USD800 million in 2014 – when market conditions were extremely challenging – to a profit of more than USD1.2 billion in 2015. With 1Q2016 profits at a level of more than half the 2015 full year profits, the outlook for 2016 is now relatively bright.
Asia's airlines are embarking on what they see as once-in-a-lifetime long haul growth. Since 2014 there has been an acceleration of new long haul destinations. In the seven years before 2014 airlines in Northeast Asia – excluding mainland China – opened 19 destinations that are still served in 2016. In the three years since 2014 they have opened, or intend to open, 24 markets. All Nippon Airways and Cathay Pacific show the largest growth, opening nine destinations each. Most recently announced was Mexico City for ANA in 2017.
Mainland Chinese airlines are setting even higher records – opening 75 long haul markets since 2006. Air China is opening 17 markets, followed by Hainan Airlines with 16 markets. Of the 75 destinations, 51 were opened only from 2014. Southeast Asia is a story of contraction. Malaysia Airlines used to be the third largest airline for non-Asian destinations but now Sichuan Airlines has just as many as Malaysia. Philippine Airlines and Singapore Airlines have added markets, but for SIA this has resulted in modest net growth.
HNA/Hainan Airlines' 13% stake in Virgin Australia for USD114 million expands HNA's equity airline network outside mainland China to nine airlines on five continents – two airlines more than Etihad has invested in. Even once HNA grows the Virgin Australia stake to 19.99%, as it intends, it will not be HNA's largest in equity or percentage; but it is the most momentous and strategically important yet. It is accompanied by a strategic alliance, subject to approval, through which Virgin Australia will fly to mainland China and Hong Kong.
HNA's past investments have either not met their originally anticipated strategic value (Aigle Azur) or are airlines (Africa World, Comair) that do not have HNA services and are unlikely to be significant in the near future. HNA's Virgin stake is different: Australia is China's largest outbound long haul market after the US but Hainan has had a limited presence. Hainan has previously focused on the US market while regulatory constraints (in both mainland China and Hong Kong) and lack of partnerships have restricted growth.
Singapore Airlines (SIA) has moved one step closer to merging short haul LCC Tigerair and medium/long haul LCC Scoot by creating a new holding company for its two budget airline subsidiaries. Scoot and Tigerair will remain separate airlines for now, with their own operator certificates, but will have a new joint management team led by the Tigerair CEO, Lee Lik Hsin.
The establishment of Budget Aviation Holdings facilitates further integration and will unlock more synergies, particularly on the cost side, as overlapping functions are eliminated. The outlook for Tigerair and Scoot, both of which are now profitable, further brightens as the two integrate but there are still challenges to overcome – including potential overcapacity.
A merger is likely to eventuate but is difficult to implement at this juncture. The anticipated rebranding of Tigerair Australia by Virgin Australia and Tigerair Taiwan by China Airlines should make it easier for the SIA Group to transition to a single LCC brand, with Scoot the likely surviving brand.
The evolving Singapore Airlines (SIA) partnership strategy has reached another milestone with a new codeshare agreement with United Airlines. While SIA and United are longstanding members of the Star Alliance, their relationship has never been close and involved any codesharing.
SIA and United stated in a 9-May-2016 application with the US Department of Transportation they intend to start codesharing on 1-Jul-2016. Initially the codeshare includes eight United-operated domestic routes beyond Houston. However, the two airlines are seeking blanket codeshare approval, which would enable potential future extensions to cover United-operated flights beyond SIA’s other US gateways, SIA-operated flights beyond Singapore and their flights in the US-Singapore market.
United is launching non-stop flights to Singapore in Jun-2016 while SIA is planning to resume non-stop flights to the US in 2018. United and SIA are fierce competitors across the Pacific but the new codeshare could open the door to a broader and potentially game changing partnership. SIA has been actively seeking new or enhanced partnerships, an initiative that has already resulted in new joint ventures with Star members Air New Zealand and Lufthansa.