Air New Zealand tops again

Courtesy Air New Zealand

AirlineRatings.com has named Air New Zealand as the world’s best airline for 2018. Other airlines that make the top ten in descending order are Qantas, Singapore Airlines (SIA), Virgin Australia, Virgin Atlantic, Etihad Airways, All Nippon Airways (ANA), Korean Air, Cathay Pacific and Japan Airlines.

According to the editorial team, airlines must achieve a seven-star safety rating (developed in consultation with the International Civil Aviation Organization) and demonstrate leadership in innovation for passenger comfort to be named in the top ten.

The evaluation team also looks at customer feedback on sites that include CN Traveller.com which perhaps explain little surprise in both AirlineRatings and Conde Nast Travel naming Air New Zealand as their favourite. (See What defines a best airline? Oct 19, 2017) Four airlines, namely SIA, Virgin Australia, Virgin Atlantic and Cathay Pacific are ranked in the top ten of both lists. These look like consistently global favourites.

Notable absences from the AirlineRatings list are Middle east carriers Qatar Airways and Emirates Airlines. While these airlines scored for service in other surveys, they may have lost the lead in product innovation for which most of the airlines ranked by AirlineRatings are commended. Virgin Australia’s new business class is said to be “turning heads” and Etihad is said to provide a “magnificent product throughout the cabins.” Looking ahead, Air New Zealand will feel the pressure from Qantas and SIA for the top spot. (See Singapore Airlines steps up to reclaim past glory, Nov 3, 2017) In the same survey, Qantas is selected for best lounges and best catering services, and SIA for best first class and best cabin crew.

For those who think best airline surveys are often skewed by the halo effect of service provided in the upper classes, AirlineRatings has named Korean Air as best economy airline.

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What defines a best airline?

What defines a best airline, considering the different surveys that rank them? Conde Nast Travel has just released its readers’ choice of the best in 2017, and it is no surprise the list is made up of Asian, Middle East, European and SW Pacific carriers.

Courtesy Air New Zealand

Of course, it depends on the readership, but recognizing that, it also points to what really makes these airlines stand out. It is clear that the premium class service weighs heavily – the seat comfort and the fine food.

Etihad Airways (ranked #16) offers “the future of first-class comfort: a three-room “residence” with a bedroom, private bath with shower, and lounge.” Emirates (#4) offers “posh perks for premium fliers – cocktail lounges, in-flight showers… part of the reason it scores so high among travellers.” And the suites on Singapore Airlines (#3) offer “a pair of fully flat recliners that can be combined into a double bed.”

Mention is made of the premium economy class in almost all the ranked airlines” KLM (#20), Lufthansa (#19), Japan Airlines (#17), All Nippon Airways (#13), Qantas (#12), Cathay Pacific (#10), Virgin Atlantic (#7), Virgin Australia (#6), Singapore Airlines (#3) and Air New Zealand (#1).

So it may appear to be the voice of the premium travellers that is being heard. Maybe coach travellers aren’t too concerned about the ranking, more driven by price and less frilly factors, although to be fair, the Conde Nast report did mention of at least one airline, i.e. Etihad Airways (#16), not ignoring “those sitting in the back.” While many travellers may resign to the belief that the economy class is about the same across the industry, it is reasonable to assume that an airline that strives to please its customers in the front cabins will most probably carry that culture or at least part of it to the rear.

Although you may draw consensus across many of the surveys, it is best best to treat each one of them in isolation. It is more meaningful to try and draw intra conclusions within the findings of the particular survey.

You will note in the Conde Nast findings, there is an absence of American (including Canadian) carriers, never mind that of African and South American carriers.

Asiana Airlines (#8) is ranked ahead of Korean Air (#11).

All Nippon Airways (#13) is ranked ahead of Japan Airlines (#17). V

Virgin Australia (#6) is ranked ahead of Qantas (#12).

The order of the “Big 3” Gulf carriers is as follows: Qatar Airways (#2), Emirates (#4) and Etihad Airways (#16).

Of European carriers, there is the conspicuous absence of the big names of British Airways (compare Virgin Atlantic #7) and Air France, and the pleasant surprise of Aegean Airlines (#9) while SWISS seems to be regaining its erstwhile status years ago as being the industry standard.

The best belongs to Air New Zealand as the quiet achiever.

Ultimately, the results also depend on the group of respondents whose experiences may be limited to certain airlines.

Other airlines ranked in the top 20 of the Conde Nast survey: Finnair (#14), Turkish Airlines (#15), EVA Air (#18).

A conscionable call as oil price plummets: Will airlines reduce airfares?

AS the oil price plummets – some 55 per cent since June last year – the question topmost in the mind of the consumer must be: Will airlines reduce airfares?

Many of them have chosen to be silent on the subject, the excuse being that the historical volatility of the market is such that the trend can turn any time. But it has taken a while, and long enough for some conviction from the airlines, now that analysts are convinced that the cost of fuel is likely to stay low for at least another year.

Travellers on American carriers can stop wishing to share in the bounty, even as US carriers are reporting hefty savings as a consequence. Southwest Airlines estimated it would save US$1.7 billion on fuel in the current year, and Delta Air Lines more than US$2.0 billion. Other airlines that include Untied Airlines and Alaska Airlines are forecasting similar cost reductions. But, say the airlines, fare reduction is not on the card. Instead, shareholders will reap the benefits while the airlines themselves see this as a well deserved windfall and respite to recoup past losses and pare down debts.

Courtesy Getty Images

Courtesy Getty Images

United Airlines spokesperson Megan McCarthy delivered the cold reality of the business when she said: “It has been our position all along that fares are not cost-driven. They are demand-driven.”

That, we all know, is the simple economics of the law of supply and demand. So consumers have themselves to blame. Airlines are enjoying near-full loads that there is no incentive for them to want to lower the fare. In Europe, even budget carriers such as easyJet and Ryanair are looking forward to even higher profits from not only savings on fuel costs but also higher fares. So McCarthy was darn right there. But airlines too have learnt to make the formula work better for them, ceteris paribus, as they reduce capacity particularly in the US with merged operations to hold up demand and maintain airfares.

The consumer’s best hope lies in competition as how it should work in the liberal world, but with consolidation which has seen the merger of big entities in the US, raising questions about the assumed competition itself. Today four airline companies control more than 80 per cent of the US market. Little wonder how US carriers have collectively signalled that airfares will not fall in response to the falling fuel cost.

Where competition does not work, the consumer can hope that some conscionable authority will be able to address the fair fare issue. On that second score, you might fault McCarthy for turning a blind eye, but United, like any other, would contend with some validity that it cannot be both operator and watchdog. Company with conscience is a preacher’s prerogative, more idealistic than operative.

Still, the likes of United may be reminded that back in the days not too long ago when the fuel price reached giddy heights, airlines were raising fuel surcharges as many as four times within a year. Strange as it sounds, they have always maintained that the surcharge is not part of the fare, but not as far as the consumer is concerned. Even so, the corollary must apply as the fuel price dips. No lesser a person than Toby Tyler, director general of the International Air Transport Association (Iata), has said that airline fuel surcharges should begin falling as the drop in oil price works its way through the aviation fuel system. Tyler said: “In many cases, airlines operates now with a basic fare and a fuel surcharge of some kind and the fuel surcharge in many airlines is directly linked to the price they’re paying for fuel.”

Courtesy Airbus

Courtesy Airbus

But it looks like it is not happening quite as quickly as Mr Tyler was convinced that it would when he said in October last year: “You’ll see the fuel surcharge very quickly come down.” Still, better late than never. Better somewhere else if not in the United States. Japan Airlines (JAL) announced lower fuel surcharges for international flights from February 1, recognizing the genesis of introducing such levies back in February 2005 in response to rises in the cost of fuel. Now that is one conscionable airline. JAL said it would revise the surcharge, whether upward or downward, if the fuel price fluctuates further. Fair enough. American and other carriers waiting on the sideline, take note.

Qatar Airlines has also announced it will reduce the fuel surcharge although it has not committed to a date for implementation.

Courtesy flyertalk

Courtesy flyertalk

Australian airlines are among the first to drop airfares in response to the falling oil price. Two forces are at work: competition and the authority. Nowhere else in the world is there more bitter rivalry than that between the two Australian carriers of Qantas and Virgin Australia. Virgin took the lead, and Qantas followed suit. Virgin said it would not get rid of the fuel surcharge altogether, but incorporate it into the fares; however it is packaged, the bottom line should see a reduction. Virgin said the “reductions reflect the benefits of the decline in global oil prices” following monitoring over recent months and “in anticipation that fuel costs will continue to remain at lower levels than the record highs seen in recent years.”

At the same time, the Australian government is putting pressure on the airlines to respond to the drop in fuel costs. Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC) said: “It is not against the law to introduce a surcharge – what is against the law is to mislead customers.” The ACCC announced it was investigating the matter. In a statement that it released, it said: “The ACCC has confirmed that it is considering whether representations made by airlines imposing fuel surcharges, following the fall in wholesale aviation fuel prices, are misleading. Under the Competition and Consumer Act 2010 businesses must not make misleading, deceptive or false representations about the price of goods or services. This includes when making representations about the reasons for rising fuel costs.”

In this connection, Qantas said: “The bottom line for consumers is that Qantas fares already in the market are some of the cheapest in years. Fuel surcharges are already included in the advertised price and those fares remain extremely competitive.”

The issue is not about the fares already being the cheapest in the market but rather whether they should be even cheaper as a result of lower fuel costs that have saved the airlines millions to billions of dollars.

Meantime the British government is studying the need for intervention. British Airways circumvents the issue with no clear commitment, saying it has launched several sale initiatives. Virgin Atlantic said it has reduced the fuel surcharge before last Christmas and will “continue to monitor the situation and fuel surcharges under review to make them as affordable as possible.”

Courtesy Delta Airlines

Courtesy Delta Airlines

It is a world of ironies. The consumer may as well confront the hard truths about the market. The door does not always swing both ways. As the global economy improves, the demand for seats picks up. And when demand exceeds supply, the game belongs to the airlines so much so that Delta CEO Richard Anderson has suggested to passengers who are looking at reduced fares to “shop around”. He said: “The marketplace is incredibly competitive, and there are always differences in fares.” The consumer can only hope that competition is well and alive without the need for state intervention. If Anderson had come across as being somewhat arrogant, he probably knew he could afford it. But heed his advice anyway.

This article was first published in Aspire Aviation.

Move over, Ryanair, the new low-cost model is Jetstar

Courtesy AFP/Getty Images

Courtesy AFP/Getty Images


REPORTING a net profit of 602m euros (US$831m) for the six months to end-September and despite an increase of 1% year-on-year, Ryanair yet again warned that profits are likely to fall for the full year. The airline reiterated an earlier exhortation about the numbers dipping as low as 500m euros compared to last year’s 570m euros, thus negating the gain made in the first half.

It is bad news that profits will fall despite an expected drop in fares by 10% over the winter months. Ryanair attributed this to “increased price competition, softer economic conditions in Europe and the weaker euro-sterling exchange rate.” As a result, the airline may ground some aircraft.

The truth is that Europe’s biggest low-cost carrier is beginning to feel that its hitherto successful modus operandi, hailed as a true budget model, may be finally running up against the wall. Surprise, surprise, surprise it is that the airline is talking about change, and more specifically in the department of customer service when previously it may even be said to have been sitting pretty comfortable and breathing arrogance about being labelled brusque, unfriendly and uncompassionate. Ryanair chief Michael O’Leary acknowledged it is now time to “listen to customers” in a somewhat belated but hopefully never too late attempt to retain customers and attract new ones.

Among the measures to be introduced are: the return of allocated seating in February next year for a smoother boarding process and to enable families and other groups of passengers to sit together; the allowance of a small second carry-on bag, which will be a bonus compared to other low-cost operators; and a 24-hour grace period to allow passengers to correct minor booking errors, a far cry from the alleged erstwhile practice of faulting or penalizing passengers on the slightest technical inaccuracy. It is a lesson learnt that in an increasingly competitive environment, customers do have a choice.

But, of course, many upstarts in the same niche market as Ryanair have failed to make the same strides as the Irish carrier. Some of them tried in vain to tweak the low-cost model to do one better and then ran the risks of evolving an expensive but misplaced hybrid model. Ryanair made no secret about flying the dollar and that everything else was baloney. Can you blame it that in its robust years it had not anticipated that this day of reckoning would arrive?

Image courtesy ABC

Image courtesy ABC


Younger Jetstar Airways and its sister airlines operating in a different part of the world might have gleaned some valuable lessons from the doyen’s experience. A subsidiary of Australian flag carrier Qantas, Jetstar has made its mark not only domestically but also in New Zealand and across Asia with local partners in Singapore, Vietnam, Japan and soon Hong Kong. It is fast becoming the region’s favourite low-cost carrier, competing with AirAsia and Tigerair whose founding fathers included Ryanair. Ranked tops in Australia, Jetstar Airways was second to AirAsia for best low-cost carrier worldwide in the Skytrax 2013 survey. Singapore-based Jetstar Asia was ranked seventh in the same category, but there was no mention of either Ryanair or Tiger Airways (now Tigerair) in the top ten list. In the Asia category, Jetstar Asia was ranked ahead of Tiger Airways. For Europe, Ryanair was outside the radar.

Jetstar is spreading its wings across Asia as Ryanair has done in Europe. It is enjoying an Asian boom, posting double-digit passenger growth. Since 2009, it has flown 23 million passengers within Asia and 10 million passengers from Australia to Asia. However, as pointed out by Jetstar CEO Jayne Hrdlicka, “low fares are just part of the story.” For too long while the going was good, competing on the lowest fares was everything for Ryanair. Price leadership has to be complemented by good products and services. Jetstar has identified “customer advocacy” as one of its drivers for growth. Providing a consistently good experience each time that a passenger flies is the surest way of attracting returning as well as new customers. It is the best advertisement that you can get.

Jetstar has contributed positively to the bottom line of the Qantas Group even though its last full year (ending June 2013) profit dipped by 32%, attributable largely to start-up losses in Jetstar Japan and Hong Kong. Is Jetstar, compared to standalone Ryanair, advantaged by its being an offshoot of an established legacy brand? Jetstar may attribute its success largely to its focus on local and independent management, but you cannot rule out parental influence. The airline is not alone in that aspect, if you consider the many others so conceived. This could well be the reason why AirAsia failed to work with partner All Nippon Airways (ANA) in the Jetstar Japan venture which has since been fully assimilated by ANA and the airline renamed Vanilla Air. Yet Qantas and Japan Airlines so far seem to have done all right in the case of Jetstar Japan.

It is not a given. The parental association can benefit or be detrimental to the offshoot carrier. United Airlines and Delta Airlines were reluctant parents to Ted and Song respectively. Or, it can disappoint. The magic of Singapore Airlines has not seemed to rub off Tigerair, not even Scoot that it wholly owns.

Good bloodline may provide an advantageous lift-off; the rest depends on the offspring coming into its own. Jetstar has scored many firsts since its inception, among them the first LCC in Asia-Pacific to introduce customer self-service for changes and disruptions, SMS boarding passes, and the unbundling of check-in bags. It was also the first LCC to put on board iPADS with the latest content and the first LCC to offer interline and codeshare flights. Soon it will be the first LCC to launch avatar chat (“Ask Jess”).

In all fairness to Ryanair, it is an equally innovative airline and it should be commended for being a bold one too. Here is where the path diverges for both airlines. As a true blue low cost carrier, Ryanair is focused on measures aimed at reducing costs further. The first principle of economics is that ceteris paribus, consumers will go for the lowest cost. If, for example, you do not fancy eating up in the air, why should you subsidise the cost of meals that other passengers tuck in? You pay only when you want to eat. Budget carriers, including legacy airlines – notably North American carriers – operating domestic or the short haul routes are already subscribing to that principle. Ryanair goes further with other measures such as charging a fee for counter check-in and has no compunction about bumping off a passenger who arrives at the airport without a pre-printed boarding pass. Scrimping on staff numbers to provide customer service also helps to reduce its operating costs. Mr O’Leary raised some brows when he suggested charging for the use of the aircraft loo and providing standing room only fares. The vibes turn out to be negative.

Jetstar on the other hand offers more positive solutions to perceived constraints that may be considered by many travellers as necessary evils of the budget travel mode. It has adopted a consolatory approach that has earned it brownie points. What little additional costs it incurs on the swings, it more than makes up for it on the roundabouts. Ancillary services are a major earner for the airline.

Move over, Ryanair, the new low-cost model is Jetstar. Still, it is quite something to hear Mr O’Leary say: “Listen to customers.”

Scoot in silence: Going where the big boys dare not go

Courtesy Scoot

Courtesy Scoot


Scoot in silence. Not quite the image, it would appear, of an airline that was so-named supposedly because it was bold enough to break away from convention. The expression sounds somewhat anomalous. Yet, perhaps, it is but only being bold, treading where few fear to go.

Scoot, the wholly-owned budget carrier of Singapore Airlines (SIA), has demarcated a quiet cabin zone on board that would keep out children under the age of 12. The “ScootinSilence” zone, said the carrier’s chief executive Scott Campbell, would cater to “guests seeking an exclusive cabin, extra legroom and confidence that under 12s will be seated in another part of the aircraft.” As if in consolation, Mr Campbell added, risking conveying condescension although most likely he did not mean it, that young children “still have the rest of the aircraft.”

Had the initiative been introduced by SIA, there might be less of a perplexity. So, one wonders, why is Scoot introducing a restriction that even an airline like SIA which may be more interested in attracting the serious business traveller (not necessarily those travelling in the upper classes) is so far not prepared to consider? The budget market is largely characterised by leisure travel and by little differentiation; indeed, if the “silence cabin” works to attract more travellers (as different from demand by customers who would fly budget anyway), it would top as a high-value privilege at no additional charge.

Courtesy Airbus

Courtesy Airbus

Apparently, Scoot is doing what Malaysian budget carrier AirAsia’s subsidiary AirAsia X has already done early in the year when it introduced a “Quiet Zone” of some 7 rows just behind the premium section. Children under the age of 12 will be banned from the zone, which will feature more conducive “soft ambient” lighting which, it may be implied, is not something that young children would want or enjoy. As someone quickly points out, considering the smallness of the aircraft, you will still catch the wails of babies but for consolation farther away, but you will at least not get children running up and down the aisle, rocking in their seats and peering over your shoulders. Suffer the little children, so they say. AirAsia X chief executive Azran Osman-Rani described his carrier’s “Quiet Zone” as a “heavenly package for those who want peace of mind.”

Suffice to say that every traveller wants that “peace of mind” when they fly. It is often a matter of luck as you try to pick a seat that you hope is not next to a family of kids or away from the bulkhead where the bassinets are normally fixed. Noise is noise and it is disruptive, whether up front or in the rear end of the aircraft. AirAsia X and Scoot may be taking a step to improve a situation that is prone to elicit complaints, something that has been mulled over before by the big boys but reservations loom large.

Some two years ago when the issue was a hot industry topic, Virgin Atlantic had said it had no plans to introduce such zoning that bans children. Former Virgin Atlantic director Paul Charles said: “It would be a bad decision by an airline to ban children. Once you did, would you start banning other types of traveller? It would be a mistake.”

Yes, indeed. What about “fat or smelly people”, as one respondent to a survey asked? It could get nasty and become offensive. There were others who said adults who drank too much and became rowdy made a worse nuisance, so too groups of travellers who moved about between seats frequently, gathered to play cards and chatted loudly and ceaselessly. Where do you draw the line?

In fact, providing good “family” service is the pride of many full-service airlines. Japan Airlines provides exclusive Family Service counters and lounges at both Narita and Kansai International Airport that even well wishers may use.

A British Airways (BA) spokesperson had said: “We do a lot of research into what our customers want and are always looking into new ways of making their journey as comfortable and enjoyable as possible.” BA wanted it to be known that “we’re a full service airline that caters for both business travellers and family and leisure customers.” The last thing it would do is to suggest discrimination and make family with children the pariah of air travellers to be seated away from a self-assumed elitist class (and this is not referring to travellers in First and Business).

Malaysia Airlines may be the only full-service airline in the region to have introduced a kid-free zone in economy class. Children under 12 are not allowed to sit in the upper deck of its Airbus A380. The aim is to provide a more restful and enjoyable trip for business travellers flying in economy – again, as if that need for rest and enjoyment is exclusive to that category of travellers and not the rest. However, the airline said (as an afterthought, it would appear by the timing of this being issued subsequent to the earlier instruction): “Where there is overwhelming demand for seats in economy class from families with children and infants, resulting in full load in the main deck, we will still accommodate such demand in the 70-seat upper deck economy class zone.” Informatively, Malaysia Airlines does not allow infants in the first class cabin of its A380 and B747 aircraft.

To a certain degree, there may be more justification to apply the restriction in Business Class, purely on the basis of it being a different class – the underlying message being that there is a price to be paid for a different privilege. In fact, price alone may do the “weeding” job, whether intended or unintended. Even then, to declare it openly speaks of indiscretion. The lesson here is that there may be ways to achieve certain goals without turning it into a controversial issue and raising a furore. For example, airlines can consciously seat families with children in a certain zone without making it known it is an unspoken policy, but travellers may circumvent this or be none the wiser these days with internet seat selection and check-in. Then again, is it all that big a deal, really?

Of course, Scoot and AirAsia X would want to capitalise on the new feature as a draw, and why should it not be when it is offered at no extra charge? While deep down in the subconscious human heart one may abhor the discrimination, let’s face it, the unaffected adult traveller is but only normal to be selfish enough, given the opportunity, to be seated away from potentially disruptive children. Yet it may all come to naught if the select minority’s expectations are not met – say, for example, a child immediately behind the zoned row starts kicking the chair in front or some baby starts bawling – or if the less privileged majority feel a sense of unfair treatment since they do not pay any less for the same ride, or if families with children are turned off by the seeming discrimination. It is a more rewarding feeling to be seated a row immediately behind a higher paying class than knowing that a fellow same-class traveller is enjoying the perks that could have been yours.

The competition between budget carriers is even more intense than that between legacy airlines, in that there is little margin for differentiation. So the creation of a “no-kid division” should place Scoot and AirAsia X a cut above the rest. Will Jetstar be the next to announce such a feature? Considering the profile of the budget traveller and the business attitude and philosophy of budget carriers themselves, it may in the end all be much ado about nothing. By targeting what they perceive to be a special group of passengers, Scoot and AirAsia X may be looking to building loyalty of a certain group of travellers. However, brand loyalty in the budget market is not a major determinant in the choice of airline. So, the “quiet” or “silent” option is good only post factum and if available; in other words, a bonus to be enjoyed that one lucky time, as you might say.

But give Scoot and AirAsia credit if they additionally think of outplaying the big boys who are increasingly facing the threat of even loyal customers downgrading to take advantage of the much lower costs offered by budget carriers, all that in spite of the perks they dish out. Why then are these bigger airlines vacillating if at all they have thought about the strategic potential of a silent cabin? Or, is it a matter of fools rushing in where angels fear to tread?

Singapore Airlines disappoints

Courtesy Singapore Airlines

Courtesy Singapore Airlines


Singapore Airlines (SIA) prefaced its report on its annual performance (2012/13) with attribution to high fuel prices and lower yields owing to a weak global economy for its lacklustre results. The announcement concluded with an equally dismal outlook, saying very much the same thing, warning that “the global economic outlook remains uncertain with the ongoing weakness in the Eurozone and sluggish recovery in the United States” and that “yields are likely to remain under pressure amid weak economic sentiment.”

So what’s new, indeed?

While the results per se disappoint, the presentation disappoints even more so, simply because it does not provide any excitement going forward, almost in resignation to whatever the circumstances that will decide its fate. Perhaps it is because we have come to expect so much more from an airline that has for a long time been considered one of the world’s most profitable, most innovative and most gungho airlines.

Group operating profit fell 19.8% to S$229 million (US$184 million) with only the parent company registering an increase of 3% from S$181 million to $187 million on the back of a growth of 7.3% in passenger carriage, and cushioned by the surplus on sale of aircraft spares and spare engines. SIA Engineering and SilkAir reported lower profits, the former from S$130 million to S$128 million (1.6%) and the latter from S$105 million to S$97 million (7.6%). Losses for SIA Cargo deepened by more than 40% from S$119 million to S$167 million.

The not so-good-signs for SIA the airline are falling yields, a weak fourth quarter of losses and relatively flat demand in forward booking for the next few months. In fact, SIA’s last quarter performance ran contrary to industry performance which, according to the International Air Transport Association (Iata), saw air passenger travel growing by 5.9%, boosted by emerging markets. Iata chief Tony Tyler added: “Strong demand for air travel is consistent with improving business conditions.” However, developed markets were experiencing relatively low growth. That could explain SIA’s limited growth – operating largely in mature markets that are highly competitive.

The pressure on yield will continue to be a challenge – and with time, a bigger challenge – as SIA faces increased competition from rival airlines for not only the long haul but also regional routes. Middle-East airlines such as Emirates, Etihad Airways and Qatar Airways in particular have become very aggressive in the premium air travel segment, investing heavily in the product and forging strategic partnerships with other operators. Their increased popularity is likely to also shift hub airport activity to the Middle East, threatening Singapore Changi Airport’s hub status in east-west connections between Asia-Pacific and the regions of Europe and Africa. No doubt SIA will benefit from Changi’s ability to remain a favourite hub among airlines and their customers.

At the lower end, SIA also faces exposure to cheaper options from regional and budget operators that in pre-economic crisis days would have been scoffed at. Consequently SIA is adopting a broad catch-all strategy – that saw the launch of budget subsidiary Scoot last year – which may not necessarily work in its favour as it dilutes its premium product and compromises yield. The other airlines in its fold are not exactly star performers: Little has been reported of Scoot’s performance to date; Tiger Airways in which SIA has a 33% stake is losing money; and SilkAir is operating below capacity growth.

SIA needs a more robust and focussed strategy than that – to lead, rather than follow, and to pro-act, rather than react. In a highly competitive environment, the player that sets the rules wins. High fuel prices and the continuing sluggish state of the global economy are by now givens since they are woes that cut across the industry, and they should be viewed as challenges and not as excuses for poorer performances. The success story of Japan Airlines’ turnaround in spite of these circumstances provides a lesson on not accepting things as they are; the Japanese carrier emerged from bankruptcy to become the world’s most profitable carrier in 2011. Certainly the credit must go to the man at the helm – honorary chairman Kazuo Inamori, who very humbly attributed his success to hardworking employees.

Some observers think that SIA is hugely disadvantaged by its lack of strong partners, but the airline has a speckled history of failed relationships, notably its acquisition of stakes in Virgin Atlantic and Air New Zealand in 1999/2000. Both stakes were later relinquished at a loss. SIA also failed to buy into China Eastern Airlines, which today has entered into a codeshare arrangement with Qantas. To be fair to SIA, a number of other airlines have also bought lemons. The International Airlines Group which owns British Airways and Iberia has reported a first-quarter loss of 630 million euros (US$808 million) – almost five times more than the 129 million euros loss in the same quarter last year – attributed to the poor performance of the Spanish partner.

The choice of the right partner is key to success. SIA has recently increased its stake in Virgin Australia from 10% to 19.9%, added to extensive marketing cooperation in schedule meshing and the use of each other’s premium lounges int heir networks. While there is potential in Virgin making big forays in the international arena, the alliance at best will present a stronger domestic presence for SIA in Australia for now and pales by comparison with the mega alliance (albeit a non-equity partnership) between Qantas and Emirates which is an attempt to shift the traditional competition to a new playing field such as replacing Changi with Dubai as Qantas’ hub for flights on the kangaroo route.

It is always with great interest and perhaps somewhat unfortunately with high expectations that the industry awaits moves by SIA to regain its lead in the business of flying. But the introductory and closing remarks of its latest result announcement provide little to excite the imagination. Somehow it seems SIA prefers to bide its time. SIA chief executive officer Goh Choon Phong said at the results briefing: “We think at some point there’ll be a recovery, and we’ll be well positioned to tap the recovery with the growth and the partnerships that we’ve established within Asia and other parts of the world.”

However, telling the same bleak story may be consoling, but it can also be dangerously self-fulfilling in resignation. The good neBut it seems SIA prefers to bide its time. SIA chief executive officer Goh Choon Phong said at the results briefing: “We think at some point there’ll be a recovery, and we’ll be well positioned to tap the recovery with the growth and the partnerships that we’ve established within Asia and other parts of the world.”ws is that many still believe in the airline’s ability to do better, in spite of gloomy weather. Backed by a strong balance sheet, not many of its rivals have the privilege of believing still that the game is theirs to lose.

Boeing blues

Three months after the grounding of the B787-Dreamliner and while Boeing struggles to resolve the issue to get the plane back up in the sky, a new problem has landed on its lap – this time, concerning the B737 jets. The US Federal Aviation Administration has issued an airworthiness directive for more than 1,000 B737 planes operating in its airspace (which also applies in Canada) to be inspected for faulty tail pins that may have prematurely corroded, causing pilots to lose control of the plane.

The FAA said: “We are issuing this AD to prevent premature failure of the attach pins, which could cause reduced structural integrity of the horizontal stabilizer to fuselage attachment, resulting in loss of control of the airplane.”

It is a precautionary move, but likely a costly one for the airlines that have a large number of the B737 jets in their fleet, such as WestJet Airlines of Canada. Since the B737 is a short to medium-range aircraft, it is likely that regional airlines including cargo operators are likely to be the most affected. But safety is not something that you can or want to downplay in the business of flying.

This could not have come at a worse time upon the heel of a Lion Air crash into the waters, short landing at Bali’s Ngurah Rai International Airport in Indonesia just this week. Fortunately all passengers survived. There was no connection between the incident and FAA’s directive – the way that the grounding of the B787-Dreamliner was consequent upon sparks aboard a Japan Airlines plane initially suspected to be caused by the lithium-ion battery pack – and investigators have yet to establish the cause. It might even be extraneous to Boeing. Lion Air, which is Indonesia’s second largest airline and one of the fastest growing in the region, is banned from operating within the US and European Union over safety concerns.

Photo: Reuters/Stringer Indonesia

Photo: Reuters/Stringer Indonesia

But what came across as frightfully familiar was how the fuselage of the Lion Air plane broke apart, recalling similar mishaps experienced by four other airlines that include Continental Airlines in 2008, American Airlines in 2009, Aires Airlines (Colombia) in 2010 and Caribbean Airlines in 2011. Mind you, the B737 has been around since the 1960s and is a favourite plane for regional flights. It is in fact the best selling jet in the history of aviation.

Boeing will have much to do to repair its image. The aircraft business is dominated by two players – Boeing itself and Airbus, and the competition is such that for the bigger jets, the decision to buy which make and model usually comes down to either one of them. Aircraft orders can span several years, and timing is important.

Then, of course, as things settle, there is the looming question of compensation for downtime if Boeing is found to be contributory to its customer airlines losing out on opportunities. At least one airline – Qatar Airways – affected by the grounding of the B787-Dreamliner has publicly announced it will seek compensation from Boeing. Qatar chairman Akbar Al Baker said: “Definitely we will demand compensation. We are not buying airplanes from them to put in a museum.”