A Brief History of Singapore Airlines Going Forward

Courtesy Bloomberg

The history of Singapore Airlines (SIA) dates back to the incorporation of Malayan Airways on May 1, 1947. The airline changed its name to Malaysia Airways in line with the formation of Malaysia in 1963. The entity splits into SIA and Malaysian Airlines System in 1972, seven years after Singapore left the Malaysian federation and became a nation in its own right. Then on SIA expanded quickly and became one of the world’s top airlines.

SIA established Tradewinds in 1975 as a regional carrier catering mainly to the leisure market. This was SilkAir’s predecessor as the airline looked beyond into the business segment and assumed its new identity in 1976. With the growth of budget travel, SIA partnered leading budget carrier Ryanair to set up Tiger Airways which commenced services in September 2004. Tiger underwent several changes over the years, performing below expectations. In the meantime SIA set up Scoot, a fully-owned budget subsidiary said to be targeting the medium (and now long-haul) while Tiger focused on the short-haul. The line soon blurred, and by the end of 2016, Tiger was assimilated into Scoot.

As SIA expanded as it grew, so did it reconsolidate by contracting as the aviation landscape shifted. The demise of Tiger was imminent when Scoot was formed, not only to extend the range of the budget operations but also to recapture ground lost by Tiger. The intra-competition that followed did not make much sense. The costly lesson from Tiger is that it can be hard to repair a badly tarnished image and easier to start a new slate.

Now, from four down to three, will there be further restructuring of the SIA stable?

Courtesy AFP

According to OAG, an air travel intelligence agency based in the UK, Scoot has overtaken SilkAir in the number of seats offered. The budget airline is also about a third as big as SIA in the economy market. And it is growing at a faster rate than its regional sibling. Besides, parent SIA looks set to refocus on premium travel, a move that some analysts believe to favour the expansion of Scoot, particularly when the line between budget and legacy airlines begins to blur across the industry.

This does not augur well for a carrier like SilkAir operating in the middle of the field. Since its inception, the so-called regional carrier has been operating in the shadow of the parent airline and continues to do so despite recent efforts to change that image. Does this forebode a merger between SilkAir and Scoot, going forward, although the former has time and again insisted it is not a budget airline? Can Scoot on the other hand be more than a budget carrier?

What’s in a name anyway? So says the Bard, a rose by any other name would smell as sweet.

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After the merger of Scoot and Tigerair, will it be Singapore Airlines and SilkAir next?

Courtesy Wikimedia Commons

Will Singapore Airlines (SIA) and its subsidiary SilkAir take the merger route of Scoot and Tigerair, now that their finance operations are merged, perhaps as a first step in that direction?

While SIA maintains that such initiatives are part of an ongoing programme to be more competitive, the speculation is only to be expected in the oontext of the company embarking on “a comprehensive review that leaves no stone unturned, cutting across all divisions of the company” as stated by its CEO Goh Choon Phong.

SlkAir started in 1975 as Tradewinds Charters which became Tradewinds Airlines in 1989 when scheduled services were introduced. Three years later, it was renamed SilkAir, shedding its leisure image and is often referenced as SIA’s regional arm.

However, in its long history, SilkAir hardly comes into its own, seen as operating in the shadow of parent SIA. Therefore, consolidating operations – finance, for a start – makes sense since some of the routes operated by SilkAir were previously operated by SIA and in light of SIA re-focussing its operations in the region. Besides, as the competition intensifies, a strong SIA brand across the region is imperative. There is no reason why a regional carrier so-called should be viewed as one providing services one notch below, an unfortunate perception that is difficult to shed.

At the height of the budget travel boom in the region, SIA launched Tigerair in 2003. Then there were already questions asked about the continuing operations of SilkAir which the company reiterated is a regional airline and not a budget carrier. Then Scoot came into being in 2012 as a medium haul budget carrier, differentiated from Tigerair’s short haul operations. It soon became clear the SIA Group was having one too many on its plate, resulting in intra-competition. Tigerair and Scoot finally merged under the Scoot brand this year.

Now that the number has been trimmed from four to three, will it be cut down further to two, typically the structure of most global airlines, between full-service and low-cost operations?

SilkAir may be likened to Cathay Dragonair, which Cathay Pacific has also insisted is not a budget but regional airline. But then, Cathay has never believed in adding a budget carrier under its wings. You might say that place is filled by Dragonair. By comparison, however, SilkAir’s status is somewhat ambiguous depending on how SIA delineates the geography as being regional or international.

Joon: Basic yet chic

Courtesy Air France

What’s basic yet chic? That, says Air France, is the design of the uniform for cabin crew of its new subsidiary airline, Joon. You can expect to serve flight attendants in trendy casuals that include blazers, polos, ankle pants and sneakers. Apparently it is Silicon Valley inspired.

A statement issued by Air France said: “Its visual identity is based on an electric blue colour code symbolizing the airline’s dynamic attitude, as well as the sky, space and travel.”

Believe it, the colour has much to do with the kind of image projected by the airlines. Targeting millennials, Joon moves away from the convention of a neutral and sedate hue for something more in line with the outgoing disposition of younger jet-setters.

Many years ago when Singapore Airlines (SIA) launched a regional carrier called Tradewinds, there was much ado about the crew uniform to project the more casual mood of leisure travel – something you might wear on a vacation. That changed when its successor SilkAir took over to target business travel and other more serious travellers as well.

Courtesy Scoot

But it is Joon that is going completely millennial, right down to white trainers.

Courtesy Air Canada

Meantime, Air Canada is going retro. Its maple leaf logo design returns to the airline’s look 24 years ago, incorporating the circle loop. Black replaces red in the letterings on the aircraft, and flight attendantswill match with black uniform highlighted with a red tie or scarf.

Looks like you either go hip or nostalgic if you want to make a statement.

And then there are three

From four to three (if you exclude SIA Cargo which will be absorbed as a division of the parent airline in 2018), Singapore Airlines (SIA) will now have three carriers in its stable as sister budget subsidiaries Scoot and Tigerair announced the completion of their merger come July 25, 2017. SilkAir, defined as a regional carrier, makes up the trio.

Both Scoot and Tigerair will henceforth operate under the Scoot brand. It seems logical, considering the poor reputation of Tigerair and the plans to expand Scoot into the long-haul. Unlike Tigerair, Scoot was launched as a medium-haul budget carrier.

The merger was long anticipated as the operations of the two carriers began to overlap with Scoot operating the short-haul as well. At the same time, loss-making Tigerair’s days were numbered as it struggled through a period of difficult times both financially and operationally, scarred with customer complaints of poor service.

While it certainly makes sense for the two carriers to eliminate intra-competition and pool their resources, it also opens the field for Scoot to expand its network. Already it is trailing behind Malaysian budget carrier AirAsia, whose chief Tony Fernandes is known to be testing new boundaries beyond the four-to-five hour limitation of the budget model. While AirAsia is not always guaranteed success, it has enjoyed headstart advantages.

Courtesy AirAsia

Scoot has announced a service to Honolulu by the end of the year, six months after AirAsia launches its service from Kuala Lumpur. Both carriers will operate via Osaka. It will be interesting to see how the competition plays out.

Scoot may be advantaged by its hub connections at Changi Airport while AirAsia will rely on its wide regional network to take advantage of Kuala Lumpur International Airport’s lower costs in a price-sensitive leisure market.

Scoot will benefit from the reputation of the SIA brand association, but somehow that has not rubbed off on the beleaguered Tigerair.

The competition is set to redefine the budget game as Scoot and AirAsia battle it out to be the region’s leading carrier not only for the short-haul but also beyond.

SIA re-incorporates fuel surcharge in base fare

sia-silkairSingapore Airlines (SIA) announced that fuel surcharges will from the end of March be incorporated in the base airfares. The policy, which also covers insurance surcharges, will apply to SilkAir as well.

As the global pressure to protect consumer rights mounts, aviation authorities are exhorting airlines to publish full fares so as not to mislead consumers and make it difficult for them to compare prices and arrive at an informed decision. Some airlines have been fined for misleading customers stating only the base fares. SIA said it is already advertising the full fares.

Virgin Australia was among the first very few airlines to announce it would not show the fuel surcharge as a separate cost but build it into the airfare way back in January 2015, at a time when the cost of oil was falling and there was public demand for airlines to similarly reduce the fuel surcharge. (See A conscionable call as oil price plummets: Will airlines reduce airfares? Jan 26, 2015)

The full surcharge was introduced as a way to pass on the cost to the consumer in the wake of rising oil prices, and falling fuel prices have made it quite unnecessary, even cumbersome. One wonders if this, having come a full circle, will change yet again when fuel prices rebound.

Singapore Airlines’ profit plunges

Courtesy The Straits Times

Courtesy The Straits Times

THE downward trend was to be expected as you followed Singapore Airlines (SIA)’s performance month-to-month for the second quarter (July-September) of its current financial year. The sluggish global economy, according to the airline, was largely to blame.

SIA’s operating profit declined 19.4% from last year’s S$98m (US$71m) to S$79m. Fortunately, the stronger first quarter boosted the result for the first half-year, with operating profit increasing 34.0% from S$206m to S$276m on declining revenue of S$343m and the contraction in passenger carriage by 3.2%. Yield as a consequence came down by 2.9%, and the passenger load factor of 78.1% was a drop of 1.9 percentage points. The saving grace was lower fuel costs by 25.2%.

Regional subsidiary SilkAir too suffered a decline in operating profit for Q2, down 19.0% from S$21m to S$17m.

Budget subsidiaries Scoot and Tigerair however managed to reverse their losses, respectively from a loss of S$2m to S$5m and from a loss of S$10m to S$3m.

Looking ahead, SIA hopes that the improved operating capability and efficiency of its growing Airbus A350 fleet as well as the long anticipated integration of Scoot and Tigerair (see The end draws near fro Tigerair, Nov 6, 2016) would improve its fortune as it continues to be impacted by geopolitical uncertainty and weak global economic conditions and faces the prospect of losing the cushion by lower fuel costs as oil producers cut back on their output.

However, if there’s any consolation, close rival Cathay Pacific too is experiencing a downward trend in profitability (see Cathay Pacific losing grip of China card, September 19, 2016 ).

Singapore Airlines reports declining passenger numbers

Courtesy Singapore Airlines

Courtesy Singapore Airlines

Singapore Airlines (SIA) carried 1.51 million passengers in September – lower than both last year’s 1.57 million and last month’s 1.61 million passengers. Consequently passenger load factor was down 2.1 percentage points from last year’s 80.8 per cent to 78.7 per cent. Rival Cathay Pacific may take some comfort there that the downward trend was not a unique phenomenon when it reported its own lacklustre performance recently.

Except for East Asia which retained a flat performance, all sectors reported declining passenger laod factors, worst of all for Europe (down 4,8 percentage points) followed by South West Pacific (down 2.7 percentage points). The weaker demand for Europe may be attributed to the uncertainty of the region’s economic and geopolitical situation, but noteworthy is the performance of South West Pacific when Qantas was bucking the trend with record profits. As recognized by SIA in its statement, “the landscape remains challenging.” Competition is a given; the real poser is whether rival airlines are closing the gaps.

The good news, however, is that except for the beleaguered budget carrier Tigerair, the other two subsidiaries within the SIA Group – SilkAir and Scoot – carried more passengers although the passenger load factor also fell. Both airlines carried less than their capacity growth, but it looks like the region closer home is where the business is thriving best for now. Looking farther down the line, the high point would be the performance of SIA’s non-stop services to the US.