Will Singapore Airlines, competing with United Airlines, have the last laugh?

Courtesy Getty Images

Two years ago, United Airlines stole a march on Singapore Airlines (SIA) when it launched a non-stop service between Singapore and San Francisco four months ahead of its rival.

Then it did it again last year when it started flying non-stop between Singapore and Los Angeles while SIA awaits delivery of an ultra long range jet to ply the route probably by next year. However, this second service, barely a year old, will cease operations at the end of October.

It looks like good news for SIA, but is it really?

It seems United might have sprinted too soon only to lose stamina to sustain the race. Yet it is anyone’s guess as to when the timing is right, and United stood to gain first-mover advantage, benefitting from the early start to build up brand loyalty.

Courtesy Reuters

SIA itself used to fly non-stop to Los Angeles and New York before the flights, introduced in 2004, were suspended in 2013 because of poor yields against the backdrop of a declining world economy and unfavourable fuel prices.

But things have since changed – the global economy has recovered from the 2007/2008 financial meltdown, fuel prices have steadied, and more fuel-efficient aircraft are reviving interest in the ultra-long range.

A big problem faced by airlines though is anticipating the change and making timely adjustment, failing which may mean lost opportunities or sunk costs depending on how the market is trending.

If there is a lesson that United has learnt from operating the non-stop Los Angeles run, it is the constant need to re-strategise. In terminating the service, it is hoping to replace it with a second non-stop San Francisco service, thus upping the ante in competition with SIA.

United said in a media statement that the changes were in response to “customers’ desire for alternative departure and arrival times.”

Travellers will now have a choice of three non-stop flights between Singapore and San Francisco, the number leaning in favour of United which is said to be also offering cheaper fares. While SIA, having earned the reputation as one of the world’s best airlines, will leverage on its superior service, the pressure on fares cannot be ignored.

Clearly, both airlines, which are Star Alliance partners, are not thinking of end-to-end traffic alone. Certainly in the case of SIA, the sole Singapore market will not have the volume to support the operations. Connecting traffic therefore is a key component.

In this respect, United boasts an extensive domestic network in the US and numerous connections to other cities in North and South America. For SIA, Changi Airport is the region’s major hub.

The game plan is explicit in the words of United’s senior vice president Worldwide Sales Dave Hilfman when he said at the launch of the Los Angeles service: “United is making travel to Singapore easier and even more convenient than ever before and customers arriving in Los Angeles will have multiple opportunities to connect to hundreds of United destinations in the US, Canada and Latin America.”

As United wraps up its Los Angeles operations, the main driver for its San Francisco service remains unchanged.

SIA CEO Goh Choon Phong expressed the same sentiment when he announced plans to once again fly non-stop to New York in October ahead of the Los Angeles service. He said that “the flights will help boost connectivity to and through the Singapore hub.”

Rivalry between SIA and United is expected to intensify. The US has been traditionally a strong market for SIA, and United is the leading American carrier in Asia. But it would be a mistake to think that the competition is confined to only these two airlines as many Asia-Pacific carriers are also well connected directly to the US.

When SIA suspended its non-stop New York services in 2013, Cathay Pacific filled that void with connections out of Hong Kong.

With more ultra-long range services connecting major cities directly, airlines thriving on connecting traffic such as SIA will be challenged to make it worth the traveller’s while to fly via their home ports to the final destinations.

Mr Goh said at the recent annual meeting of the International Air Transport Association in Sydney that SIA was looking into more non-stop services to other US destinations. Besides New York, Los Angeles and San Francisco, the airline currently also serves Houston via Manchester in the UK.

This will set the stage for a different ball game altogether if SIA moves increasingly to feed directly into US destinations, chipping away at United’s domestic strength. The question is whether there is enough load to justify more non-stop flights.

In tandem, SIA is said to be reassessing its stopover flights to the US, but it is unlikely it will skip stopovers altogether in favour of non-stop flights. While it is true that some passengers may prefer a break in their long journeys to get off the plane and stretch their legs, SIA is also able to tap into the traffic that originates or ends at stopover airports. It therefore makes economic sense to continue operating some flights via Hong Kong, Taipei, Seoul and Tokyo.

United’s cessation of the Los Angeles-Singapore service will not deter SIA from mounting a similar non-stop flight, although New York takes precedence when the new Airbus A350-900ULR aircraft joins its fleet in September. What SIA has now is lead time to build up demand for the service. On the other hand, if United succeeds in mounting a second non-stop service to San Francisco and it becomes a threat, this may hasten plans for an earlier launch to promote Los Angeles as an alternative gateway to the US.

Where United has failed, SIA may succeed since it had been down that road before. Only then can SIA confidently have the last laugh.

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United Airlines steals a march on Singapore Airlines

Courtesy Alamy

Courtesy Alamy

United Airlines has stolen a march on Singapore Airlines (SIA) when it announced its launch of a non-stop service between San Francisco and Singapore in June. This will be the first non-stop service between Singapore and the United States after SIA terminated its services to Los Angeles and New York in 2013. United`s announcement came soon after SIA made known its plans to resume non-stop services in 2018, if not earlier in 2017.

You may wonder why United has moved so quickly to fill the void left by SIA when the poor loads experienced by the latter contributed to its suspension of the non-stop services. Apparently the passenger traffic between the two markets has since improved and is growing by an average of 4 per cent annually. Of course, this is good news for Singapore Changi Airport, which is hoping that United could potentially bring more tourists to Singapore. Understandably, it does not matter which airline brings in the load. And since it is believed that capacity will help grow the traffic, then United has made the right move while SIA waits. The business climate changes so fast that the right time is as good as anybody`s guess.

For SIA, it is an opportunity cost. Or, an opportunity lost. When it terminated its non-stop services to New York, regional rival Cathay Pacific moved in quickly to fill up the void, flying non-stop between Hong Kong and New York. That also pits Hong Kong International Airport, which is only some four hours away from Changi, as an Asian gateway for onward connections. It also provides opportunities for Middle Eastern airlines, notably Emirates, Qatar Airways and Etihad Airways, to better compete to carry more traffic through their Gulf hubs as they expand their connections within Asia and services direct to the US.

Changi`s euphoria over United`s decision is understandable, since connections are key to hub operations. With a non-stop link between Singapore and San Francisco, it will mean more regional traffic feeding into Changi to take advantage of the trans-Pacific connection and the support of United`s extensive network within the US. United vice-president of Atlantic and Pacific sales Marcel Fuchs said: “Those arriving in San Francisco will have dozens of options to connect to other cities across the Americas.” Changi Airport Group senior vice-president for market development Lim Ching Kiat echoed the same sentiment, adding that it will strengthen Changi’s position as the preferred gateway between South=east Asia and North America.

United’s domestic network may be its edge over SIA when the time comes for the latter to mount its planned non-stop services. But SIA can always rely on its partnership links with US carriers such as JetBlue, not excluding too United which is a Star Alliance partner. And SIA has always competed on the strength of its superior service. For the long haul, especially for one that flies such a great distance, it is an important customer consideration.

United’s non-stop flight from San Francisco to Singapore is an estimated 16-hour-20-minute journey. Singapore’s erstwhile non-stop flight in the same direction but from Los Angeles to Singapore clocked 17 hours 30 minutes, and from New York (Newark) non-stop to Singapore, 18 hours or longer. United will be flying the B787 Dreamliner for the new non-stop route. In the past, SIA was operating the Airbus A349-500 but will be converting seven of 63 A350-900s on order to the A350-900ULR variant for the resumed services – the reason for the delayed plan. Referring to the new variant aircraft at the time of its announcement to resume the services, SIA chief executive Goh Choon Phong said: “We are pleased that Airbus was able to offer the right aircraft to do so in a commercially viable manner.”

Perhaps too, little did SIA suspect that United would spring ahead to operate its service using the Dreamliner. According to travel magazine Conde Nast, the Boeing 787 could possibly be the most comfortable aircraft by far to travel the ultra-long distance of 8,446 miles, said to be designed to limit jet lag. Among the reasons cited: the 787 has a better air filtration system and more humidity than comparable planes, so you’re less likely to land with chapped lips or dried skin and nasal passages; the windows are larger so the cabin looks brighter and roomier; and the ride is promised to be smoother and quieter. United vice-president Ron Baur said: “Our passengers will arrive less fatigued, and most experience a significant reduction in jet lag,”

We will have to wait to see what SIA has up its sleeves. There may be surprises yet. SIA’s previous services were configured as an all-business-class flight, and while the target market is still very much corporate and business travellers, SIA is not revealing details about how many seats the new business class cabin will have. However, weight limitations are likely to suggest more leg room, if not fewer seats.

High fuel costs were a major reason why SIA suspended its previous non-stop operations. Fortunately for United, today`s low oil price favours its early move and affords the American carrier precious lead time to consolidate its market. Until SIA resumes its non-stop operations, the game belongs to United.

This article was first published in Aspire Aviation titled “United Airlines vs Singapore Airlines: The race for non-stop US-Singapore connections”.