How Covid-19 is changing the way we fly

https://www.todayonline.com/commentary/how-covid-19-way-we-fly-airline-SIA-Scoot-airport-travel

A bleak year for airlines

It looks quite certainly a bleak year for airlines as Covid-19 keeps people away from travelling. The outbreak has become more extensive than anticipated, short of being classified as pandemic by the World Health Organization.

Cutting capacity

Many airlines are cutting back or suspending services not only to destinations in China where the outbreak started but also across the world.

Among them are:

Courtesy Singapore Airlines

Singapore Airlines, which has cancelled almost 700 flights across its network through to May. Its low-cost subsidiary Scoot has cancelled all flights to China.

Cathay Pacific, which so far has seen flights reduced by more than 75 per cent till the end of March, with hints of more to be scrapped.

Qantas, which has reduced capacity to Hong Kong and suspended flights to Shanghai and Beijing. It is also reporting weak demand for seats on flights to Singapore and Japan as well. Capacity to Asian destinations will be reduced by 15 per cent until the end of May. Its low-cost subsidiary Jetstar is also adjusting capacity as a result of the weaker domestic market.

Air France, which has taken out flights to China until the end of March.

British Airways, which has cancelled not only flights to China but also more than 200 flights from London to destinations in the United States, Italy, France, Austria, Belgium, Germany and Ireland in the latter half of March.

Ryanair, which will cut up to 25% of flights in and out of Italy from 17 March to 8 April..Ryanair chief Michael O’Leary said: “There has been a notable drop in forward bookings towards the end of March, into early April.”

EasyJet, which is cancelling some flights because of “a significant softening of demand and load factors into and out of our Northern Italian bases”.

United Airlines, which has suspended flights to China and axed flights to South Korea, Japan and Singapore as demand across the Pacific has fallen by as much as 75 per cent. Delta Air Lines has also cancelled flights to China.

Air Canada, which has cancelled all flights from Toronto to Hong Kong until the end of April.

Middle-east airlines, which are affected by action taken by the Gulf authorities. Iran as the epicentre of the outbreak in the region has seen flights to its airports cancelled by neighbouring United Arab Emirates (UAE), Bahrain, Oman, Jordan, Kuwait, Iraq and Saudi Arabia.

Events cancelled

The threat of the disease spreading easily at public events has led to many of them being cancelled, which in turn will affect the airlines which would have enjoyed a boon in carriage numbers.

Courtesy United Airlines

United Airlines for one has scaled back additional flights between San Francisco/Newark and Barcelona planned for the Mobile World Congress which has been cancelled.

Now all eyes are on the 2020 Summer Olympics to be staged in Tokyo.

Business travel, as noted by British Airways chief Willie Walsh, has been affected by the cancellation of large conferences. Some large corporations are also restricting executive travel.

International cruises, which pose a similar threat following the outbreak of the disease on the Diamond Princess docked at Yokohama, have also suffered from reduced patronage or cancellations, and this in turn reduces feeds from airlines from across the globe to the ports of call.

Reduced profitability

Expectedly airlines are predicting reduced profitability although some of them are optimistic about the impact as not being as drastic as it seems.

Air France-KLM warned its earnings would be affected by as much as €200 million (US$224 million).

Qantas said the COVID-19 outbreak would cost the airline up to A$150m (US$99m).

Air New Zealand expects the impact to be in the range from NZ$35 million (US$22 million) to NZ$75 million as travel demand to Asia drops.

Finnair is expecting a significant drop in operating profit this year.

Airlines which rely heavily on Asian traffic are naturally more affected, even more so budget carriers such as AirAsia and its long-haul arm AirAsiaX. Particularly vulnerable are airlines which are struggling to stay afloat, such as Norwegian Air Shuttle, which is cutting back on long-haul operations, and Hong Kong Airlines, which is 45 per cent owned by Hainan Airlines of the HNA Group, which itself is facing a sell-off by the Chinese government.

Cost cutting

Besides reducing or cutting capacity, expectedly many airlines are looking at cutting cost.

EasyJet is looking into reducing administrative budgets, offering unpaid leave, and freezing recruitment, promotion and pay rises.

Singapore Airlines is implementing paycuts of 10 to 15 per cent for senior executive management. General staff will be offered a voluntary no-pay leave scheme.

Cathay Pacific is asking employees to take unpaid leave.

Courtesy Airbus

Perhaps the impact is most felt at Hong Kong Airlines which has slashed in-flight services to a bare minimum and dismissed staff, targeting 400 of them.

What’s next?

While the industry contnues to grapple with the prolonged saga of the B737 Max jet predicament, the coronavirus outbreak could not have come at a worse time on its heels. In both cases, it is the uncertainty that poses the biggest problem. Soem airlines are pessimistic that the threat will blow over by the end of March, which is unlikely, while others are more cautious in their forecast, looking at the end of May. It is this uncertainty that makes one wonder if any of them might not survive the wait.

Singapore Airlines’ third quarter performance: Silver lining before the clouds darken

Courtesy Singapore Airlines

Singapore Airliners (SIA)’s double-digit profit growth for the third quarter (October to December 2019) is a silver lining before the clouds darken.

SIA posted a 3Q operating profit of S$413 million (US$297 million) – S$44 million or 12 per cent more than the same quarter a year ago. This gives a 9-month total of S$878 million which is 13 per cent short of the full FY 2018/19 profit of S$991 million Of that, 4Q contributed 21 per cent.

The question is whether SIA can match last year’s performance in the current situation with the dip in global travel because of COVID-19.

SIA has cancelled almost 700 flights to destinations not only in Asia but also in the United States, Europe, Australia and New Zealand, and Africa and West Asia. Some flights are suspended from February with others taking effect in the months following until May.

The full impact of the cancellations will not be felt in FY2019/20 which nevertheless will be impacted by present and continuing dip in demand.

In particular, China is a large market for SIA and its low-cost subsidiary Scoot, which has cancelled all flights to China. SilkAir which will in time be merged with the parent airline has also drastically reduced its services to China.

SilkAir’s 3Q performance was flat, posting an operating profit of S$7 million. The airline’s capacity has been impacted by the grounding of the B737 Max jet.

Scoot posted an operating profit of S$4 million for 3Q 2019/20. In light of its reliance on the China business, it is not likely to fare any better in the last quarter.

Of course, SIA is not alone in this unfortunate situation. Other airlines such as Cathay Pacific, Malaysia Airlines and Royal Brunei Airlines have also cut back services to cope with reduced demand. In the case of Cathay, capacity has been reduced by as much as 40 per cent.

It is during times like this that confidence is most needed. SIA is optimistic that the airline is “well-positioned to weather current challenges posed by COVID-19 outbreak” according to its statement released on February 14.

What’s behind the partnership between Singapore Airlines and Malaysia Airlines?

This article was published in Today on 26 November 2019

https://www.todayonline.com/commentary/whats-behind-partnership-between-singapore-airlines-and-malaysia-airlines

Protecting the consumer rights of air travellers

This article was published in Today, 25 October 2019.

https://www.todayonline.com/commentary/protecting-consumer-rights-air-travellers

Can AirAsia save Malaysia Airlines?

Courtesy Reuters

Back in March, AirAsia chief Tony Fernandes said he was not keen on acquiring Malaysia Airlines (MAS).

This came amidst speculation of a likely scenario when Malaysian Prime Minister Mahatir Mohamad mulled over the future of the beleaguered flag carrier, suggesting it might be better off sold if not downsized or expanded as the case may be with a change of management.

Dr Mahatir said: “Although we hired foreign management, MAS still faced losses. Therefore, one of the options is to sell.”

Four turnaround initiatives without success had apparently cost the government MYR250 billion (USD 6.05 billion).

Recent events have led to renewed speculation of AirAsia’s interest. Former AirAsia Group Bhd non-executive chairman Pahamin Rajab is said to have met Dr Mahatir. However, it might well point to Mr Pahamin’s personal interest eyeing the top job at Malaysia Airlines following the resignation of Tan Sri Mohammed Nor Md Yusof as chairman.

But if the acquisition does come about, it would be an interesting case of how a budget carrier came to assimilate a larger national carrier. AirAsia, once itself heavily indebted, had become Asia’s leading budget carrier.

There are clear benefits of such a merger. The two carriers can complement their networks and not compete as rivals on the same routes given AirAsia’s ambition to expand into the long-haul market, unless the products differ substantially in their make-up. This can be modelled after the likes of Singapore Airlines-Scoot and Qantas-Jetstar complement.

The execution is key. The industry has seen one too many examples of assimilation by a legacy carrier of a low-cost operator. For AirAsia, the big question must be one of how its operating culture will mesh with that of MAS, noting in particular that its success lies in the austere budget model although this does not imply it is not inclined to be service-bias.

One can’t help but wonder how and why MAS has failed to change in spite of earlier initiatives at restructuring, so much said about cost-cutting and perhaps not enough focus on the operating culture. So can AirAsia work the magic?

But, of course, only if Mr Fernandes wanted it. He had said: “For low-cost carriers to go full-service… is a mistake.” He had also called Malaysia Airlines “old-fashioned”. For him, the priority is to transform AirAsia into a “travel technology company”. In his words, to be “more than just an airline”.

The real question then is: Is MAS ready for the transformation?

2019 Skytrax World Airline Awards: Who are the real winners?

It’s that time of the year when the airline industry is abuzz with the Skytrax World Airline Awards announced recently at the Paris Air Show.

There are surveys and there are surveys, if you know what I mean. Skytrax, which launched its survey back in 1999 (according to its website) is generally viewed with some regard. It is said that more than 21 million respondents participated in the 2019 survey.

But what can we read of the results?

Which is the real winner: Qatar Airways or Singapore Airlines?

Qatar Airways switched places with last year winner Singapore Airlines (SIA) to be the world’s best airline.

As far back as 2010 until now, the two airlines have been ranked one behind the other in the top three spots, except in 2012 when Asiana came in second place between Qatar the winner and SIA in third position. In the ten year period, SIA came behind Qatar in eight years, except in 2010 when SIA was second and Qatar third, and last year when the Singapore carrier became the world’s best ahead of Qatar in second placing.

It looks like a tight race between Qatar and SIA for the top spot, and going by the survey results, Qatar has outranked SIA. It has become the first airline to have won the award five times, one more in the history of the awards.

But SIA is still ranked ahead of Qatar for first class and economy class.

In the first class category, Qatar is not even a close second to SIA in first placing but fifth behind Lufthansa, Air France and Etihad as well

In the economy class category, Japan Airlines is tops followed by SIA and Qatar in second and third placing respectively.

Besides SIA has the best premium economy in Asia, second only to Virgin Atlantic worldwide. But,of course, Qatar does not offer that class of travel.

Additionally SIA tops for cabin crew, and Qatar is farther down the list in 9th position.

But Qatar wins for business class, followed by ANA and SIA in second and third placing respectively. So it seems there is heavier weightage for this segment which has become probably the fiercest battleground for the airlines. First class included, it also suggests the halo effect of the premium product, but it is the business class that is the primary focus in today’s business.

It also attests to the impact of the recency factor. Qatar obviously impresses with its cubicle-like Qsuite that comes with its own door to provide maximum privacy. Quad configurations allow businessmen to engage in conference as if they were in a meeting room and families to share their own private space. And there is a double bed option.

Which brings up the importance of having to continually innovate and upgrade the product to stay ahead in the race.

The top ten listing: Consistency equals excellence

The ranking does not shift much from year to year. Besides Qatar and SIA, there are some familiar names: All Nippon Airways (3rd this year), Cathay Pacific (4th), Emirates (5th), EVA Air (6th) and Lufthansa (9th). So there is not much of a big deal as airlines switch places so long as they remain in the premier list.

Hainan Airlines (7th) is making good progress, moving up one notch every year since 2017. Qantas (8th) is less consistent, moving in and out of the top ten list, Thai Airways retained its 10th spot for a second year.

It is no surprise that the list continues to be dominated by Asian carriers which are generally reputed for service. You only need to look at the winners for best cabin crew: Besides SIA, the list is made up of Garuda Indonesia, ANA, Thai Airways, EVA Air, Cathay Pacific, Hainan Airlines, Japan Airlines and China Airlines. With the exception of Qatar, no other airline outside Asia is listed.

If you to look to find out how the United States carriers are performing, scroll down the extended list of the 100 best and you will see JetBlue Airways (40th), Delta Air Lines (41st), Southwest Airlines (47th), Alaska Airlines (54th), United Airlines (68th) and American Airlines (74th).

Home and regional rivalry

Rivalry between major home airlines or among competing regional carriers is often closely watched.

Air Canada, placed 31st ahead of rival WestJet at 55th can boast it is the best in North America. That’s how you can work the survey results to your advantage.

ANA (3rd) has consistently outdone arch rival JAL (11th). In fact, ANA has been the favoured airline in the past decade till now. It has Japan’s best airline staff and best cabin crew. Across Asia, it provides the best business class. Internationally, it provides the best airport services and business class onboard catering.

Asiana (28th) is favoured over Korean Air (35th ).

The big three Gulf carriers are ranked Qatar first, followed by Emirates (5th) and Etihad (29th).

Among the European carriers, Lufthansa (9th) leads the field, followed by Swiss International Air Lines (13th), Austrian Airlines (15th), KLM (18th), British Airways (19th), Virgin Atlantic (21st), Aeroflot (22nd), Air France (23rd), Iberia (26th) and Finnair (32nd).

What about low-cost carriers?

Worthy of note is how some budget carriers are ranked not far behind legacy airlines. AirAsia (20th) is best among cohorts. EasyJet (37th) and Norwegian Air Shuttle (39th) are not far behind the big guys in Europe. Among US carriers, Southwest Airlines (47th) is third after JetBlue (40th) and Delta (41st).

Also, pedigree parents do not necessarily produce top-ranked offshoots. Placed farther down the list are SIA’s subsidiary Scoot (64th) and the two Jetstar subsidiaries of Qantas – Jetstar Airways (53rd) and Jetstar Asia (81st). So too may be said of so-called regional arms. Cathay Pacific’s Cathay Dragon is ranked 33rd, but SIA’s SilkAir is way down at 62nd.

Pioneer of the modern budget model Ryanair is ranked 59th.

Down the slippery road of decline: Aisana Airlines and Etihad Airways

If it is difficult to stay at the top, it is easy to slip down the slippery road of decline. Asiana and Etihad are two examples.

Asiana was ranked world’s best airline in 2010 and became a familiar name in the top ten list up to 2014, after which its ranking kept falling: 11th (2015), 16th (2016), 20th (2017), 24th (2018) and 28th (2019). Its erstwhile glory has been whittled down to being just best cabin crew in South Korea.

Etihad did reasonably well for eight years until 2018 when it was ranked 15th, and a year later suffered a dramatic decline to the 29th spot. That, despite beating Qatar to be this year’s best first class in the Middle East.

As I stated at the onset that there are surveys and there are surveys. Some are not specifically targeted , whether its interest is business or leisure for example. There is always an element of subjectivity and bias in the composition and weightage, and this renders no one reading as being definitive. At best, we can read across several creditable surveys to know with some conviction how the airlines really measure against each other.

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https://www.todayonline.com/commentary/can-singapore-airlines-overtake-qatar-worlds-best-airline