Singapore Airlines (SIA) is fighting to prevent travellers from switching to Emirates Airline, which is offering luxuries like on-board shower, while budget carriers are chipping away at the coach class. The result: The lowest yield from passengers in six years.

Yields, or the revenue earned from a passenger for flying a kilometre, was 10.6 Singapore cents in the year ended March, dropping from 11.2 cents a year earlier. That damped full-year net income to S$804 million, or about a quarter of what Emirates racked up in the same period.

South-east Asia’s biggest airline by market value is facing increasing challenges to retain customers as the Middle East carriers expand more into the region and about a dozen low-fare offerings seek to win business on short-haul routes from Singapore to resorts like Bali and Phuket. To fight back, Chief Executive Officer Goh Choon Phong, 52, has ordered more than US$10 billion (S$13.7 billion){ of new aircraft and formed alliances from Australia to India as Asia is poised to become the world’s biggest travel market in two decades.

“They’re being squeezed in many different fronts,” said Mr Shukor Yusof, founder of aviation consultant Endau Analytics in Malaysia. “The market dynamics have changed forever for Singapore Air.”

The national carrier on Thursday (May 12) reported fourth-quarter profit that lagged behind analyst estimates as losses from fuel-hedging countered gains from carrying more passengers during the Lunar New Year holiday season.

Net income jumped more than five-fold to S$224.7 million in the quarter ended March, the carrier said in a statement to the Singapore stock exchange after trading hours Thursday. Analysts estimated Singapore Air to report a profit of S$249.2 million. Sales at S$3.71 billion also missed estimates.

“The group is contending with a challenging operating environment in key markets, caused in part by weak economic activity and relatively rapid growth in capacity, evidenced by increasing promotional fare activity,” Singapore Airlines said in the statement. Booking in the current quarter “are tracking positively against seat capacity,” it said.

Singapore Airlines shares fell 0.2 per cent to close at S$11.63 before the earnings announcement in Singapore. The stock has gained 3.8 per cent this year, compared with a 4.8 per cent decline in the benchmark Straits Times Index.

HEAVY DISCOUNTS

SIA has had no choice but to discount “heavily”, sacrificing yields to fill more seats amid the rising competition, said Malayan Banking analyst Mohshin Aziz.

The parent airline carried 4.65 million passengers in the quarter, 2.9 per cent more than 4.45 million a year earlier. It filled 78.5 per cent of seats in the three-month period, compared with 76.1 per cent a year ago.

SIA has been looking to build alliances abroad as part of a multi-hub strategy. It partnered with India’s Tata Group to start Vistara in January 2015 and owns about 23 per cent of Virgin Australia Holding. The company’s Scoot unit also teamed up with Nok Airlines of Thailand to set up NokScoot.

SIA started flying its two Airbus Group SE 253-seat A350 aircraft to Amsterdam from May 9. The carrier will receive the ultra-long-range version of the plane in 2018 for services to New York, which will become the world’s longest non-stop flight.

SIA — the only Asian carrier to fly the Concorde and the first in the world to fly the A380 superjumbo — needs new passengers to stem the slide in earnings. Operating profit peaked eight years ago and sales reached a high in the year ended March 2009 as the global financial crisis crimped premium travel. The carrier is counting on cabin comforts to lure higher-end passengers used to its fully flat beds as well as more price-conscious customers.

Source:
courtesy of TODAY

by Today Online

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