DECEMBER 2017 AUSTRALIAN AVIATION 39SIA SUITES
help improve the profitability of its
A380 operations.
“SIA is obviously hoping the
higher revenues generated by the A380
fleet offset the A380’s relatively high
operating costs and the investments
in the new products,” Sobie said in a
research note dated November 6.
“SIA’s A380 operation should
generate 14 per cent more available
seat kilometres (ASK) once the retrofits
are completed, driving a two per cent
to three per cent increase in total ASKs
for SIA.
“While this may not seem
significant it will enable SIA to resume
capacity growth after a period of
capacity reductions.“
SIA’s A380s operate on 12 routes.
While most are year-round, some
destinations such as Melbourne, Osaka
Kansai and Auckland are seasonal.
Further, there are a number of routes
- Sydney and London Heathrow are
two examples – that feature both the
379-seat and 441-seat variants.
Sobie said having one 471-seat
layout across the entire fleet of A380s
made sense given a fleet of just 19
aircraft.
Further, the new A380 layout was
“much more efficient” than what is on
board currently.
“Splitting the A380 fleet into two
configurations has created challenges
for SIA, particularly during periods
of heavy maintenance and unexpected
service disruptions,” Sobie said.
“The new cabin products on the
A380 fleet reinforce SIA’s premium
position and enable the airline to
continue offering among the best
premium products in the industry
despite intensifying competition.
“However, the products are also
practical and efficient, enabling SIA
to make better use of space at a time
profits are increasingly coming under
pressure.”
Sensible though it may be, routes
such as Singapore-Zurich and
Singapore-Frankfurt-New York JFK
will experience an increase in economy
seats of about 40 per cent as they
transition from 379-seat A380s to the
new configuration.
Goh said the 379-seat layout was
the result of “incremental changes
in the cabin” such as the addition of
premium economy and described the
configuration as “not quite ideal”.
“It wasn’t optimised across the fleet
so if you ask me, that was actually
undersized,” Goh said.
SIA MAKES PROGRESS ON
TRANSFORMATION
The A380 cabin upgrades come at a
time where SIA, and others, continue to
battle the rapid international expansion
of Chinese airlines and the ongoing
threat from Middle East carriers offering
long-haul to long-haul connections
through their hubs which have bitten
into previously lucrative markets. And
in Asia, low-cost carriers (LCC) have
won passengers happy to pay lower
fares for a no-frills product on short- and
medium-haul routes.
As part of efforts to adapt to this
new environment, SIA established
Scoot to capture a slice of the growing
low-cost long-haul market. Scoot
recently merged with short-haul LCC
Tigerair Singapore and the combined
entity now operates under the Scoot
brand.
And earlier in 2017, SIA said it had
established a transformation office to
conduct a wide-ranging review of the
airline group’s network, fleet, product
and service, as well as organisational
structure and processes.
While it is still early days, there are
signs the Star Alliance member may be
weathering the storm, with net profit
for the six months to September 30
2017 up 32 per cent at S$425
million (A$407 million), compared
with S$321.5 million in the prior
corresponding period.
The result was boosted by an
improvement in operating profit from
the Singapore Airlines operation,
as well as from SIA’s cargo and
engineering units.
Singapore Airlines’ revenue
passenger kilometres (RPK) rose 3.4
per cent in the half, while capacity
measured by available seat kilometres
(ASK) eased 0.1 per cent. As a result,
load factors improved 2.8 percentage
points to 80.9 per cent. Yields, a
measure of average airfares perpassenger, fell 1.9 per cent.
“Unfortunately, yields continue to
decline,” SIA senior vice president for
finance Stephen Barnes said during
the company’s November 8 results
briefing, according to a transcript of the
presentation released to the Singapore
stock exchange.
“To the extent that if there is any
silver lining in that, the decline is
at a slower pace than we’ve become
accustomed to seeing.”
However, operating profit declined
at regional wing SilkAir and low-cost
carrier Scoot.
Goh said the airline’s transformation
program, which involves more than 60
projects, had already achieved some
early goals, including the move to a
new revenue management (RM) system
that has allowed the airline to be “more
nimble” in its pricing.
“Some of the results are coming
through, not in full yet, but some
results are coming through,” Goh said.
“First time in, since 2013, we are
actually seeing growth in terms of
flown revenue for first half, not total
revenue, but flown revenue, which is
important because this is really the
revenue you get from selling tickets to
our customers.”
In terms of making the organisation
more efficient in its day-to-day
operations, Goh said the company on
November 1 implemented an approvals
process that required no more than
three levels of review to get the final
go-ahead.
“That would definitely cut down a
lot of decision-making, bureaucratic
processes and ensure that we are a lot
more effective and prompt,” Goh said.
“This is really just the beginning,”
he said of the transformation plan.
“It’s only about since May that we
formally launched it. There is a lot
more that we are doing.”
In terms of the outlook, SIA said
in its results presentation there were
still “headwinds” in the market as
competitors mounted significant
capacity in key markets, with yields
continuing to be under pressure, despite
some stabilisation in recent months.
“It’s fair to say that going forward,
we are still seeing the demand, but we
are also seeing more capacity being
added,” Goh said at the results briefing.
“How that is going to balance out is
something that we have to watch very
closely, but we do now have a better
tool in the form of the RM system.
Plus also a more nimble organisation in
response to pricing in the market.”SIA chief executive Goh Choon
Phong chats with one of the
100-odd international journalists
invited to the official launch in
Singapore. Goh commenced as
chief executive in January 2011.
ANDREW WEST/SIAEconomy class features an 11.1in
touchscreen IFE monitor that
removes the need for a separate
handset. Note the rectangular
NFC reader on the left side just
above the table.ANDREW WEST/SIA