Has SIA lost its way ?

[scooby5]

For example, it is frustrating that despite aggressive additions from CX, SQ has yet to add a single red eye service from Singapore to Hong Kong, not even with MI.

One might argue that CX's LCC is KA, given their own red-eye flight to Busan and other relatively short destinations. SQ's LCC, Scoot does the red-eye on the Group's behalf to HKG.

[flyguy]

SIA must come out with new routes soonest possible as it cannot afford to remain static as even a new route will take some time to develop and to be profitable. SIA have for the past couple of years, excess aircraft in the form of its 772s; and shouldnot wait for the new planes like the A350s to arrive in a year or two - and most of these new aircrafts are to replace its current older aircrafts like the 772s and 773s and some A333s by then.
SIA cannot depend on its LCC subsidiaries to develop their routes - and at the same time its two subsidiaries have been making heavy losses especially for Tiger and with excess aircraft. Even Scoot too is in the red and likely for a few more years to come and it have a very difficult task fron next year to find quite a number of new routes as its 20 787s are being delivered from the end of this year. At the same time, its also inevitable that Scoot and Tiger will cannibalised some of SIA's economy and leisure market; as they fly to the same cities that SIA flies too.
SIA's current CEO and management must step up to developing SIA - and not just by enhancing especially premium cabin products only.

[CarbonMan]

Indeed it should, flyguy, increase it's routes but it should do so in a smart way. Part of any measurement of success is the load factor. They need to ensure that whatever route they launch has to be firstly profitable, sustainable and has a good load factor and a possibility of growing it a number that makes it very profitable flying to over the longer term. There's a tremendous amount of fixed cost to starting a route and part of the problem is that SQ doesn't have the range of aircraft types to cater from low to high volume, but mid to high (if indeed there's such a gauge!). They can't test the demands so to speak by going conservative apart from utilizing MI or TZ for short/medium hauls. So if they currently want to go SEA or YVR, they have to mount a 77W. Sure, they can fly 3 times a week to start with but if you want to fill the premium cabins, where the margins are highest, it's best to have a higher frequency as they have a higher need fly when they want to fly.

The future will be more interesting when SQ gets more fuel efficient aircraft. They must already have an idea where they want to go with them. If fuel cost stays at current levels (or drop in the medium term), it should be bring about a lower threshold to enter new routes. IMHO.

[SQ228]

Indeed it should, flyguy, increase it's routes but it should do so in a smart way. Part of any measurement of success is the load factor. They need to ensure that whatever route they launch has to be firstly profitable, sustainable and has a load factor has the possibility of growing to a number that makes it worthwhile flying to. There's a tremendous amount of fixed cost to starting a route and part of the problem is that SQ doesn't have the range of aircraft types to cater from low to high volume, but mid to high (if indeed there's such a gauge!). They can't test the demands so to speak by going conservative apart from utilizing MI or TZ for short/medium hauls. So if they currently want to go SEA or YVR, they have to mount a 77W. Sure, they can fly 3 times a week to start with but if you want to fill the premium cabins, where the margins are highest, it's best to have a higher frequency as they have a higher need fly when they want to fly.

The future will be more interesting when SQ gets more fuel efficient aircraft. They must already have an idea where they want to go with them. If fuel cost stays at current levels (or drop in the medium term), it should be bring about a lower threshold to enter new routes. IMHO.

That's a pretty sound and even analysis. We often love to have "SQ should fly to..." threads on here, which I think is perfectly legitimate and a fun way to swap ideas. The reality, however, of finding 300 people every couple of days willing to buy a ticket so that you can sustain the route and frequency in a competetive and unpredictable market remains daunting. (Unless of course you are based in the Mid East where cash is constantly thrown at you from an external party to build an empire of routes and A380s without any acknowledgement of the word sustainable!)

[flyguy]

Understandably, but SIA have not had any new destinations for the past couple of years (not counting like SIA taking over Silkair route to Myanmar for example as that's like taking away from its subsidiaries and not new routes per se). In business, there's no such thing as for sure a new route will be profitable but they still have to develop new routes in order to expand and sustain. Originally SIA ordered the 787s which caries abt 250 pax and is good for new route development too - but then SIA decided against taking these 789s and giving it to Scoot - but later ordered another batch of bigger capacity 787s. Silkair cannot be used for all new route developments as they are restricted by its plane size and range beyond 5 hours.
On Mideast airlines having "money thrown to them" - well, but looking at their new destinations and loads, they are doing well. Even expanding Emirates flights in and out of SIN have very high load factor. Even Cathay have launched 2 or 3 destinations in the last to this year.

[Jumbojet Lover]

Originally SIA ordered the 787s which caries abt 250 pax and is good for new route development too - but then SIA decided against taking these 789s and giving it to Scoot - but later ordered another batch of bigger capacity 787s.

I had the impression that the 789s were meant to replace the B777-200ERs. Which could be why the refits took place so late, only after SQ was certain that the 789s were to be handed down to Scoot (so that Scoot can retire the old 777s and be an efficient competitor to the likes of Jetstar). While the bigger capacity 787-10s would presumably be used to replace B777-300s on regional routes.

I read somewhere that in the 90s, SQ had already recognized EK as a potential threat to their business. I wonder if any strategy was implemented by SQ to counter that. SQ has also lagged behind in on-board innovation in recent years.

I think it's not so much that SQ has lost it's way as the industry leader, but that other airlines have caught up and taken the lead, with SQ struggling to take on the competition. What SQ has been doing right previously is no longer enough.

[Dickson]

All the points everyone here raised only affirms my personal perception that SIA has lost its way. Whether you call it "SIA losing its way" or simply that some competitors have now gotten much beter, either way when I compare the quality of SIA's management decisions in recent years vs when Pillay was in charge years ago, my perception is that SIA is behind the curve.

Yes, launching new routes is risky and maybe the "strategy" is to just focus on increasing capacity in existing high yield routes like NZ, LHR and OZ. But then again, I look at CX and see how they're systematically launching new routes and increasing capacity on existing routes and I can't help but wonder if SIA is too conservative. I do recall that years ago, SIA routinely launches new routes but somehow after having failed in Las Vegas, Chicago, (anythng else?), it seems to have taken an ultra-conservative approach today.

Another symptom - what's SIA's "low cost" strategy? On the one hand, it has a significant minority stake in Tiger Airways, and when Tiger got into trouble in OZ, it essentially parachuted management in to turn around the ship. Today, this is still work in progress. On the other hand, probably deciding that its better to have 100% ownership in a low cost airline, it sets up Scoot. The impression I get is SIA is throwing darts to see what sticks.

Another symptom - choice of aircrafts.
"Originally SIA ordered the 787s which caries abt 250 pax and is good for new route development too - but then SIA decided against taking these 789s and giving it to Scoot - but later ordered another batch of bigger capacity 787s."

Another symptom - launch of Premium Economy. For years, SIA had been reluctant to try PE because of risk of cannibalization of its lucrative J loads. Until a major airline like CX showed that the needle can be threaded - it essentially managed to increase its "Y" yield, with minimal canibalization of premium "J" and "F" loads. With such clear evidence that PE can be launched as a sweet-spot, SIA now follows. Once again, behind the curve.

Another symptom : service offerings. It used to be that SIA offers inflight service even other airlines talk about. Nobody says that today. The gap has closed. SIA wasn't the first to have personal monitor in every Y seat - Emirates was the first. CX consistently offers caviar service on its First Class routes, eg: even on late night supper sectors for SFO-HKG flight. SIA offers caviar service only on selected First Class routes. Compare the menu offered on late night supper flights to OZ. SIA has scaled back the menu considerably in First and Business, essentially offering only a single main course which can be taken as supper or breakfast. CX still offers a supper and full breakfast. Of course, the "class beyond first" was initially a disaster since SIA hopes that Suites passengers will be willing to cough up additional money for merely improved hardware, without corresponding improvement in service offerings. And the website remains an embarrasment. And SIA has one of the slowest and stingiest Wifi offering among major airlines. If you're already charging a premium compared to other carriers, why not bundle "free Wifi" as a service enhancement to say, First class passengers?

I put all these together and can't help but feel that SIA is busy playing defense. Its busy coming up with tactics after tactics but I do not see a confident and winning strategy. Its still a great airline to fly and I'd have to say that the one thing SIA still has going for it is well-trained crew that offers CONSISTENT service, in general more consistently good compared to other major carriers. But this strength is also a legacy inherited from Pillay's management.

[Dickson]

Regional rivals swoop in on USA-Asia market

Source : http://www.straitstimes.com/premium/...t-sia-20140902

Regional rivals swoop in on gap left by SIA
Asian carriers rev up service to US after SIA axes non-stop flights there

By Karamjit Kaur Aviation Correspondent


Almost a year after Singapore Airlines (SIA) axed non-stop flights to the United States, rival carriers like Cathay Pacific and Korean Air have been boosting services and growing market share.

This has given other airports in the region an edge over Changi when it comes to Asia-US air links, said analysts.

"With the reduction in flights, there has been some impact on Changi as other airlines in other airports have added services to the US," said Mr Shukor Yusof of aviation consultancy Endau Analytics.

From 1.09 million one-way seats from Singapore to the US last year, SIA will offer an estimated 935,489 seats this year, based on data compiled by British aviation consultancy firm OAG.

Hong Kong's Cathay Pacific, on the other hand, will provide 1.11 million seats this year, up from 897,423 last year.

Four years after launch, SIA scrapped its non-stop services to Los Angeles and New York late last year due to weak demand and high fuel prices.

Today, it operates four daily flights to the US - one to Los Angeles via Tokyo, a service to New York via Frankfurt and two flights a day to San Francisco, via Hong Kong and Seoul.

SIA also flies five times a week to Houston, via Moscow.

The US market is important, said Changi Airport Group's spokesman Ivan Tan.

Even though it makes up less than 5 per cent of overall traffic, "it was essential for Changi to maintain and grow the Singapore-US sector due to important business trade links between the two countries", he said.

Changi will continue to work closely with airlines and other partners to encourage carriers to use Singapore as a stopover for their US flights, he added.

For example, the airport has worked with SIA and United Airlines on marketing programmes to promote stopover and transit via Changi, he added.

The airport has been working closely with Delta Air Lines, which rerouted its daily service from Minneapolis to Singapore via Tokyo, to leave from Seattle.

But more is needed, said experts.

Changi should try and convince Delta to fly non-stop between its hub in Seattle and Singapore, said analyst Brendan Sobie.

Such changes are needed, said analysts, because Changi Airport and SIA are facing increasing competition from Asia-Pacific and Middle Eastern rivals.

In April last year, Qantas stopped using Singapore as its hub for flights between Australia and Europe, choosing to stop over in Dubai instead as part of a partnership with Emirates.

For travellers like laboratory manager Tay Wanyi, 56, who still prefers to fly SIA when she travels to the US, mainly for work, the more links and flight options, the better.

She is prepared to pay a premium for better service and space.

"I believe that there are passengers like me who will be prepared to pay up to 50 per cent more than the standard economy fare for more spacious seats," she said.

karam@sph.com.sg

[Dickson]

I'd difficulty attaching this image in the report, so typed it out here :

Number of one-way seats to the USA :
2013 2014 %Change
United 2,325k 2,444k 5.2%
Delta 1,709k 1,801k 5.4%
Korean Air 1,514k 1,641k 8.4%
Cathay 897k 1,115k 24.2%
ANA 909k 995k 9.6%
SIA 1,093k 935k -14.4%

[259850]

The list does not include BR, which has significantly increased its US frequencies, and most of the flights are on the new 777-300ERs, with the older 747s being phased out. Transits in TPE are timed to match flights coming in from SIN and SGN. It is kind of sad, but it is faster to fly SIN-LAX on BR than on SQ.

But the reality is there's not much SQ can do for now. It is not economical for it to fly non-stop to the US with its current fleet. If only SIN were a couple of thousand kms further north....

[259850]

CX is expanding, but if you look at their recent results, it is at the expense of yields. Comparing the two, SQ may be more conservative in serving new markets, but it is more aggressive in fleet renewals. It is probably a reflection of the companies' natural strengths:

- CX can fly non-stop to any city in North America from its hub while SQ can't. CX is able to capture Chinese traffic (especially southern China) while SQ's catchment area (primarily Indonesia) is not quite as deep a market for international travel (let's face it, Guangdong alone is economically larger and more dynamic than Java).

- SQ can borrow at a lower cost, making hurdles for capex lower.

[flyguy]

SIA yields and most importantly its profitability have dropped fairly substantially than it used to be; and hence SIA's yields also have not been that good or much better than Cathay's. Although Cathay is just at the tip of China's Guangdong province, it doesn't necessarily mean that Cathay can easily capture the Chinese market - as one must know too that Cathay in fact faces significant competition from China's airlines and in particularly from China Southern which is based in Guangzhou some only 197km away from HK and China Southern do fly internationally to US, Australasia and Europe. And Cathay faces a lot more competition from the likes of China Eastern, Hainan air, Air China and a host of others.
In fact, SIA could do much more aggressive marketing to promote especially Southeast Asia and flying in passengers from Europe and Australasia to stop and transit in change as its is a very central hub to connect to the whole SEA and Indonesia which collectively even have a much larger population pool than Guangdong.

[259850]

SQ's strengths:
- Established brand name in premium travel.
- Hub is geographically well suited for capturing Australia-Europe route.
- Strong growth in regional markets (China, India, Southeast Asia).
- Changi is very business friendly.
- Due to Temasek ownership, ridiculously low borrowing cost.

SQ's weaknesses/challenges:
- Hub is useless for North American routes.
- Catchment economies can be cyclical (look at how the Indonesia market performed over the last two years).
- SE Asia is the region with the highest adoption of LCCs in Asia (LCC choice in SIN far superior to that in HKG, for instance).
- S$ has appreciated significantly against US$ over the last few years, making some operating costs higher.

Some thoughts:

- SQ cannot continue to offer its premium products and grow aggressively at the same time. In the long run, other than for some select cities (CGK, HKG, PER, PVG, PEK, ICN, NRT/HND, DEL, BOM), it should operate regional services under the MI brand. This means MI may have to take over some/all of SQ's current regional fleet (A330s, B772s). This is not a new concept - see how KA operates wide bodies to feed into CX. MI continues to achieve good yields, and operating costs are lower. Switching these routes to MI allows SQ not to dilute the image of its premium products. Of course, MI should become an associate member of Star Alliance.

- Think what it really wants to do with its LCC strategy. Not having one is not an option given how dominant LCCs have become in this region. TR's current problems are really due to poor management (rapid fleet expansion without considering competition). It doesn't mean LCCs cannot be profitable. Putting Mr Pillay as TR's chairman now shows SQ's resolve to fix the problem. It won't be easy but the way forward is to merge TZ and TR and make the combined airline a 100% subsidiary. It also needs to bring an experienced LCC executive from some other market to run the business. SQ's main contribution to this business will be cheap capital and ability to source aircraft/parts as a group. The last point is very important, as it cannot match AK's costs in other areas, but definitely can borrow at a few percentage points lower.

- Keep trying to get a proper hub for North American flight. Logically, the choice is PVG or PEK. Clearly, therefore, it has to be a G-to-G effort. SQ can't afford to fly FRA-NYC with a 380 forever.

[CarbonMan]

SQ's old time strategy has been to manage costs and maximise revenue. 20-30 years ago, this was achieved by holding payroll, controlling maintenance/usage costs by staying on newer planes. Payroll was relatively maintained by focusing on cheaper labour from within the region (ahem, M'sia) and Singapore's labour was also not exorbitantly high. Fuel costs was also reasonably cheaper. Fat margins were there for the taking, which allowed SQ to go beyond many other national airlines burdened with heavy union and political costs.

What is different today is that costs has gone up. Fuel costs, as we all know, jumped 4-5 times in the last 15 years. The cheap labour from up north is drying up, less kampong boys and girls now, and they are less attracted to work cheap as a "glamourous" inflight crew, travelling the world. But SQ has not been able to charge multiples from what they were charging from the good old days, especially with LCC's clawing away at the bottom. I remember paying S$650 for a BA Y SIN-SYD one-way in the early eighties (considered very cheap those days). You can still get the same or less today. To add to it, even the highly profitable SIN-KUL milk run disappeared. The point I'm making is that margins have collapsed, which gives SQ less room to be more generous in service, etc.

SQ also made some costly decisions that affected management and priorities also changed. Wrong fuel hedging. Killing PY on the 345s for all-J, only to have a financial collapse befall them. Politically too, the success of SQ became a lower priority to the importance of Changi as a major hub. Am sure many here have better memory on listing all of them.

The current environment is very, very different from the 70's to the early 90's. So the question is: why is EK able to offer the Residence over SQ's "pathetic" Suite? Why are they able to attract pax to stopover in that hot barren desert? IMHO (and many airline analysts), lower costs, cheaper funds. In the absence of a deep-pocketed sugar daddy, SQ needs to be much more clever at juggling its resources, and prioritise them to where it gives the best bang for the buck.

On SQ's side, I feel that they need to recover from the era of mistakes and take bold steps with the recognition (from their shareholders) that the air transportation industry is not a sunrise business, but a mature one. It needs interesting and risky ideas to re-make itself just as LCC's carved a slice of it for itself. A paradigm shift is in order: SQ needs to ask itself if it is just an airline or a premium transportation facilitating the needs of both holiday makers as well as business travellers, or something else.

[259850]

SIA yields and most importantly its profitability have dropped fairly substantially than it used to be; and hence SIA's yields also have not been that good or much better than Cathay's. Although Cathay is just at the tip of China's Guangdong province, it doesn't necessarily mean that Cathay can easily capture the Chinese market - as one must know too that Cathay in fact faces significant competition from China's airlines and in particularly from China Southern which is based in Guangzhou some only 197km away from HK and China Southern do fly internationally to US, Australasia and Europe. And Cathay faces a lot more competition from the likes of China Eastern, Hainan air, Air China and a host of others.
In fact, SIA could do much more aggressive marketing to promote especially Southeast Asia and flying in passengers from Europe and Australasia to stop and transit in change as its is a very central hub to connect to the whole SEA and Indonesia which collectively even have a much larger population pool than Guangdong.

True, SEA has a larger population pool than Guangdong, but middle class size in southern China is just much much bigger (if you draw a 3 hr radius around HKG, you also have cities like CTU, CKG and KMG. I'm leaving out PVG as it is well connected internationally. CAN and SZX are near HKG but CZ/MU/CA/HU are not a good competition to CX other than at very low yielding prices). Also, in terms of economic dynamism, SEA doesn't quite match up.

SQ has suffered on yields and profitability, but so has CX. It is a function of fuel costs and badly timed fleet expansion more than anything else.