AT a time where Gulf Airlines such as Emirates and Etihad are stepping up their luxury features at affordable prices, other full-service airlines in Asia are feeling the pinch.
And Singapore Airlines is feeling the brunt of it – the airline recorded a “surprise loss” for the first time in three years with stocks plunging as much as six percent. Singapore’s flag carrier reported a net loss of US$99.5 million in the quarter that ended in March.
In a regulatory filing, the airline said: “Intense competition arising from excess capacity in major markets, alongside geopolitical and economic uncertainty, continue to exert pressure on yields.”
The carrier’s passenger yield, or the average fare paid per passenger for each kilometer flown, fell 3.8 percent to 10.2 cents (US$0.7). Yield is a unit of measure used in the aviation industry as a tool to calculate revenues.
— TODAY (@TODAYonline) May 19, 2017
To recover, chief executive officer Goh Choon Phong is said to be boosting borrowings to facilitate a record US$53 billion order for new planes.
Goh said the group would take “bold radical actions”, including setting up a “dedicated transformative office” to conduct reviews of sectors like aircraft network and fleet, products and services, and organizational structure and processes.
In response to potential job cuts, Goh said, “There will certainly be changes in the way we do things and staff will have to pick up new skills,” reported TODAY.
Some of the current jobs would have to be redesigned because some jobs may not be relevant anymore, he said.
“We will leave no stone unturned. Some changes may be radical, but if needed, we will do it.” – Goh
An outline of the review is expected to be revealed in six months.
This is all part of a journey “to better position the group for long-term sustainable growth across its portfolio of full-service and budget airline operations.”
— Business Insider UK (@BIUK) May 15, 2017
Following the loss, the airline may be forced to reduce entertainment, food and alcohol options as well as expect to be incurred charges for services like baggage check-in and in-flight meals.
Currently, Singapore Airlines offers top-flight features, including champagne for premium economy passengers, double beds in first class, Givenchy duvets, and chilled caviar.
However, the embellishments may have to come at an extra cost for passengers, a model adopted by US airlines such as Delta.
Mathieu De Marchi, a Bangkok-based aviation consultant at Landrum & Brown told Bloomberg: “Making money out of so-called ancillary services emerged among traditional US carriers following the global financial crisis, when their losses ballooned.”
And it’s not just Singapore Airlines facing turbulence. Cathay Pacific – Asia’s biggest international airline – is also conducting a “critical review” of its business.
However, the airline recently told shareholders it is making “significant progress” on restructuring.