Singapore Seeks Strategy Shift

Singapore Airlines has delivered a less-than-rosy outlook after releasing financial results that were weaker than predicted.

An increase of nearly 13 per cent in full-year net income and a net profit of S$68.3m in the fourth quarter (compared to a loss of S$38.2m in the year-before period) could not mask the struggles the full service carrier is facing in the wake of competition from low cost rivals in Asia, as well as Gulf carriers.

Pointing out the “uncertain” global economic outlook, with the ongoing weakness in the Eurozone and sluggish recovery in the United States, the airline wrote that forward passenger bookings for the next few months “are almost flat compared to the same period last year” while “yields are likely to remain under pressure amid weak economic sentiment”. Revenues will also be “further diluted if key revenue-generating currencies continue to depreciate against the Singapore dollar”, it warned.

So what can Singapore do to reverse the tide? In the short-term the carrier will seek to cut capacity between April and June as a reaction to the sluggish market. As well as the intense competition, Singapore has also been forced to cut fares in recent times as a result of lower demand for premium and business travel.

Longer term, the airline reports that it is in a strong financial position which will “allow for continued investment in product and service enhancements”. This essentially refers to the needed strategy revamp the carrier is undertaking, with an increased focus on the low-cost or budget sector, while laying out plans to significantly expand its regional network.

This strategy should ultimately lead to growth at the airline, but Singapore also desperately needs to see an uptick in demand for premium class travel, given that these were the foundations on which the airline was built.

Despite facing a potentially fragile future, the airline still remains confident its financial position “will enable it to weather the many challenges”.

Jason Holland, Editor, Aircraft Technology Engineering & Maintenance
[email protected]

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