Singapore Airlines sees flyers swap champagne for cheap seats
By Bloomberg News, May 18 2017
Singapore Airlines – first in the world to put a double bed, mattress and duvet on a commercial plane – posted a surprise loss at its marquee brand for the first time in three years. Its two budget carriers reported a profit.
Intense competition from Emirates, Qatar Airways and Etihad that offer services such as a personal butler and shower on board aircraft has crushed profits at Singapore Airlines and its Hong Kong-based rival Cathay Pacific as the two Asian airlines conduct a strategic review of their business.
To fight back, Singapore Airlines CEO Goh Choon Phong is boosting borrowings to fund a record $53 billion order for new planes.
"Evidently, the pressure of the Middle Eastern carriers and the lack of a domestic market is impacting, similar to Cathay,' Joshua Crabb, head of Asian equities at a unit of Old Mutual, said from Hong Kong. Crabb said he doesn’t own Singapore Air stock.
The Singapore Airlines group – which includes Singapore Airlines, regional airline SilkAir and budget carriers Scoot and Tigerair – announced a surprise net loss of S$138.3 million (A$133.5 million) in the three months ended March, compared with a median forecast for a profit for S$54.3 million in a Bloomberg survey of six analysts.
The company took a previously-announced provision of S$132 million in the quarter relating to its cargo unit.
Hero brand Singapore Airlines had an operating loss of S$41 million in the quarter while Budget Aviation Holdings - which operates low-fare carriers Scoot and Tiger – recorded a profit of S$22 million at the operating level, according to a statement the carrier issued to the Singapore stock exchange.
The loss at the main airline is the first since the fourth quarter of fiscal year 2014, according to company filings.
“A dedicated transformation office is conducting a wide-ranging review, encompassing network and fleet, product and service, and organisational structure and processes, to better position the group for long-term sustainable growth across its portfolio of full-service and budget airline operations,” the airline said in the statement.
Cathay Pacific has embarked on a three-year revamp to cut costs after reporting in March its first loss in eight years. Cathay has set a target to save 30 percent in employee costs at its Hong Kong head office as part of the biggest revamp in two decades.
Passenger yield at Singapore Airlines – the money earned from carrying a passenger for one kilometer – fell to 10.1 Singapore cents, hovering around the lowest level in six years.
Singapore Airlines was the only Asian airline to fly the Concorde and the first in the world to fly the Airbus A380 superjumbo.
When the aircraft entered service in 2007, the plane featured suites created by French luxury-yacht designer Jean-Jacques Coste and cushions from fashion house Givenchy.
In 2015, Singapore Airlines started offering champagne to passengers who flew its premium economy seats.
“Business travel demand has not been very strong and this impacts Singapore Airlines parent airline, which derives around 45 percent of its passenger revenue from the first and business class cabin,” said Corrine Png, Singapore-based CEO of Crucial Perspective, a research firm focused on Asian transport equities. Long-haul routes are facing overcapacity and there’s pressure on yields, she said.
Singapore Airlines also announced a total dividend for the fiscal year of 20 Singapore cents per share, compared with 45 Singapore cents last year.
23 May 2014
Total posts 118
Well... the reason I don't fly them as much anymore is the food and drinks in business class have been cut too much... make of that what you will.
26 Aug 2012
Total posts 44
The tides are turning. With a widening gap between premium seats and discounted fares to fight LCC's the value equation prevails. Business class fares are fare too high despite the product upgrades. I was happy paying $2.5k to $3.5k to fly to Asia return but not $4k to $5k plus compared to $800 or less. It's the fundamentals of economics in reality.
Qantas - Qantas Frequent Flyer
08 Dec 2014
Total posts 51
Well clearly, if the airline is making a loss, the fares are too low.
31 Mar 2016
Total posts 619
@Ozshanel:
31 Mar 2016
Total posts 619
26 Aug 2012
Total posts 44
31 Mar 2016
Total posts 619
1st CX, now SQ. Both top tier premium brands in Asia suffer the same fate re losses despite fuel prices remaining @ historic low level throughout.
Cathay Pacific - The Marco Polo Club
01 Jun 2016
Total posts 12
To be honest, it seems like CX's base game plan is better than SQ's. If they didn't make that massive mistake of fuel hedging (which is only a big mistake in hindsight...), CX would be making record profits right now. Unfortunately, it seems that fuel prices will rise continually before the contract ends. SQ, in the mean time, hasn't really done much fuel hedging, so this loss is directly related to how their system works. Maybe SQ should completely revamp like CX.
Cathay Pacific - The Marco Polo Club
01 Jun 2016
Total posts 12
Correction: not record profits, but they would have a profit of 8 billion HKD, a solid profit which is higher than the profit in 2011-2015 (actual record profit of 14 billion was in 2010).
26 Aug 2012
Total posts 44
SIN has 2 runways but they are building a 3rd
16 Nov 2011
Total posts 580
Half right. They DID have 3. 20L/02R was closed a while back to allow for the new terminal and replacement runways to be built. Believe was used for GA and military and not commercial.
31 Mar 2016
Total posts 619
@boeingmannn:
Cathay Pacific - The Marco Polo Club
01 Jun 2016
Total posts 12
Why is the title of this article "Singapore Airlines sees flyers swap champagne for cheap seats"? Quite misleading the article has nothing to do with this.
Air New Zealand - Airpoints
10 Aug 2015
Total posts 79
People flying Scoot instead of SQ
31 Mar 2016
Total posts 619
@kwikiwings:
Qantas
19 Apr 2012
Total posts 1429
. Not sure what the point of this statement is, QF has been doing that for years and I think CX did years ago when I flew PE with them. Also not sure what the Concorde statement is about. It was shared with BA and lasted only a handful of flights - a bit of a stretch!!
Qantas - Qantas Frequent Flyer
19 Aug 2011
Total posts 165
"Singapore Airlines is the only Asian airline to fly the Concorde"
28 Oct 2011
Total posts 645
This happens on a regular basis, on various sites/media. Readers can't see the REAL NEWS/STORY because of all the 'fluff'/CRAP!!. This is how social/media 'operates', so we the readers just gotta sift through the 'fluff', to uncover the REAL NEWS! LOL.
Singapore Airlines - KrisFlyer
31 Jan 2013
Total posts 26
I've been a long term SQ flyer so I see the problem as being multi-factorial. It is not just competition from other carriers, but also the lack of evolution on SQ's part. Sure they were innovative with the Suite in 2007, but they really haven't change much since then. Whether on board or not. Even their flagship lounge in T3 has been serving the same food for 10 years. No barista, no a la carte. Chicken wings anyone?
QF
04 Oct 2012
Total posts 2
I must admit I haven't flown SQ for some years. Their treatment of Australian routes as regional is mainly to blame.
The A330's they fly to Brisbane on most flights are terrible in Business Class, angled lie flat seats and 2-2-2 configuration is simply not acceptable in 2017 and the 777-200's are not much better in most cases (still 2-2-2 except the odd 200ER , particularly when even QF give you an excellent full flat seat. I know they are gradually introducing A350's on some Australian routes but very slowly.
They are living on their old reputation for service and quality food and wine. They will not get my custom back until they offer competitive comfort for a similar price.
20 May 2015
Total posts 5
It would be interesting to know what percentage of SQ pax revenue is derived from routes in and out of Australia. Might give a hint on how they treat the Oz market
Qantas - Qantas Frequent Flyer
14 Feb 2017
Total posts 25
The reality is that there are a whole lot more airlines now generally offering comparable hard product in premium cabins at a lower price point. Also the influx of LCC's mean that the trade-off to fly Economy in SIA vs an LCC is much more tolerable with most casual flyers now considering the huge price difference between the airlines in some instances even double. Would be interesting to see what strategic direction they take from here on out to right the ship.. Not sure if ordering $53bil of new planes is necessarily the answer.
Virgin Australia - Velocity Rewards
06 Sep 2012
Total posts 231
Their main issue is consistency. You pay a premium for Y or J and you end up in their old unfurnished Boeing 777-200s and B777-300s. Many airlines have upgraded their hard product and are competitive. SQ are better off getting rid of the old aircraft ASAP and getting the new aircraft in the popular routes. That being said, it's good to see that they're being proactive in undertaking a review early whilst they're still making some profit, unlike other airlines who only react after achieving substantial loss.
QFF
19 Sep 2013
Total posts 206
For me it's simply the cost of their J fares. The ME airlines seem to always come in far cheaper.
Singapore Airlines - The PPS Club
20 Apr 2015
Total posts 33
Living in Singapore, I have seen a significant drop in Singapore expats in the past 2 years and a reduction in the perks that used to be associated with expat packages (e.g. no more business class flights home a couple of times a year). In addition, companies are no longer willing to fork out for SQ for short/medium regional flights at such a significant premium over the competition. I'm sure this has negatively effected SQ's performance.
21 Apr 2012
Total posts 3006
A few things SQ has to do to regain my business:
If they are making a loss, then its clear their current policy of cost-savings alone is not enough. A re-think of how they segment the market and cultivate each segment is required. Their former big spenders are going elsewhere. Its time to grow the pool of big spenders along less elitist lines.
Singapore Airlines - KrisFlyer
31 Jan 2013
Total posts 26
Completely agree, especially on the PPS status. It is overly onerous and you get no life time accruals or benefits. I used to be a regular PPS member but dropped my travel in the last few years so I've been trailing just a bit short of the threshold.
21 Apr 2012
Total posts 3006
Policy of not allowing Star Alliance Gold to use the main lounge (Silver Kris) and instead shepherding Star Gold pax flying Y&P to the Gold Lounge that does not even have showers. For a hub airport that focuses on transiting pax, that's just dumb.
Singapore Airlines - KrisFlyer
12 Apr 2017
Total posts 207
I think @TheRealBabushka means the Gold lounge policy. For Gold status members flying economy, the Gold lounges are quite underwhelming!
Singapore PPS club
22 Aug 2015
Total posts 5
I agree Babushka.
I'm sitting in the SQ lounge at Changi writing this. Despite having PPS status for years, and on flying on a J ticket, here I am in the business lounge as my PPS status won't get me into F.
I don't spend 50K /year on F or J travel so will never get solitaire PPS.
So what does PPS status get you if you (especially if you are already booked in J? Not much.
No access to F lounges anywhere.
No preferential access to reward seats (as Qantas does).
The on board service is usually excellent but with the exception of Qantas in my experience it's no longer clearly better than most flying to Europe.
Combine that with no limousine transfers, average food on board and, (apart from their champange offering) a really poor wine list in J, it's perhaps no surprise that people are looking elsewhere.
I fly them because PPS qualification accrues on $ spent, so I can collect VA status and points but still stay PPS.
But they really need to start looking after their premium customers a lot better if they want to keep business.
QF
02 Sep 2013
Total posts 6
Having flown business class on Singapore and Silk Air this year I thought both were sub standard compared to CX and QF. SQ business class seats are horrible now and Silk served cold food and then offered me a worthless voucher as compensation. Guess why they made a loss.
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