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Singapore Airlines wants to be a budget carrier, too

SINGAPORE — When you think of Singapore Airlines, visions appear of cushy premium cabins, bespoke leather seats, and free-flowing Champagne poured by the carrier’s throwback “Singapore girls” flight attendants.

Goh Choon Phong, chief executive officer of Singapore Airlines. Photo: Bloomberg

Goh Choon Phong, chief executive officer of Singapore Airlines. Photo: Bloomberg

SINGAPORE — When you think of Singapore Airlines, visions appear of cushy premium cabins, bespoke leather seats, and free-flowing Champagne poured by the carrier’s throwback “Singapore girls” flight attendants.

It’s all that, yes. But the luxury carrier is working hard to diversify with budget airlines under its corporate banner. It owns low-cost carrier Scoot; 49 per cent of Vistara, a joint venture in India with Tata Sons; and NokScoot, a low-cost Thai airline Singapore owns in a joint venture with Nok Airlines. This collection of airlines — plus a new “ultra long range” Airbus A350 variant scheduled to arrive in 2018 — enables Singapore to explore a range of expansion plans, many of which are currently focused on North America.

It’s no coincidence that the region continues to be the runaway success story of airline profitability. It will provide roughly two-thirds of the industry’s projected US$29 billion (S$41 billion) net income next year, according to estimates released Dec 8 by the International Air Transport Association.

Singapore’s portfolio of carriers offers “a lot more nimbleness and flexibility in addressing the needs of the markets”, Chief Executive Officer Goh Choon Phong said during an interview on Dec 6 in New York.

SQUEEZED ON ALL SIDES

Last month, Singapore reported a 70 per cent drop in net income and warned that 2017 could be challenging as well. The airline has struggled amid the expansion of low-cost carriers in its home region, and moves by a trio of Middle East-based full-service airlines to encroach on its core franchise of premium business travellers.

“It’s not going to be business as usual,” said Mr Goh, an MIT-trained engineer in computer science who chose an airline career over academia. “These are structural changes; these are changes that are not going to go away.”

Into this environment, the CEO has prescribed a diversification of revenue, a renewed focus on cabin comforts for big spenders, and new markets.

A chief pillar of the company’s expansion rests on further long-haul expansion, driven by firm orders for 67 new Airbus A350s and 30 of Boeing’s largest 787 variant, the -10. The newest 787 is scheduled to enter commercial service in 2018. Of its A350s, Singapore will take seven from Airbus in an “ultra long range” configuration, which includes software changes and modest modifications to the landing gear. Other A350-900s can be altered to the ULR version, which is able to fly 8,700 nautical miles.

“We have called it a game changer for us and there’s a reason for that,” Mr Goh said, alluding to the growth opportunities the A350 affords.

With these new, more fuel-efficient planes, Singapore executives have been keen to resume the nonstop flights from the city state to New York and Los Angeles, which operated for nine years before ending in 2013 because of the route’s extreme fuel costs. The airline is also considering the potential for new US destinations, having for years studied traffic flows in places like Boston, Chicago, and Miami, Mr Goh said. Many weren’t feasible, given the mix of large seat counts and the range limits of its existing aircraft. But the new, more fuel-miserly A350 may well change the math for such an expansion. (In March, for example, Singapore is swapping the 777 it flies to Houston with an A350.)

“The US is an important market for us,” Mr Goh said, but technological limitations required a stop between American cities and Singapore. No more.

GATEWAY TO INDIA AND SOUTH-EAST ASIA

The airline is envisioning a day when the new fleet allows its hub at Singapore’s Changi Airport to become a connection for US and Canadian corporate travellers bound for places such as India, Malaysia, Indonesia, and Thailand. It sees a precedent in the operations Emirates Airlines and Qatar Airways have built at their hubs in the Persian Gulf, particularly for traffic to and from India.

Yet beyond the moneyed travellers who want frills on long flights, Singapore’s Scoot budget airline is also keen to expand. In June, Scoot will commence its longest flight to date, to Athens, a city where Singapore has ended service with its flagship. Scoot is increasing its all-787 fleet to 20 over the next few years, and is likely to look to markets where premium-cabin traffic is insufficient for flights by the flagship Singapore brand, Mr Goh said.

“Scoot might also look to some kind of operation to the US,” Mr Goh said. “At some point in time they will look at the US to see if it makes sense.”

On the premium side of their house, Singapore executives have been cagey about the cabin configuration for the A350-ULRs to be deployed on the new US non-stops to Los Angeles and New York. The latter will reclaim its title as the world’s longest route, at 19 hours or more, depending on winds. The airline plans a two-class service, but has declined to reveal the cabin mix or how many seats the planes will carry. They will have fewer than the 253 seats now on the three-cabin aircraft Singapore currently flies, with a stop in Asia, en route to Singapore, Mr Goh said.

“The beauty of it is that this aircraft is not too big,” he said. “We can size it to best fit the traffic number that makes sense.” BLOOMBERG

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