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SIA warns of challenging skies, steps up integration with group airlines

SINGAPORE — Despite an improved scorecard in the latest financial year, flag carrier Singapore Airlines (SIA) continues to warn of challenging market conditions, amid global economic uncertainty and softer demand, as it faces increased competition mainly on key American and European routes.

SIA warns of challenging skies, steps up integration with group airlines

Singapore Airlines’ net profit for the financial year ended

March 31 rose 2.3 per cent to S$367.9 million, helped by fuel cost savings, while revenue increased

2.1 per cent to S$15.56 billion. TODAY FILE PHOTO

SINGAPORE — Despite an improved scorecard in the latest financial year, flag carrier Singapore Airlines (SIA) continues to warn of challenging market conditions, amid global economic uncertainty and softer demand, as it faces increased competition mainly on key American and European routes.

Foreign exchange movements are adding to the challenges. The depreciation of key revenue-generating currencies, such as the Australian dollar, the yen and the euro will place further pressure on yield and demand, while the stronger United States dollar will increase operating costs.

“A weaker yen relative to other currencies, for instance, is attracting lot of inbound traffic into Japan. The substitution effect is being felt on other popular South-east Asian destinations like Singapore,” SIA chief executive Goh Choon Phong said yesterday during a post-results briefing.

The carrier’s net profit for the financial year ended March 31 rose 2.3 per cent to S$367.9 million, helped by fuel cost savings, while revenue increased 2.1 per cent to S$15.56 billion.

To enjoy scale economies and optimise operations, SIA is stepping up the integration of operations among the four group airlines — SIA, SilkAir, Scoot and Tiger Airways. “The group airlines are working together to optimise capabilities, be it in engineering, flight operations, joint training, procurement, human resources and other support systems,” Mr Goh said.

SIA, meanwhile, is looking for partners to enhance its position in the US and Europe — a sector hit by cut-throat competition caused by aggressive capacity infusion by Gulf carriers. American and European airlines are crying foul over the move by their Gulf rivals, alleging that they have an unfair edge with subsidies from their oil-rich state owners.

“We are looking for opportunities to mount more long-haul services to the US and Europe and are aggressively pushing for partnerships to capture these markets. We are strategically positioned in South-east Asia. As a gateway to the south-west Pacific, our deliberate strategy was to position ourselves with a stake in Virgin Australia. We have various partnerships across the rest of Asia, like Vistara in India,” Mr Goh said.

SIA, along with SilkAir, now offers 1,097 weekly flights to 100 destinations. The network is being expanded to 119 destinations across 35 countries, including Singapore. SilkAir’s coverage will be extended to 49 destinations across 12 countries, while Scoot will launch services to its 14th and 15th destinations of Kaohsiung and Melbourne. Tigerair will commence services to Ipoh, bringing its total number of destinations to 38 across 12 countries.

SIA has lined up S$2.9 billion for group capacity expansion in the current financial year. “The bulk of this amount will go into Scoot and SIA as we induct the wide-body aircraft to their respective fleet,” Mr Stephen Barnes, the company’s senior vice-president of finance, told TODAY.

SIA’s fleet will comprise 106 aircraft after it takes delivery of the first three A350-900s, as well as three A330-300s and two 777-300ERs by next March. Scoot will be operating 11 787s by then, while SilkAir and Tigerair will have fleets comprising 29 and 23 aircraft, respectively.

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