SINGAPORE — In what could be a sign of more turbulence in the economy, Singapore Airlines (SIA) announced yesterday that it is letting go of 76 expatriate pilots who are on fixed-term contracts.

The last time the national carrier resorted to the move to cut costs was in 2003, during the SARS (severe acute respiratory syndrome) crisis.

The aviation industry is often seen as a bellwether for the economy. Nevertheless, analysts TODAY spoke to were divided on whether SIA’s move was a sign of things to come — considering it is the first blue chip company here to announce layoffs — for Singapore companies or a mere reflection of the airline’s current woes and internal management issues.

In a press statement, SIA attributed the cuts to a “surplus of pilots to its operational requirements, as the global financial crisis of 2009 to 2010 had resulted in excess capacity and slower-than-expected growth”.

It added that it had earlier implemented other measures to address the surplus, including asking its pilots to take no-pay leave voluntarily and suspending its cadet pilot recruitment. SIA declined to reveal how many pilots have taken voluntary no-pay leave.

The affected expat pilots are typically on three-year contracts. SIA said they are expected to be released by June 30. It added that they will be given a pro-rated gratuity.

The airline will assist the affected pilots “to pursue employment opportunities within the SIA Group and with other airlines”.

SIA has a total of 2,300 pilots, of which 75 per cent are Singaporeans. Pilots employed on fixed-term contracts make up about 4 per cent of its total pilots’ workforce.

When contacted, Air Line Pilots Association of Singapore (ALPA-S) President Mok Hin Choon said the union — which was also informed of the cuts yesterday — was caught off-guard by the announcement. Said Captain Mok: “This came as a surprise to us ... After this I suppose we should be ready for more surprises.”

Adding that the union is “saddened” by the situation, Captain Mok said: “We’re just trying to make it as less painful as we can for the expat pilots by working with the company to facilitate their departure.”

CIMB Research regional economist Song Seng Wun noted that airlines hire “very aggressively” when the outlook is good.

However, overall demand for travel has been hit by “still sluggish” growth in the developed economies, he said. “Given that outlook is uncertain, as far as the growth in the industrial economies are concerned, perhaps this sluggish demand may persist (into the year),” he added.

However, Barclays Senior Regional Economist Leong Wai Ho said SIA’s lay-offs were not indications of a larger economic malaise. “Economy-wise things are actually stabilising and improving. But it has been slow to percolate through to specific industries which have been hit by other factors … and I think banking and air transport are some of these industries,” he said.

He added: “I think it’s a function of jobs cuts that we’ve seen among foreign banks in Singapore and in the region that may have affected demand for premium travel services.”

Aviation analysts felt that the lay-offs were down to a lack of foresight by the SIA management. Said Flightglobal’s Asia Managing Editor Siva Govindasamy: “During the 2008-2009 global financial crisis, SIA was still hiring ... it probably did not foresee that things would remain as bad.” SIA also did not foresee the extent of the slowdown in its capacity growth, he said.

Aviation consultant Prithpal Singh added: “When SIA was doing its forecast for fleet expansion and crew expansion, it might have made an assumption for higher growth … what is happening today is bad policy planning 10 years ago.”

Mr Singh also questioned SIA’s human resource management. Noting that SIA subsidiary Scoot had advertised and hired “a whole bunch” of expat pilots before it began operations, he said: “Why do you need to go and hire new expatriate pilots when there are already surplus pilots in SIA?”