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SIA To Cut Flights And Seats

Posted in Airline News, Singapore AirlinesNo comments

SINGAPORE Airlines (SIA) plans to shed flights and cut seats in weak markets to trim losses after being hit by falling traffic and historically high fuel prices.

In particular, cost-cutting has led to travellers on shorter flights within the region downgrading from first and business classes, to economy class.

But business class travel is still holding steady for long-haul flights, the world’s most profitable airline said yesterday.

‘Executives are persuaded to travel coach when they fly on legs that are shorter than six hours but for longer than six hours I think the comfort of business class is justified,’ chief executive Chew Choon Seng said at a media briefing.

This is why traffic is still holding up on its newly introduced ‘all business class’ long-haul flights to New York and Los Angeles, for example.

On some days, just 30 or 40 seats are occupied out of 100 but ‘if you get on board the flight on a Thursday, Friday or Saturday, you will find over 80 per cent of the seats are taken up’, Mr Chew said.

The SIA chief’s comments come a day after the airline reported a 36.2 per cent fall in second-quarter profits to $323.8 million.

In response to a slowing market, the airline suspended services to Osaka via Bangkok in May. And last month, it stopped flying to Los Angeles via Taipei.

SIA also announced recently that services to Amritsar, India, will be withdrawn from February and the number of flights to Penang, Ho Chi Minh City, Seoul, Bangalore and Chennai will be progressively reduced.

With new jets still being delivered, the carrier now expects to be faced with an aircraft surplus when capacity growth is cut from 5 per cent this year to about 1 per cent in the 12 months from next April.

On what SIA will do with the spare aircraft, Mr Chew said: ‘We have various options. We can sell them, lease them, convert them into freighters or park them in the desert.’

But despite the new difficulties posed by the financial crisis, SIA still expects to ’stay above’ water.

And because there is still growth, albeit marginal, there is no need to fire people, Mr Chew said when asked if retrenchments were a possibility.

‘We never say never in any business but we are still a long way off from having to contemplate that issue…As we tailor capacity to the traffic patterns we should be able to manage our business to stay above water so at this juncture we have no intention, no plans to start reducing headcount.’

There is also no need, at this time, to ask staff to go on leave without pay or cut flying hours for pilots and cabin crew, he said.

The last time the airline took such measures was when Sars hit in 2003, paralysing the industry overnight and dragging SIA into its first-ever financial loss.

But even as the Singapore carrier seems to be doing all right and continues to make money – profits for the first half ended Sept 30 of the current financial year came in at $682.4 million – industry watchers warn of a prolonged crisis.

Aviation analyst Shukor Yusof at Standard & Poor’s Equity Research said in a a note yesterday that ‘the pain’s only just begun’.

Citing SIA’s steep fall in profits, he said it is ‘a sign that things are really bad’ when ‘even the best in the business has not been spared’.

The International Air Transport Association has forecast a collective loss of US$5.2 billion (S$7.8 billion) for the airline community this year.

This was before the financial meltdown led to global air traffic shrinking 2.9 per cent in September over a year earlier – the first year-on-year contraction in five years.

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