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Jul 19, 2017

Singapore Airlines flies into smoother skies, for a month at least

Not everything is gloomy in the airline game, with the SingaporeAir group getting on top of the problem of excess capacity

SingaporeAir is renovating its A380s, and replacing the oldest of them with new.

It might only be one month’s operating results, but the Singapore Airlines Group of carriers managed to fill more seats with paying customers than it added to the market across its full service and low fare brands in June.

If continued in coming months this will be a significant change of direction for a major player in the Asia-Pacific airline sector, something other carriers are very keen to achieve in their own operations after months of reporting slowing activity and concerns about supply growing faster in some sectors than demand.

Singapore Airlines doesn’t tell us whether profit margins on these improved load factors have also grown, or been satisfactory. Its filing shows it headed upward in its operational performance while major rival Cathay Pacific continues to flag unsatisfactory results, although with different hub airports, and some very different market realities, the varying fortunes of two of Asia’s most recognised airline brands don’t lend themselves to deeply meaningful comparisons on a like for like basis.

This is the core of the SIA Group announcement:

In June 2017, SIA Group airlines’ passenger load factor (PLF) improved 4.6 percentage points to 82.7%. Passenger carriage (measured in revenue passenger kilometres) increased 8.6% compared to last year, outpacing capacity (measured in available seat kilometres) expansion of 2.7%.
 
Singapore Airlines’ passenger carriage increased 5.4% compared to the previous year, against a capacity contraction of 0.9%. PLF improved 4.9 percentage points to 82.7% due to higher passenger carriage registered for all regions, in particular on the Kangaroo routes. The restructuring in the Americas network, and the increase in passenger volume across all routes in West Asia and Africa, also led to higher PLFs in the respective regions.  The competitive landscape remains challenging and promotional efforts will continue in relevant markets.
 
SilkAir’s systemwide passenger carriage grew 23.9% year-on-year, surpassing capacity growth of 14.3%. Consequently, PLF improved by 5.7 percentage points to 73.8%. Strong growth in demand exceeded capacity injections across East and West Asia.
 
Budget Aviation Holdings (BAH) recorded a 17.8% year-on-year increase in systemwide passenger carriage, exceeding capacity expansion of 14.7%. Consequently, PLF improved by 2.3 percentage points to 85.8%. Demand on routes to Thailand, India and Australia, as well as fifth freedom routes to North Asia, continued to improve. During the month, BAH launched its maiden European long-haul service to Athens.
 
Overall cargo load factor (CLF) was 4.5 percentage points higher with growth in cargo traffic (measured in freight-tonne-kilometres) of 7.2% against capacity reduction of 0.2%. CLF improved across all regions as demand outpaced capacity changes.

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10 comments

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10 thoughts on “Singapore Airlines flies into smoother skies, for a month at least

  1. Dan Dair

    That’s promising news from SIA.
    Maybe Cathay are going to have to look for a new home-hub to avoid the problems inflicted upon them by Chinese ATC, before they can improve their profitability.?

    1. comet

      Chinese ATC will be driving Cathay Pacific passengers into the arms of Singapore Airlines.

      I question whether it is viable or wise to travel via Hong Kong at all, when China might close down its airspace at any time without any notice.

      Three hour delays at Hong Kong or Chinese airports are considered normal. Six hour delays are routine, and often flights don’t get out at all. It’s madness.

      Some say that Chinese ATC can’t handle storms or bad weather. Others say the Chinese military has taken over, but the result is Hong Kong is no longer a viable hub if you need to get somewhere.

      1. JW (aka James Wilson)

        Comet,
        It really depends on where you’re going. Long delays are common for flights that have to cross Chinese airspace after departing Hong Kong, but it’s nowhere near as bad for other flights (eg Australia/NZ, SE Asia, N.America, Japan, etc). Flights to India & the Middle East are often re-routed to avoid Chinese airspace and if things get really bad then some flights to Europe are also re-routed via India instead of China.

        1. comet

          I recently got rerouted via India on a flight from Hong Kong to Europe after China closed its airspace.

          Looking at Flight Radar 24, while sitting for three hours on the tarmac in HK, showed that almost all of China was devoid of commercial air traffic, apart from one narrow band in the North.

          It’s extraordinary. I wonder what damage this must be doing to the Chinese (and HK) economy.

          1. Dan Dair

            It’s bizarre that ‘Chinese’ airlines, even those based in HK aren’t given priority or exemptions within Chinese airspace.?
            We’d probably do it at home & we know the Chinese generally do similar stuff in other areas of their business dealings.!

  2. JW (aka James Wilson)

    Passenger load factor is only part of the story and, as Ben noted, the SQ announcement doesn’t say anything about yield. SQ could be filling more seats with lower yielding passengers, thereby earning less revenue. CX’s June traffic figures show that capacity has increased and the passenger load factor has decreased, but nevertheless remains high at over 85%, somewhat higher than SQ’s 82.7%. The big problem is yield – increased competition, particularly from the Middle East, mainland China and Asian low cost airlines, is forcing the legacy carriers to offer more seats at higher discounts, severely eroding their earnings.

  3. Suti I

    having to wait 2½ days in Singapore last week to wait for a spare seat back to Sydney shows you that route and its 4 flights a day are very full…

  4. Jacob HSR

    Colombo will be an alternative way to get to London from Oct and seems to be the cheapest way to fly from MEL to LHR around Christmas time at A$1200 one way.

    Even in June 2018 it seems to be the cheapest 1-stop method at $1405 return.

    I wish them all the best.

  5. Ken Borough

    Load factor is not a valid indicator of profitability, as we all know. I think SQ are heavily promoting their business by offering very low fares. I just saw an SQ ad pop up offering incredibly fares from Aus to Hong Kong. Either they can’t be making any money from them or the two leaders in that market are generating huge profits. I suspect the former to be the case!

    1. Dan Dair

      Ken Borough,
      “Load factor is not a valid indicator of profitability”
      True enough,
      but equally, low cost carriers margins are predicated upon knowing what their costs per seat are & then ensuring they sell every seat at break-even or above.

      If SIA are taking a leaf out of their Scoot handbook & selling every seat at $10 above break-even, as a promotional offer to get bums back on their seats in bigger numbers, they’ll have made a big inroad into getting passengers to consider returning to them more regularly.?

      Of course, the other thing that low-cost carriers are infamous for, is advertising very low fares for which there might be only a couple of seats allocated at that price. So you go on their website to find the seats aren’t actually available at that price, but by then they’ve drawn you onto their booking website, which was the marketing-purpose of those loss-leader prices.