Singapore Airlines

PUBLISHED MAY 10, 2014
SIA plans new cabin class, sticks by Tiger

It'll launch premium economy on medium-to-long-haul flights in the middle of next year
BYJOYCE HOOI
joyceh@sph.com.sg @JoyceHooiBT

Yesterday, SIA also announced that it would launch a premium economy class in the middle of next year. It will be introduced on the Boeing 777-300ERs, and then on the Airbus A380s.
According to SIA executive vice-president commercial Mak Swee Wah, this new class is meant for the medium-to-long-haul flights. It will be aimed at a mix of leisure and corporate travellers who want a bit more comfort than in economy class.
"There is a niche there that is quite established in the market now. We are now designing the product to fit that segment and we will come up with something that will be interesting," Mr Mak said.
This additional space is going to come out of economy class. "We will have to take out some economy class (seats), but at the end of the day, premium economy is a product that we think can command a better premium than the equivalent economy."
UOB Kay Hian analyst K Ajith said the move carries the risk of cannibalising SIA's business class product, but also noted that the airline has little choice, given stiff competition and how other airlines already have similar offerings. "But they could, of course, price it in such a way that there is still a differential. Typically, business class seats before promotions can generally be 3-5 times that of economy. SIA could price the premium economy seats 100-150 per cent higher than economy class on routes where there's less competition," he said.
About a decade ago, SIA had a similar class option in place, billed as "executive economy", on its non-stop flights to the United States. These seats were phased out in 2008 for an all-business-class configuration.
On Thursday, SIA reported a Q4 operating loss that widened year-on-year to $60.3 million. Had it not been for large tax credits and exceptional gains, its quarterly bottom line would have been red, too. Even so, the group is doubling down. It said yesterday it will spend US$325 million to retrofit the cabins of 19 Boeing 777-300ERs, starting in early 2015 and completed by September 2016.
Last July, a unit was set up within the group to examine ways to grow revenue through other channels apart from ticket sales. This "new revenue unit" already has several ongoing initiatives, such as the involvement of commission-based third-party products and advertising.
"We have undisclosed but ambitious targets for this unit to meet," Mr Goh said.

(10-05-2014, 06:03 PM)greengiraffe Wrote: PUBLISHED MAY 10, 2014
SIA plans new cabin class, sticks by Tiger

It'll launch premium economy on medium-to-long-haul flights in the middle of next year
BYJOYCE HOOI
joyceh@sph.com.sg @JoyceHooiBT

Yesterday, SIA also announced that it would launch a premium economy class in the middle of next year. It will be introduced on the Boeing 777-300ERs, and then on the Airbus A380s.
According to SIA executive vice-president commercial Mak Swee Wah, this new class is meant for the medium-to-long-haul flights. It will be aimed at a mix of leisure and corporate travellers who want a bit more comfort than in economy class.
"There is a niche there that is quite established in the market now. We are now designing the product to fit that segment and we will come up with something that will be interesting," Mr Mak said.
This additional space is going to come out of economy class. "We will have to take out some economy class (seats), but at the end of the day, premium economy is a product that we think can command a better premium than the equivalent economy."
UOB Kay Hian analyst K Ajith said the move carries the risk of cannibalising SIA's business class product, but also noted that the airline has little choice, given stiff competition and how other airlines already have similar offerings. "But they could, of course, price it in such a way that there is still a differential. Typically, business class seats before promotions can generally be 3-5 times that of economy. SIA could price the premium economy seats 100-150 per cent higher than economy class on routes where there's less competition," he said.
About a decade ago, SIA had a similar class option in place, billed as "executive economy", on its non-stop flights to the United States. These seats were phased out in 2008 for an all-business-class configuration.
On Thursday, SIA reported a Q4 operating loss that widened year-on-year to $60.3 million. Had it not been for large tax credits and exceptional gains, its quarterly bottom line would have been red, too. Even so, the group is doubling down. It said yesterday it will spend US$325 million to retrofit the cabins of 19 Boeing 777-300ERs, starting in early 2015 and completed by September 2016.
Last July, a unit was set up within the group to examine ways to grow revenue through other channels apart from ticket sales. This "new revenue unit" already has several ongoing initiatives, such as the involvement of commission-based third-party products and advertising.
"We have undisclosed but ambitious targets for this unit to meet," Mr Goh said.

Hm.... does this mean a lower supply of economy class will see its price increases as well?

So all-in-all, revenue will increase but cost will go down because they will be carrying less load ie less people and less lagugges?

With a long overdue premium economy class, SIA will likely be able to attract business travelers that can only travel on Economy class. Having said that they will nevertheless be a possibility of cannibalising customers travelling in the Business Class. But all in all, I feel that the overall effect will be an increase in passengers and revenue.

From the cost perspective, the operating leverage of the business is on the high side. The proportion of fixed cost (fuel, maintenance and personnel) is more than the variable cost (additional meal on the aircraft, drinks served, boarding pass issued). Hence. the marginal cost of bringing an additional customer is small. Which means filling capacity becomes important.

No longer cocky and arrogant. SIA refuse to admit their booking website is very user unfriendly. They asked for it because they think travellers really can't fly without them.

Industry is so competitive that even SIA is not spared. Budget airlines basically can be easy victims...

Qantas part of a crazy industry
• STEPHEN BARTHOLOMEUSZ
• BUSINESS SPECTATOR
• JUNE 04, 2014 12:00AM


Competition from competitors prepared to accept sub-economic returns has forced Qantas into a brutal restructuring and cost-reduction program. Source: News Limited
THE latest International Air Transport Association analysis of the state of the aviation industry highlights what a dysfunctional industry it is and provides context for the ongoing haemorrhaging and continuing shrinking of Qantas’s international business.
IATA expects the industry to make aggregate profits of $US18 billion ($19bn) this year (up from $US10bn last year but slightly down on its March forecast of $US18.7bn).
That represents an average return on invested capital of only 5.4 per cent.
In a report issued yesterday, IATA says the industry’s cost of capital is about 7.5 per cent and therefore the loss of shareholder value if the industry meets the forecast is more than two percentage points, or about $US15bn. In fact, over the three years to the end of 2014, the industry would have cost its capital providers more than $US55bn.
Unlike many of its government-owned or sponsored competitors, there is no way Qantas — a listed entity with private shareholders — could convince those shareholders to give it capital to invest in activities that destroy capital.
The bizarre aspect of the industry is that it is actually growing solidly. IATA says air travel is accelerating, with growth of 5.9 per cent expected this year, compared with the 5.5 per cent average over the past 20 years.
Average one-way fares, however, are 3.5 per cent lower than last year in real terms.
The available seats in the industry rose 5.3 per cent last year and will rise another 3.5 per cent this year, IATA says. In any other industry generating returns below its cost of capital, there would be capacity reductions, not increases. The industry is expected to invest more than $US150bn in new aircraft this year.
The best-performing region in the industry is the US, where consolidation and a focus on managing capacity profitably saw profits rising from $US2.3bn in 2012 to $US7bn last year and a forecast $US9.2bn this year. As a percentage of revenue, the profit of the US carriers would be 4.3 per cent.
In the Asia-Pacific region, profits are expected to rise from $US2bn to $US3.2bn, a margin on revenues of only 1.6 per cent despite (or because of) capacity growth of 7 per cent. For Middle Eastern airlines, which have the world’s lowest break-even load factors, profits are expected to rise from $US1bn to $US1.6bn, generating a margin of 2.6 per cent in the context of a 13 per cent rise in capacity.
It is, of course, the Asian and Middle Eastern carriers that have decimated Qantas’s international market shares, forced it to cull its international route network and ultimately pressured it into its alliance with Emirates. Competition from competitors prepared to accept sub-economic returns has also forced Qantas into a brutal restructuring and cost-reduction program.
As IATA’s Tony Tyler said, in any other industry the response to the circumstances would be consolidation, which has been the key to the improvement in the condition of the US industry. The regulatory structures in the industry, national aspirations and non-level playing fields make rational responses to those circumstances almost impossible.
The growing trend towards alliances is a step in the right direction towards synthetic consolidation, but those ‘‘alliances’’ tend to be one-sided.
Stephen Bartholomeusz is a columnist for Business Spectator. Visit businessspectator.com.au

Good article GG. My perception is that capacity supply is pretty inelastic in the industry because many airlines (e.g A number of the Middle Eastern airlines) have sovereign majority owners who are using the airline to promote growth within their own countries, rather than earn an economic return on their investment. This means sub-economic returns are likely to persist in the international travel market. Certain airlines eg QANTAS with strong (ie noncompetitive) domestic franchises could still earn strong returns in those businesses but the international travel market looks uninvestable at the moment unless at a steep discount to book.

Generally Airlines are not long term investment. better to just own them during a cyclical upswing


www.valueinvestasia.com

Heng...

SIA flight 'over Ukraine about the same time'
Published on Jul 19, 2014 12:49 AM


By Karamjit Kaur And Amelia Teng

SINGAPORE Airlines (SIA) is believed to have had a flight over Ukraine on Thursday night, about the same time that Malaysia Airlines Flight MH17 was apparently shot down.

Yesterday, SIA joined other carriers such as Air France and Germany's Lufthansa in saying it would stop flying over Ukraine. It did not comment on reports that its Flight SQ351 from Copenhagen was just about 25km from MH17 when the latter went down.

A source told The Straits Times that the SIA plane was "pretty close" to the Malaysian jet. According to flightradar24.com, SQ351 and Air India AI113 were both within 25km of MH17.

An SIA spokesman said: "We are no longer using the Ukrainian airspace and have re-routed all our flights to alternative flight paths that are away from the region."

She did not elaborate, explaining that it was against aviation safety and security protocol to provide specific information on the path of any particular flight prior to departure.

At Changi Airport yesterday, passengers who got off an SIA flight from London said they were not aware of the MH17 tragedy. Short of some turbulence, it was a normal flight, said 22-year-old Ho Lit Xian, a student at University College London who was home for his holidays.

His mother Daphne Tang was at the airport with her husband to receive him. The 51-year-old housewife questioned why MH17 was flying over a conflict zone in Ukraine where pro-Russian rebels are fighting government forces.

"I don't understand why any plane would take a route over a war zone. They should take a longer but safer route."

karam@sph.com.sg

ateng@sph.com.sg

That's my ex neighbour...

Air fares of SIA are not cheap but also chose to save fuels by fling over war zone ???