Singapore Airlines

[AlphaQuant]

SIA to release pilots on fixed-term contracts.

quite drastic to me - previously they've done no-pay leaves + non-renewals.

rough days ahead.

[lonewolf]

Depends on how you want to look at it. Or how you want to flip the story.

Pilots employed on fixed-term contracts make up about 4% of Singapore Airlines’ total pilots’ workforce.

4% reduction of the pilots cannot be considered drastic by any stretch of measurement.

(Vested)
[ S O U R C E ]

[pianist]

Depends on how you want to look at it. Or how you want to flip the story.

Pilots employed on fixed-term contracts make up about 4% of Singapore Airlines’ total pilots’ workforce.

4% reduction of the pilots cannot be considered drastic by any stretch of measurement.

(Vested)
[ S O U R C E ]

what does it mean by fixed-term contract? how long usually is such contract?

[lonewolf]

The Straits Times reported that it was a 3-yr contract. More interestingly, these pilots are on expatriate terms with up to $5000 a month in housing and other subsidies.

SIA has more than 2,4000 pilots and 76 of these have been asked to go. They will receive a pro-rated gratuity ($30,000 upon completion of contract)

[pianist]

so ang moh piolts on a renewable 3 yr contract..time to fly them back to the western world

[kazukirai]

A blog post by a Mr Emmanuel Daniel (I'm not sure about his background. His bio page on his site takes too long to load) but some anecdotes on the current state of affairs over at SIA. If anything this guy says turns out untrue, then we should be seeing SIA respond in due course.

Anyhow, might be worth noting for those vested. For those not-vested, makes nice reading too.

http://www.emmanueldaniel.com/?p=807

[lonewolf]

Emmanuel Daniel is the founder of The Asian Banker, the most respected financial services industry intelligence provider in the emerging markets. He is also the founder of The Banking Conversation, an online repository of interviews with a wide range of leaders and shapers of the global economy from a financial perspective.

S O U R C E

[specuvestor]

A blog post by a Mr Emmanuel Daniel (I'm not sure about his background. His bio page on his site takes too long to load) but some anecdotes on the current state of affairs over at SIA. If anything this guy says turns out untrue, then we should be seeing SIA respond in due course.

Anyhow, might be worth noting for those vested. For those not-vested, makes nice reading too.

http://www.emmanueldaniel.com/?p=807

This is a great article. I always think management is very important for a company. In that aspect I differ from Buffett: while we agree in buying companies that even a fool can manage, because at some point of time one will, I will be selling out when that happens. An M&A overnight by a fool can change the company totally.

I feel strongly that SIA had been squandering the moat it built up on its past successes, and recent foray into Tiger and Scoot shows that management is getting clueless how to run an airline. The moat will eventually disappear for SIA if they continue to get clueless scholars and military men to run the company.

Even a 败家仔 can't bankrupt the family fortune overnight, but eventually it will.

[touzi]

I feel strongly that SIA had been squandering the moat it built up on its past successes, and recent foray into Tiger and Scoot shows that management is getting clueless how to run an airline. The moat will eventually disappear for SIA if they continue to get clueless scholars and military men to run the company.

How do Tiger and Scoot show that management is clueless how to run an airline?

By the way current CEO has joined the company in 1990. He is unlikely to be a "military man", and even if he was, after more than 20 years he must have been converted to civilian many times over.

I am sure there are some ex Military man among the senior staff of SIA, but that does not mean SIA is totally run by them. Scoot is run by a New Zealander, and the previous Tiger fellow who screwed up big time in Australia is also an ang mo. Moreover if you look at the Board of SIA, there isn't a single Scholar or Military man.

[D123]

Be it for business or leisure, everyone who travels by air would surely have no qualms skipping the flight if they could. Airline flights are just not a desirable good or service. Given its undesirability, people usually want it to cost as little as possible. This results in them choosing to travel by the shortest route or the cheapest route. Most of the time, each route will have a few alternatives flights that can fly you in roughly the same amount of time.

In the end, airlines compete mostly by price. And no matter what airline you are, your price is dictated by the most foolish airline operator, the one with the cheapest leverage, or the one who has the least desire for yield. Anybody with a moderate amount of capital and access to cheap leverage can start an airline with a handful of planes. Competitors are waiting in the wings all the time to enter the moment they can price a trip cheaper than you.

Interest rate and oil price fluctuations can wreck your attempts to control yield. It may be easy to hedge away large spikes but that is usually by accepting a gradual increase. Add to that a duopoly within your key suppliers of air planes and a strong union among a key input - pilots.

So it seems to me that the economics are such that it is difficult to both raise prices, and lower costs. No wonder the airline industry is tough. I'm not sure if any star manager would be able to run an airline successfully over the long run. Some airlines have had moderate success in differentiating their product from competitors by creating a unique brand, but that is usually after they meet the lowest price points (or thereabouts) for their flights (Southwest, Ryanair). Scoot seems to be trying to follow this strategy.

P.S. Not to mention the significant role governments can play to affect the competitive economics.