Singapore Airlines

[Layman A]

I have be keen on SIA since more than 10 years ago, and yet I have not been able to pick up some SIA shares.

Why ?
There is just too many unknown variables that could hit the airline business hard.

Just to name a few :

1. Recession.
In a recession, people travel less, airline suffers.

2. Epidemic.
SAR in 2003 turn the whole asia airline business into ghost town.

3. Vocano eruption.
Vocano ash cloud from Iceland caused chaos in 2010 and caused many airports in Europe to shut for 2 weeks. About 100,000 flights were cancelled, causing billion of dollars of losses in airline revenue.

4. Oil crisis, fuel cost.
Escalation of fuel prices will definitely eat into the bottom line of the airline business.

5. Terrorist attack, war, political crisis.
War and terrorist attack will caused tourist number to dwindle.
Bali bombing, recent Thailand political crisis are just a few good examples.

6. Airplane accident
Airplane crashed, airplane shot down by terrorist, airplane disappeared.
Till now, the disappearance of MH370 still hurt the number of traditional tourists from Mainland China who used to travel Singapore, Malaysia and Thailand as a whole package.

etc. etc. etc.

[freedom]

With SIA Engineering trading almost 4 times of book value and SIA trading below book value, SIA should seriously consider selling down its shareholding in SIA Engineering and reinvest in its airline operation or return the money to its shareholders. SIA Engineering is not a big profit contributor to the overall group when SIA is doing well.

The regional business of both Silkair and SIA will continue under pressure from other national airlines such as Thai Air/MAS/Garuda, as the reputation and service of the competing airlines go up and are cheaper than SIA because they operate in a overall cheaper environment. It is very tough to be better from good, but it is much easier to be good from bad.

The European routes will continue being pressured by the like of Qatar/Emirates which could operate under huge loss(my guess) given their lower fare and not bad service. I am not sure how much the European routes contribute to the profit of SIA, but if it is big, SIA will be in trouble for a long time.

Unlike a lot of other airlines, which has a large domestic market with rational competition, especially the US ones, SIA will constantly be under attack from all international airlines. If during the good days, SIA can invest into Changi Airport, at least it could lower its operating cost or recoup some money from all the competitions. But sadly, Temasek probably would never allow it to happen.

[Shrivathsa]

With SIA Engineering trading almost 4 times of book value and SIA trading below book value, SIA should seriously consider selling down its shareholding in SIA Engineering and reinvest in its airline operation or return the money to its shareholders. SIA Engineering is not a big profit contributor to the overall group when SIA is doing well.

The regional business of both Silkair and SIA will continue under pressure from other national airlines such as Thai Air/MAS/Garuda, as the reputation and service of the competing airlines go up and are cheaper than SIA because they operate in a overall cheaper environment. It is very tough to be better from good, but it is much easier to be good from bad.

The European routes will continue being pressured by the like of Qatar/Emirates which could operate under huge loss(my guess) given their lower fare and not bad service. I am not sure how much the European routes contribute to the profit of SIA, but if it is big, SIA will be in trouble for a long time.

Unlike a lot of other airlines, which has a large domestic market with rational competition, especially the US ones, SIA will constantly be under attack from all international airlines. If during the good days, SIA can invest into Changi Airport, at least it could lower its operating cost or recoup some money from all the competitions. But sadly, Temasek probably would never allow it to happen.

I guess the reason for the SIA Engineering stake is strategic to act as a buffer for SIA profits i.e. when times are bad, it makes sense to have the SIA Engineering profit to contribute.

For all you know, they might do a in-specie distribution as well if they want to hold some cash.

[greengiraffe]

Singapore's Tiger Airways, Scoot win anti-trust immunity
192 words
8 Aug 2014
Reuters News
LBA
English
Copyright 2014 Thomson Reuters. All Rights Reserved.
SINGAPORE, Aug 8 (Reuters) - Singapore's competition watchdog has cleared a proposal from struggling budget airline Tiger Airways Ltd and Scoot Pte Ltd to extend their partnership in a move that is expected to help both carriers boost traffic.

As part of the anti-trust immunity, the two airlines will be able to collaborate on pricing, sales, scheduling and other matters, a tie-up that analysts said could make it easier for Singapore Airlines Ltd (SIA) to restructure both companies.

"The alliance will also enable Scoot and Tigerair to collaborate closely on connecting traffic via Changi airport, supporting the Singapore aviation hub and broader economy," Tiger and Scoot said in a joint statement on Friday.

SIA owns about 40 percent of short-haul operator Tiger and 100 percent of medium-to-long haul operator Scoot. In May, Lee Lik Hsin, a 20-year veteran of SIA and a board member of Tiger, became the CEO of the budget airline, in a sign that its largest shareholder will wield greater influence at Tiger. (Reporting by Anshuman Daga)


Thomson Reuters (Markets) LLC

Document LBA0000020140808ea88004d2

[CY09]

Both have SIA/Temasek controlling influence, therefore its a matter of time before they collaborate.

Secondly, if they are buddies buddies, I never understand the need to have similar flight routes and compete against each other (Singapore-Taiwan, HK, Phuket, Bangkok, perth etc) in the first place. its plain stupidity to be competing with each other for the same group of consumers/routes, imho. If you look at SIA and Silkair, SIA rarely competes with Silkair routes or target the same consumer class.

You may say tiger is short haul, scoot is mid-long haul, but if you see their routes, there is an awful number of ovarlaps.
If I am SIA, I will tell Tiger to focus on flights of <3 hour radius and south asia and give scoot >3 hr radius and east asia/aussie. This prevents cannibalization of each other.

Some History lesson: Tiger is never 100% owned by SIA, its merely a JV and the reason why SIA did so is likely because it was unwilling to shoulder all the risk of starting a LCC as it did not have an expertise. it was only when SIA fully recognized the potential of LCC that creating "Scoot" was conceived in 25 May 2011.

[Art or Science]

exotic name..

---------------------

Vistara will take delivery of its first plane, an Airbus A320-200, in September. It plans to increase its fleet to 20 aircraft, including A320neos, by the end of the fifth year of operation.

http://www.channelnewsasia.com/news/busi...07274.html

[greengiraffe]

Out of thin air: profits lay in loyalty points program

THE AUSTRALIAN SEPTEMBER 06, 2014 12:00AM

Richard Gluyas

Business Correspondent
Melbourne
Airport Generics for Online
Frequent flyer programs can effectively become licences to print money, with reward points conjured from nothing and onsold to partners. Picture: Stuart Milligan Source: News Limited
LEGENDARY investor Warren Buffett once used the defence of “temporary insanity” to explain a failed investment in a US airline in the late 1980s.

Now, whenever he’s gripped by the temptation to invest in an airline stock, the sage of Omaha says he dials a toll-free number so a counsellor at the other end of the line can “talk me down”.

The airline industry, with its curious allure, has confounded the world’s most astute investors, who have repeatedly tripped up on its huge fixed costs, strong and sometimes militant unions, and wild gyrations in commodity prices, particularly for aviation fuel.

Buffett, though, might be tempted to take a second a look at frequent flyer schemes.

Many of these loyalty programs churn out massive profits, even as the airline businesses that host them are awash in red ink.

Announcing a 2014 underlying loss of $212 million last week, ­Virgin Australia chief executive John Borghetti said the airline would sell a 35 per cent stake in its Velocity rewards program to the private equity firm Affinity.

The deal valued Velocity at $960m, which is equivalent to two-thirds of the airline’s $1.45 billion market value, despite the scheme’s relative immaturity — by the end of 2017, the partners want to grow its membership from 4.5 million to 7 million.

Qantas, after a nine-month review, has decided to maintain full ownership of its program.

Based on a membership of 10.1 million and last year’s $286m in earnings before interest and tax, the scheme is estimated to be worth $3bn — an extraordinary 88 per cent of the market capitalisation of its parent, which reported operating loss last year of $646m.

Frequent flyer programs can effectively become licences to print money, with reward points conjured from nothing and onsold to partners like credit card companies and supermarkets.

The partners, in turn, use the points to attract and reward customers, who swap them for free flights and seat upgrades, or go shopping in frequent flyer stores.

Buffett’s concerns about fleet costs, expensive wages and unpredictable fuel prices tend to fly out the window with loyalty schemes, where the main task is collection of a lazy profit margin from issuing points at a higher price than their subsequent redemption.

It’s money for jam. The collection of data is also valuable for the airline and its partners, as they ­tailor product and service offers to individual customers.

Last month, Qantas launched the Qantas Golf Club — an online community where points can be earned for playing golf, with members able to book tee times and access travel packages to visit some of the world’s best courses.

As the only two domestic carriers to offer points, both Qantas and Virgin tend to get a bit dewy-eyed about the loyalty of their customers, pumping out a lot of fluffy and feel-good marketing material.

The customer perspective is somewhat different, if Clifford Reichlin from the online forum The Australian Frequent Flyer is any guide.

Reichlin, a former Ansett employee and industry consultant, says frequent flyer points are a “promotional and marketing currency” designed to get customers to fly more. “What they really want to do is to convert the occasional traveller into a frequent traveller,” Reichlin says.

“It’s not a loyalty program and has nothing to do with loyalty. The airlines aren’t rewarding you for flying with them; they’re trying to get you to buy more airline tickets, preferably the pricier ones.

“If it were a straight-up loyalty program, your points wouldn’t expire and the programs wouldn’t be so difficult to figure out.”

Because of the complexity of the schemes and the wide range of variables, it’s difficult to put a value on the points themselves.

Reichlin told the consumer group Choice in March that the airlines had continually reduced the value of their frequent flyer points over the last decade or so, but not in ways that were obvious to consumers.

That might be so, but it’s impossible to displace the conviction held by most consumers that loyalty points means they’ll get something for free. Points become a second currency, which the airlines retain the right to print.

[opmi]

Yes. SQ krisflyer is hidden assets if SIA can unlock. Air Canada puts % of the Aeroplan frequent flyer program into a trust to cash out.


Sent from my iPhone using Tapatalk

[CityFarmer]

Both TigerAir and Scoot are bleeding amid the "crowded skies"(?), not due to poor management? AirAsia is providing a good case study for budget carrier...

(not vested)

Scoot bleeds $25 mil in 2 years amid crowded skies

Scoot, Singapore Airlines’ long-haul budget carrier, has opened its books for the first time and the picture is not pretty. It revealed losses of more than $25 millionin less than two years, the Straits Times reported.

The red ink comes amid intense competition among Asia- Pacific carriers - both full-service and budget - seeking a slice of a growing market.
http://www.theedgesingapore.com/the-dail...skies.html

[specuvestor]

Probably instructive to reread our discussion 20 months ago and see in real time how management missteps can take years to grind a good company into mediocrity

http://www.valuebuddies.com/thread-261-p...l#pid46224

Time is the friend of the wonderful company, the enemy of the mediocre. I do hope for Singapore's sake they get better calibre management that understands what our formula was.