Singapore Airlines

[freedom]

Several problems with SIA.

For the starter, SIA has too strong a pilot union so that it can't cut cost deep enough when the business is going down. Airline business is not exactly a growing business, especial for the customer segments SIA served. There will always be difficult time for SIA. You will lose for sure when everyone else is cutting cost during the down time, but you can't.

Second, airline market is not a free market. There are too many players with state aid behind, which does not aim for profit, specifically, the gulf carriers and MAS. And unlike the US carriers, SIA does not have a domestic market to protect itself from competitions. This leads to the third point.

Third, SIA should invest into Changi airport during the good times when it earned quite a lot of money. Instead, it pays too much dividends. Without SIA, it would be hard to imagine that Changi airport can be this successful. But SIA did not capitalize on it. If SIA has invested into Changi airpot, not only it could be compensated for part of the rising operating cost from Singapore, but prosper with the growing outlook with Changi Airport as Singapore is still a preferred destination within the ASEAN.

It is hard to imagine that SIA can return to its glory days, except in a few good years. SIA is now more like a utility(runoff) and a cyclical investment.

[LionFlyer]

I was told there is a slight spill over effect as a result of MAS cancellations, although how significant is this to the bottom line is unclear.

Re cargo biz bleeding is well known, it's a 'strategic investment' (maybe they all call this when they dun know wat to do with it.)[/align].

[sgd]

I spoke to a friend who works there, profit margin is very very high just consider the 1st class air ticket for some long haul is around 18k she tells me if on the whole flight economy and business class totally empty except first class fully booked they still can cover and make money.

But agree union is very strong she said those opt retirement get lump sum over 100k thats just for aircrew. But we have to consider why travellers despite high cost and now have so many other cheaper choices still choose sia over others? Perhaps we can say marketing but what I believe and read is also down to training and the personalized attention to detail which can only come from initiative of your employees if you making so much money please only the shareholder but cutback on training and don't care employees welfare they get disgruntled will go or they will not do you will not get this level of service your business eventually also take a hit so there must be a balance.

Remember many years ago there was a pilot strike over pay related issues.

[specuvestor]

Union has been strong for decades. It's not a new factor recently

Neither is the notion of protected national carriers. Recall I've said that countries dont allow national carriers to go down because of national pride so that puts pressure on profitability if one strategises on cost alone. Which is why most value investors steer clear.

Is changi airport strong because of SIA or the other way round? On thing for sure is LKY is very concerned about this ecosystem as key to tourism industry

IIRC SIA dont have a large dedicated cargo fleet? I think cargo is incidental to the passenger business to increase overall load

[freedom]

Singapore used to be a cheap cost center in the earlier days. Of course, the union did not matter much then. How about now when there are so many low cost carriers and the airline business is going down and the fuel price is high? Oh, the solution is what? I did not see any solution but to leave. Yeah, that's how a business should be run. For investors, of course, they can always leave. But for business?

Maybe everyone in Singapore should just leave as Singapore is so small that not everyone can have a big house(like in Australia or US) and the living cost is getting more expensive.

Maybe the new way of investment is that I don't care why it was successful before and why it is down now, but I just know it is a bad investment and it has to fail. ：p

[sgpunter]

I honestly don't see SIA being able to go back to the good old days...pilots are overpaid yet they can't cut costs there, corporates are reducing costs and travel costs are usually one of the first to be cut, "premier" branding eroded badly, low cost carrier business not taking off (sorry for the pun)...Honestly, these days, I think they are grossly overpriced when I can fly cheaper and equal (if not better) on Cathay/Qatar/Emirates.

That being said, I still try to support SIA whenever I can solely for the fact that they are our national carrier...better support ka ki lang then outsiders...

At current price, it just seems overvalued to me even though it has dropped so much as the PE Ratio does not justify a business that is facing so much headwinds.

[greengiraffe]

Qantas unveils new business class suite for its Airbus A330s
THE AUSTRALIAN OCTOBER 21, 2014 2:31PM

Steve Creedy

Aviation Editor
Sydney

Qantas CEO Alan Joyce at the launch of the new Qantas A330 business suite. Source: News Corp Australia

THE battle of the airline comfy chairs is underway in earnest after Qantas revealed the full version of the business class suite it will be installing in its Airbus A330 aircraft.

The seat reveals some extensive modifications to the base model of the Thomson Aero Seating Vantage XL seat to give passengers more working and storage space as well as a fully flat bed.

The airline will begin rolling out the seat in December as part of an 18-month refit.

It will be pitched against Virgin’s charcoal and brushed aluminium B/E Aerospace’s “Super Diamond’’ seat.

Qantas (QAN) says it will have 11 aircraft refitted by the time Virgin’s six A330s are done and five rolled out by the time first Virgin plane debuts.

The flying kangaroo again harnessed the talents of designer Marc Newson to modify the seat, which will be configured to give all business class customers aisle access and the ability to keep the seat reclined during landings and takeoffs.

Qantas has opted for lighter colours than Virgin after its research showed this conveyed a sense of more space.

The seats are 23 inches to 25 inches (58cm-63cm) wide and extend to a 79-inch (200cm) lie-flat bed with a generous footwell capable of comfortably accommodating big feet and sporting a cushioned ottoman.

There is plenty of storage space with a hook to hang headphones, a spot for tablets and notebooks and areas for smaller items such as glasses and mobile phones.

A generous flat workspace means passengers can spread out documents and continue to work while eating.

The new Qantas business class suite.
The new Qantas business class suite.
Those who choose to be entertained will be able to take advantage of the airline’s high definition Panasonic eX3 in-flight entertainment system, with 750 hours of expanded content. The system’s user interface has been redesigned for easier navigation and to capitalise on the tablet-like “swipe’ capability.

The planes will also have the airline’s Q streaming technology, which allows people to use their own digital devices to access content.

Qantas chief executive Alan Joyce said design had included more than 100 hours of sleep trials and been tested by frequent flyers.

“We believe this will deliver the best travel experience between Australia and Asia, and probably the best domestic travel experience anywhere in the world,” he said.

The number of business seats will decline slightly from 30 to 28 but Mr Joyce said modelling had shown there would be enough seats to meet demand, although it could have some impact on the availability of seats for staff.

Virgin used design house ­London Tangerine to tweak it to include features such as a 16- to 18-inch (40cm-45cm) touchscreen entertainment system, storage space that includes a spot for laptops and iPads and convenient shelf space that research shows travellers like.

The 28-inch (71cm) wide, 80-inch-long (203cm) lie-flat seat will be installed on the Airbus A330s used by Virgin on transcontinental routes between March and August next year and on its international long-haul Boeing 777s from November of that year. It will be installed in 1-2-1 configuration that gives all passengers aisle access, something the airline opted to do after Qantas unveiled its plans a year ago.

Qantas has also improved its economy seats.

[CY09]

Assuming post right, SIA owns a 70% stake in Tiger; sustaining Tiger's operations to 2020 will be a massive cash drain on SIA, if the LCC market doesn't turn up (which is likely to be the case). Read at nextinsight, they a quote from the Stan Chart analysts is that a Tiger/Scoot merger is not possible as the Tiger brand has been licensed out for the next 20 years.

Adding to that, I am pretty sure SIA wont want the Scoot brand to die out, as Scoot has done extensive marketing/media presence. So it seems SIA will rather put the "sick Tiger" on life support than out of its misery. SIA will endeavor to support Scoot and Tiger despite the seemingly obvious synergy benefit. While I am not a shareholder of SIA/Tiger, it is interesting for shareholders to ask and observe what SIA will do to rescue Tiger. In my view, Tiger will be a black hole sucking money from SIA.

Post rights, it will have s$45m cash. Assuming Tiger turns around in 2015 and generates s$40M cash annually (this is a tall order but hey! Lets assume this happens), Tiger will still need money from shareholders to fund its aircraft purchases in 2015 and from 2018 to 2020). * See the Tiger thread for more details.

All in all, it seems SIA is refusing to throw in the towel and prefers holding to an entity which will drain its $5 billion cash holdings (which is partly financed by a MTN program). SIA should spend this money privatizing SATS or SIA engineering and reap the full benefits of these cash cows

[weijian]

All in all, it seems SIA is refusing to throw in the towel and prefers holding to an entity which will drain its $5 billion cash holdings (which is partly financed by a MTN program). SIA should spend this money privatizing SATS or SIA engineering and reap the full benefits of these cash cows

SATS had been spinned out of SIA a couple of years back and so Temasek is the majority shareholder instead. SATS now owns catering businesses, attempting to build some pig farm in China (Jilin) and even tried to play funny by trying to gain total monopoly over the cruise ship terminals in Singapore..

OTOH, maybe SIA will attempt some creative financial engineering to load debt onto debt-free 80% owned listed subsidiary SIAEC and use the proceeds to 'invest' in the Tiger?

[opmi]

All in all, it seems SIA is refusing to throw in the towel and prefers holding to an entity which will drain its $5 billion cash holdings (which is partly financed by a MTN program). SIA should spend this money privatizing SATS or SIA engineering and reap the full benefits of these cash cows

SATS had been spinned out of SIA a couple of years back and so Temasek is the majority shareholder instead. SATS now owns catering businesses, attempting to build some pig farm in China (Jilin) and even tried to play funny by trying to gain total monopoly over the cruise ship terminals in Singapore..

OTOH, maybe SIA will attempt some creative financial engineering to load debt onto debt-free 80% owned listed subsidiary SIAEC and use the proceeds to 'invest' in the Tiger?

Sats was made to eat 'dead cat' SFI by T.