Sin­ga­pore Air has pre­mium fly­ers in its sights

The Pak Banker - - COM­PA­NIES/BOSS -

Sin­ga­pore Air­lines Ltd., hurt by com­pe­ti­tion from op­u­lent Mid­dle Eastern car­ri­ers and a rash of bud­get air­lines, is try­ing to re­vive its for­tunes the way it knows best: woo­ing fly­ers with new air­craft.

The car­rier re­ceived its first Air­bus Group SE A350 in Sin­ga­pore Thurs­day. While the new air­craft with its ex­tra-wide cab­ins and a new en­ter­tain­ment sys­tem will set Sin­ga­pore Air apart from lo­cal ri­vals, it might be too lit­tle, too late to turn around its for­tunes.

"This air­craft won't be enough to turn the for­tunes around for the air­line," said K. Ajith, an an­a­lyst at UOB Kay Hian Pte. in Sin­ga­pore, who rec­om­mends buy­ing the stock. "That shouldn't be rea­son to be bullish on earn­ings or traf­fic. Bring­ing back the glory days -- it all de­pends on com­pe­ti­tion."

Sin­ga­pore Air -- the only Asian car­rier to fly the Con­corde and the first in the world to fly the A380 su­per­jumbo -- needs new pas­sen­gers to stem a slide in earn­ings. Oper­at­ing profit has fallen 76 per­cent from a peak eight years ago. Sales reached a high in the year ended March 2009 as the global fi­nan­cial cri­sis crimped pre­mium travel. The car­rier is count- ing on cabin com­forts to lure high­erend pas­sen­gers used to its fully flat beds as well as more price-con­scious cus­tomers.

"At this point in time we are not re­ally see­ing a slower, weaker de­mand on busi­ness class," Chief Ex­ec­u­tive Of­fi­cer Goh Choon Phong told re­porters af­ter the plane ar­rived at Sin­ga­pore's Changi Air­port. "But with the kind of out­look we're see­ing in the world econ­omy, we do ex­pect that it will af­fect busi­ness de­mand at some point. That is some­thing we will watch out for."

Qatar Air­ways has flown the plane for a while, as has Fin­nair, which has a deep reach into Asia, so Sin­ga­pore Air doesn't have any brag­ging rights for com­ing first. That's a de­par­ture from the A380 jumbo, spear­head­ing a new di­men­sion of lux­ury travel that in­cluded fully en­closed cab­ins in first class.

"This air­craft is hugely im­por­tant for Sin­ga­pore Air­lines," said Shukor Yu­sof, founder of avi­a­tion con­sul­tancy En­dau An­a­lyt­ics in Malaysia. "The A350 will hope­fully re­ju­ve­nate them and re­vive their for­tunes in the pre­mium and also the pre­mium-econ­omy sec­tors, which they are fo­cus­ing on."

The new plane will be a "gamechanger" for the com­pany amid in­creas­ing com­pe­ti­tion, Goh said.

"We ac­knowl­edge that com­pe­ti­tion," he said in an in­ter­view on board the A350 in Toulouse, France, Wed­nes­day. "It's some­thing I've been open about. That, plus the emer­gence of new, low-cost car­ri­ers, has struc­turally changed the land­scape for us, es­pe­cially in South­east Asia."

Sin­ga­pore Air will be the fifth air­line to op­er­ate the twin-aisle A350. The air­craft will be­gin fly­ing to Am­s­ter­dam May 9 and Dus­sel­dorf in July, while an ul­tra-long-range ver­sion is planned for non­stop flights to New York in 2018.

Goh has or­dered 67 A350s to ex­pand the fleet and bet­ter com­pete with Emi­rates and Qatar Air­ways Ltd., whose pas­sen­ger num­bers have both more than dou­bled in the past decade. While ris­ing in­comes in Asia are spurring air travel, bud­get air­lines are forc­ing full-ser­vice car­ri­ers to pro­vide greater value for money in the fight for cus­tomers.

Air­bus says the A350 con­sumes 25 per­cent less fuel than Boe­ing Co.'s 777 air­craft, while its in­te­rior is 6 inches (15 cen­time­ters) big­ger than its near­est com­peti­tor. Sin­ga­pore Air's 253-seat A350 has 42 busi­ness class seats equipped with the pre­set loungestyle po­si­tions of "Sun­deck" and "Lazy Z" that are al­ready in its 777300ER air­craft.

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