Out­sourc­ing pi­lot train­ing can keep SIA fly­ing high

The China Post - - COMMENTARY - KARAMJIT KAUR

The Straits Times re­ported last week that Sin­ga­pore Air­lines (SIA) may shut its fly­ing school, the Sin­ga­pore Fly­ing Col­lege in Sele­tar, as part of an over­all re­view of its pi­lot train­ing pro­gram.

Sources said that the air­line is look­ing at mov­ing the train­ing out­side Sin­ga­pore where air space is less tight and costs are lower.

SIA did not con­firm or deny if the school would be closed, say­ing only that train­ing re­quire­ments are con­stantly re­viewed and that the air­line re­mains com­mit­ted to de­vel­op­ing pi­lot re­sources in-house.

The school also has a cam­pus in Jan­dakot in Perth, Aus­tralia.

The on­go­ing re­view is a good time for SIA to think about whether it should even be train­ing pilots in the first place.

It is not cheap tak­ing a cadet from ground school to ac­tual com­mer­cial fly­ing.

SIA spends about half a mil­lion Sin­ga­pore dol­lars per trainee, which ex­plains the seven-year bond once a stu­dent at­tains his wings.

Apart f rom hav­ing to main­tain two train­ing f acil­i­ties and pro­vide lodg­ing and meals for the trainees, there are also in­struc­tor salaries and bonuses to be paid, on top of other costs.

The school has seven small train­ing air­craft and three in­struc­tors in Sele­tar, and another 12 air­craft and eight in­struc­tors in Jan­dakot.

Dif­fer­ent from the Old Days

In the old days when there were no third-party providers, car­ri­ers like SIA had no choice but to start their own fly­ing schools.

But things are dif­fer­ent now. Plane­maker Air­bus, as well as other firms like Sin­ga­pore Tech­nolo­gies Aerospace and Canada­head­quar­tered CAE, are in the pi­lot-train­ing mar­ket.

With the de­mand for cock­pit crew set to soar on the back of record air­craft or­ders, es­pe­cially in the Asia-Pa­cific re­gion, the firms are keen to cash in on the growth.

With economies of scale, such schools can of­fer pi­lot train­ing pro­gram and fa­cil­i­ties at more com­pet­i­tive rates than air­lines do­ing the train­ing in-house, ex­perts say.

The other big ad­van­tage of out­sourc­ing is that in a down­turn, air­lines are not stuck with ex­pen­sive fa­cil­i­ties and equip­ment ly­ing idle or un­der­uti­lized, said Paul Yap, who heads Te­masek Poly­tech­nic’s avi­a­tion and aerospace cen­tre.

This is ex­actly what has hap­pened to SIA dur­ing a busi­ness down­turn the last few years, which re­sulted in a sur­plus of pilots and led to mea­sures to trim the ex­cess like ask­ing pilots to take vol­un­tary leave and not re­new­ing the con­tracts of those on ex­pa­tri­ate terms.

With ri­val car­ri­ers like Emi­rates and Cathay Pa­cific breath­ing down its neck, SIA’s bot­tom line has been hit.

While SIA’s prof­its for the three months to the end of June dou­bled to SG$91.2 mil­lion (US$65.04 mil­lion), this was due mainly to lower fuel costs and bet­ter per­for­mance by as­so­ciate com­pa­nies.

“With com­pe­ti­tion in­ten­si­fy­ing, now more than ever, it is crit­i­cal for SIA to fo­cus on its core busi­ness and farm out ev­ery­thing else,” Yap said.

More full-ser­vice air­lines and low-cost car­ri­ers are in­creas­ingly out­sourc­ing pi­lot train­ing, he said.

Fo­cus­ing on the Core

Over a decade ago, Lee Kuan Yew had ad­vised the air­line to divest its non-core ground-han­dling and air­craft main­te­nance arms to stay com­pet­i­tive.

Back in 2004, then Se­nior Min­is­ter Lee said SIA must “trans­form its busi­ness model” and re­struc­ture to cut costs, if it was to con­tinue to fly high.

The late Lee said the air­line should fo­cus on its core busi­ness and en­gage out­side ex­perts to do work that can be hived off, like pre­par­ing in-flight meals.

The in­dus­try had then just emerged from the ef­fects of the dev­as­tat­ing Sars virus which dealt SIA a huge fi­nan­cial blow and fu­elled un­prece­dented clashes be­tween man­age­ment and pilots who were un­happy about pay cuts and other aus­ter­ity mea­sures.

To add to the air­line’s woes, ri­val car­ri­ers were start­ing to nip at its heels.

SIA even­tu­ally gave up its ground- han­dling arm Sats, but kept SIA En­gi­neer­ing which man­age­ment viewed as part of the group’s core busi­ness.

The air­line also out­sourced its in­for­ma­tion tech­nol­ogy work, cut­ting more than 400 jobs.

A decade later, the chal­lenges fac­ing SIA are more in­tense and the need to keep a con­stant eye on costs, crit­i­cal.

From be­ing alone at the top, SIA now shares the spot with other pre­mium air­lines such as Cathay Pa­cific, Emi­rates and Qatar Air­ways.

In a 2013 pa­per, a part­ner at in­dus­try con­sul­tant In­for­ma­tion Ser­vices Group, Har­vey Gluck­man, noted that his­tor­i­cally, car­ri­ers have out­sourced a va­ri­ety of func­tions, in­clud­ing check-in, cargo han­dling, in­for­ma­tion tech­nol­ogy and even fly­ing it­self.

Out­sourc­ing al­lows man­age­ment to fo­cus on the core busi­ness — air­lines can lever­age on a ser­vice provider’s scale, ex­per­tise and sys­tems, as well as ben­e­fit from lower labour and cap­i­tal costs, he said.

As for con­cerns about out­sourc­ing, such as main­tain­ing high lev­els of in­struc­tion and safety, other ex­perts pointed out that air­lines can re­tain con­trol, for ex­am­ple, of train­ing man­u­als and pro­ce­dures.

An ad­di­tional safety net is that all com­mer­cial pilots have to be cer­ti­fied by the re­spec­tive avi­a­tion reg­u­la­tor in the coun­try where the air­line they work for is reg­is­tered.

In Sin­ga­pore, this is the job of the Civil Avi­a­tion Au­thor­ity of Sin­ga­pore, which also ap­proves train­ing pro­grams for all lo­cal car­ri­ers.

Other con­cerns — for ex­am­ple, how out­sourc­ing may get in the way of im­part­ing SIA val­ues to the pi­lot trainees — can easily be ad­dressed with a cus­tom­ized train­ing syl­labus.

Given the cur­rent chal­lenges to prof­itabil­ity, SIA must leave no stone un­turned in the in­ten­si­fy­ing dog­fight for air supremacy — and this in­cludes how it trains its pilots.

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