Outsourcing pilot training can keep SIA flying high
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.