Air Transport World

Change at Changi: Singapore Airlines aims to maintain its leadership position among the world's carriers but is not willing to leave the low-fare market to the discounters.(Profile)(Company Profile)

BOEING'S CATCHPHRASE IN the early 1990s was "working together," but for Singapore Airlines Group Chief Executive Chew Choon Seng it has become "working together quickly." Speed is needed to insulate SIA from the relentless shocks that have ravaged the airline industry and tourism in Southeast Asia over the past four years: 9/11, avian flu, the Bali bombing, SARS and the tragic tsunami in December.

At the peak of the SARS crisis in June 2003, SIA slashed its flights by 31.5% and was losing S$6 million a day, resulting in a net loss of S$312 million ($183 million) in its fiscal first quarter--the first time this had occurred since the carrier was split from Malaysia-Singapore Airlines in 1972. Temporary staff pay cuts and unpaid leave combined with flare stimulation to enable SIA Group to bounce back to a full-year profit to March 31, 2004, of S$849 million, down 16% on the prior year, while reimbursing staff for lost wages and paying them a 15% bonus.

Recovery continued through the current year as earnings for the first half ended Sept. 30, 2004, totaled S$616 million compared to a loss of S$6.5 million in 2003. Those results also surpassed SIA's performance in 2002 excluding the impact of a S$278 million tax reversal in the earlier period that pushed the net figure to S$774 million.

Despite this swift revival, the impact of SARS refocused SIA management on the need to reduce the cost base so as to ensure that return on equity exceeds the cost of capital, says Chew. Some speculate that the emergence of a vibrant low-cost carrier sector in Asia is also behind the effort, although Chew downplays the challenge airlines like AirAsia pose. "We should keep the LCC threat in context," he says. "Their operations affect only about 10% of our revenue base. We certainly don't ignore it, but we don't blow it out of proportion." Nonetheless, the LCCs have caught the imagination of travelers, and while they may not want to give up the perks of travel on SIA, they are attracted to the LCC fare levels.

SIA is without a doubt today's bellwether for the health of the international airline industry. If it has a sniffle, everyone else probably has the flu. Situated astride the Pacific and Indian Oceans, it has benefited from solid demand for high-yield travel from the enormous business infrastructure in Singapore. …

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