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Singapore Airlines sacrificing yields to defend market share
Reuters ? 17 hours ago* Tough competition from Emirates, others on long-haul routes
* Budget carriers taking 50 percent of seats in SE Asia
* SIA " lacking confidence" to price appropriately-analyst
By Anshuman Daga
SINGAPORE, Nov 13 (Reuters) - Struggling Singapore Airlines Ltd is showing little sign of a recovery with passenger yields falling to near four-year lows, highlighting SIA's eroding pricing power in a weak market for premium airlines.
SIA's yields fell for the third consecutive quarter as it faced stiff competition on its medium and long-haul routes from Gulf carriers such as Emirates Airline and others including Malaysian Airline System Bhd and Cathay Pacific Airways Ltd.
Premium-class travel, which makes up about 40 percent of SIA's revenue, has been hit as businesses cut travel spending and budget carriers including AirAsia Bhd and privately held Lion Air are also attracting more passengers and now operate more than 50 percent of seat capacity in Southeast Asia.
" We are going through a period in the world where demand is sluggish, but there's been a lot of capacity growth by many airlines, some more than others," Mak Swee Wah, head of commercial activities at SIA, told Reuters on Wednesday after a presentation to analysts.
On Tuesday, SIA reported a 24 percent rise in operating profit to S$86.9 million ($69.5 million)in the quarter ended September from a year earlier, matching an average estimate of S$87.2 million in a Reuters poll of four analysts.
Passenger yield, or the average price a passenger pays to fly one kilometre, fell to 11 Singapore cents from 11.4 Singapore cents at SIA's flagship airline unit. Passenger numbers rose about 6 percent to 4.8 million.
Promotional activities and a rising Singapore dollar against major revenue-generating currencies pushed yields lower.
" This is one business where there's no one single factor. You have to push all accelerators and at the same time making sure that your cost is under control," Mak said.
Though advance bookings are picking up, SIA expects yields to remain under pressure. Analysts said this was surprising, given that Cathay Pacific was keeping its prices firm.
" Singapore Airlines is obviously just lacking confidence in its ability to price its products appropriately," said Timothy Ross, analyst at Credit Suisse, who cut SIA's net profit estimate for this year by 20 percent and downgraded the stock to " neutral."
" On every basis, Cathay is a much better-run airline," said Ross, adding that Cathay was more nimble, more responsive on products and more aggressive on pricing products appropriately.
To win customers, SIA and its regional arm, SilkAir, said checked-in baggage allowances would increase by 10 kilograms for all classes of travel from Nov. 15. Economy-class passengers will be able to carry 30 kilograms of free baggage.
Under CEO Goh Choon Phong, SIA has been diversifying its revenue streams and aims to create new ones, such as an Indian joint venture for a full-service airline it expects to start operating from next year.
SIA, 56-percent owned by Singapore sovereign investor Temasek Holdings Pte Ltd, started Scoot, a medium and long-haul budget airline last year and it has raised its one-third stake in short-haul budget airline Tiger Airways Holdings Ltd.
" It certainly seems to be running faster just to stand
still. There is a lot of capital being expanded, but it's not
clear that there's going to be a return on that capital," Ross
said of SIA.
($1 = 1.2504 Singapore dollars)
India's Jet Airways posts sharp loss, hit by slowdown
AFP News ? 10 minutes agohttp://sg.news.yahoo.com/tony-fernandes-admits-airasia-screw-ups-japan-europe-072031055.html
Tony Fernandes admits AirAsia screw-ups in Japan, Europe, says London still a target
The Malaysian Insider ? Sat, Oct 12, 2013AirAsia founder Tony Fernandes (pic) admits that the low-cost carrier failed in its ventures in Japan and Europe.
?Japan was a disaster. Our partner didn?t understand what we wanted,? said Fernandes at the Global Entrepreneurship Summit 2013 in Kuala Lumpur today.
AirAsia parted ways with Japan?s All Nippon Airways (ANA) when it sold its 49% stake in AirAsia Japan to ANA in June this year.
Both airlines had clashed over management and operational differences followed by losses amounting to ¥3.5 billion (RM113 million).
Fernandes, 49, has publicly said that he wants AirAsia to re-enter the Japanese market and is on the lookout for financial partners.
?We?ve just got to look for the right one this time because we screwed up the last time,? he added.
He also spoke on the airline?s failed routes in Europe, citing multiple factors for the axing of the carrier?s European routes in March 2012.
?We pulled out of London because we had the wrong aircraft, the A340. The price of oil was US$80 (RM254) at the time. Then it went up to US$130 (RM413). With a four-engine aircraft, it was just not feasible,? Fernandes said, adding that the UK government's green tax is " discriminatory against ultra-long-haul airlines" .
But Fernandes is keen to revive AirAsia?s previously axed routes, specifically to London.
?We've got to be in Europe. There?s a huge demand for London,? he said.
He said in June this year that the company was looking into commencing its flights to Europe once it receives its Airbus A350 aircraft, which are expected to be delivered beyond 2017 ? a timeline that Fernandes says may be too late for the carrier to re-enter the European market.
?We may change the seating configuration and have business class, but we do have to fly to London,? he added.
He also rubbished rumours that low-cost carrier Malindo Air poses a threat to AirAsia, saying: ?I have zero interest in Malindo? our competition is ourselves.?
Malindo is a new joint-venture between Lion Air, Indonesia?s low-cost carrier, and Malaysia?s National Aerospace and Defence Industries (NADI). The airline started operating in March this year. - October 12, 2013.
?Japan was a disaster. Our partner didn?t understand what we wanted,? said Fernandes at the Global Entrepreneurship Summit 2013 in Kuala Lumpur today.
AirAsia parted ways with Japan?s All Nippon Airways (ANA) when it sold its 49% stake in AirAsia Japan to ANA in June this year.
Both airlines had clashed over management and operational differences followed by losses amounting to ¥3.5 billion (RM113 million).
Fernandes, 49, has publicly said that he wants AirAsia to re-enter the Japanese market and is on the lookout for financial partners.
?We?ve just got to look for the right one this time because we screwed up the last time,? he added.
He also spoke on the airline?s failed routes in Europe, citing multiple factors for the axing of the carrier?s European routes in March 2012.
?We pulled out of London because we had the wrong aircraft, the A340. The price of oil was US$80 (RM254) at the time. Then it went up to US$130 (RM413). With a four-engine aircraft, it was just not feasible,? Fernandes said, adding that the UK government's green tax is " discriminatory against ultra-long-haul airlines" .
But Fernandes is keen to revive AirAsia?s previously axed routes, specifically to London.
?We've got to be in Europe. There?s a huge demand for London,? he said.
He said in June this year that the company was looking into commencing its flights to Europe once it receives its Airbus A350 aircraft, which are expected to be delivered beyond 2017 ? a timeline that Fernandes says may be too late for the carrier to re-enter the European market.
?We may change the seating configuration and have business class, but we do have to fly to London,? he added.
He also rubbished rumours that low-cost carrier Malindo Air poses a threat to AirAsia, saying: ?I have zero interest in Malindo? our competition is ourselves.?
Malindo is a new joint-venture between Lion Air, Indonesia?s low-cost carrier, and Malaysia?s National Aerospace and Defence Industries (NADI). The airline started operating in March this year. - October 12, 2013.
Singapore Air and Tata plan full-service Indian airline
" It is Tata Sons' evaluation that civil aviation in India offers sustainable growth potential," the Tata Group's Prasad Menon, who will be the chairman of the planned carrier with Singapore Airlines, said in a statement.
SIA MGT wake up????? Another bad dreams???????