SilkAir to stay separate from Singapore Airlines: CEO Foo

06-Oct-2017 Intellasia | Nikkei | 6:00 AM Print This Post

New Boeing jets to boost group’s Asian reach, starting with Hiroshima flights

SilkAir, Singapore Airlines’ regional arm, is to stay separate from its parent, at least for now, said Foo Chai Woo, SilkAir’s chief executive, on Wednesday.

“We still see the benefit of maintaining separate operations and the separate branding of SilkAir,” Foo said.

But analysts believe a full merger of the two premium brands is a matter of time, as the group revamps its operations in hopes of competing more effectively in a tough market.

“We certainly see demand for our products”, Foo said. “Boeing’s 737 Max 8 presents us [with] great opportunities to do more,” he said, referring to the airline’s newest jets, which arrived in Singapore the same day. “The Max 8 puts us in a stronger position to compete and offer a better value proposition”, he said.

Strength in unity?

SilkAir, a full-service airline fully owned by Singapore Airlines, flies within Asia. The group has another brand, low-cost carrier Scoot. There have been market rumours that SilkAir will be integrated to Singapore Airlines to improve efficiency. In July, Scoot absorbed the now-defunct Tigerair discount airline to streamline operations.

Merging SilkAir with Singapore Airlines “would make a lot of sense. It would generate efficiency and ensure a consistent product at the full-service end of the market,” according to Brendan Sobie, chief analyst with aviation think tank CAPA. “They have pursued closer integration in recent years, and I think inevitably they will look at merging the two entirely,” he added.

“SilkAir’s cost structure is 71 percent higher” than the group’s low-cost carrier business, said Corrine Png, CEO of Crucial Perspective. “But its product and service tend to fall short of [Singapore Airlines'] mainline business, which may leave some passengers feeling shortchanged,” she said.

“SIA Group should just keep two brands, one premium airline and one budget airline,” Png said.

Singapore Airlines is restructuring. It set up a “transformation office” in May to review operations. “We will leave no stone unturned,” said the group’s chief executive, Goh Choon Phong, at the time. Revenue and overseas accounting for SilkAir and Singapore Airlines were merged earlier this year. But, said Nicholas Ionides, Singapore Airlines vice president for public affairs, “There is no parallel between this move and the recent merger of Scoot and Tigerair.”

With its new aircraft in hand, SilkAir plans to expand into new markets. On October 30, the carrier is starting service to Hiroshima, its first destination in Japan. The airline has ordered 37 of the new 737 Max 8s, which will also fly to current destinations, including Darwin, Australia, and Kathmandu.

The Max 8 jets are 14 percent more fuel efficient than the airline’s current fleet, according to Foo, and equipped with spacious business-class seats. “They will put us in a stronger position to compete in a highly competitive market,” he said.

SilkAir has been leading the group’s capacity expansion for the past few years, riding a wave of growing demand for air travel in Asia. For the April-June quarter, SilkAir’s capacity grew 11.6 percent, while passenger volume rose 12.4 percent. “The airline will likely add capacity at a double-digit rate for the next several years,” said CAPA’s Sobie. During the April-June period, parent Singapore Airlines’ capacity shrank 0.8 percent, reflecting weak demand for long-haul flights.


Category: Singapore

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