FOXTROTS
Fox – sly. Trots – left-leaning (Trotsky) plus its more insalubrious meaning.
Foxtrots – leading the industry in a dance.
October 13 2011
Singapore Airlines. Under threat?
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RE we witnessing the end of a 30-year period of dominance? When Singapore Airlines has been what it claimed – “the airline other airlines talk about” (or similar)?
For more than a year now, I have occasionally reported that Singapore Airlines (SIA) is under-performing in its home market. For longer than that, I have noted that Emirates took the SIA business plan and made it better – albeit mainly because Emirates’ geographical location is better.
Singapore is good geographically for sixth-freedom traffic for not much more than Europe-Australasia. But that isn’t a giant market. Emirates’ Dubai, however, is good geographically for sixth-freedoms for a good share of the world – Kuala Lumpur-Lagos one stop, for example, or Manchester-Manila.
Emirates also provides good inflight service (arguably not as good as SIA though), and good prices (ie, low). SIA has moved away from its early-days good prices; it now generally charges a premium.
SIA management has not yet realised that passengers might be willing to pay more (20%?), but not a lot more. But when the premium is closer to 50% and the service of competitors is ‘good enough’, SIA will lose passengers.
In the year-to-date, SIA’s growth of 2% compares with the market’s 11%. That is a serious gap, and it is not just this year. SIA has been under-performing its home market on and off for about two years.
Worse, the SIA group is becoming dysfunctional. Following a disastrous purchase of a no-power 49% share of Virgin Atlantic a decade ago*, it launched Tiger Airways, a low-fare-airline, holding 33% of the shares, into a crowded market. That might have been a good move, but it is hard.
There have been operational problems with Singapore-based Tiger, but not too serious. Much more serious was the Australian-government-ordered shutdown this past summer of the Australia-based Tiger – for safety reasons. The airline is now flying again, on a restricted schedule, but this is, or should be, a serious corporate setback for the SIA group.
Silk Air, another subsidiary, is doing well, although I have long argued that there is no raison d’etre for the airline. Why not operate those routes as Singapore Airlines? I did note, however, that if Silk was turned into a lower-cost (not necessarily low-fare) subsidiary, ready to operate on all routes, including medium- and long-haul, then there would be some reason to have a separate airline.
(That’s as Jetstar International does for Qantas. I call them JPAs – J-Plan Airlines.)
SIA’s planned launch of a low-fare long-haul airline – what I have name Swing, for Singapore Wing – appears to indicate that management knows there is a problem at the core SIA airline.
(My relatively-minor criticisms of Swing’s launch plans were included in the September issue of People-in-Travel.)
But those YTD figures noted above should introduce some urgency into Swing’s launch. SIA talks casually of mid-2012, and it has not even given the airline a name. Launch should be April 2012 at the latest, and it should incorporate Silk Air routes. Or Silk Air should morph into Swing.
Any other way, then SIA may continue to fade – as Air India, Malaysia Airlines, and Thai Airways have done before it.
(*Before that, there have been still-born plans to launch airlines in India and Taiwan. And ones management perhaps wished had been still-born – into Air Lanka, and into Ansett/Air New Zealand in Australasia.)
The Fox
