FOXTROTS

Fox – sly.  Trots – left-leaning (Trotsky) plus its more insalubrious meaning.

Foxtrots – leading the industry in a dance.

 

PAGPFT: Singapore Airlines.

PAGPFT (pronounced PAG-puffed); People Are Getting Paid For This.

One quarter’s (bad) results would not really warrant a change in strategy. But two?

 

Singapore Airlines (SIA) should at least take a good look at what it is doing – corporately-speaking – and see if there is a need to make changes. Total revenue was down in the last two Qs – a bad sign. By -1.0% Jan-Mar and -4.1% Apr-Jun. And operating loss grew 36.4% Jan-Mar and operating profit fell 51.7% Apr-Jun.

 

For me, the changes needed were included in a special report on the SIA group in the December 2013 issue of our Travel Business Analyst newsletter. In essence, the SIA group needs to:

 

-Shut down Scoot, and merge its operations into Tiger.

-Increase its ownership in Tiger, to at least 51%, and rationalise aircraft fleet (such as Scoot’s too-big ex-SIA B777s).

-Expand Silk into an LCA*, which means operating on some medium- and long-haul routes, sometimes in competition with SIA. (It might even be able to take on some of Scoot’s B777s – although we think they are probably too big for most routes, at least to begin with.)

 

Not mentioned in the analyses of SIA recent results is the damage that I see Emirates doing to SIA’s business, and even its business model – which, ironically, Emirates copied.

 

Plus the fact that total traffic into SIA’s main point in Europe, the UK, is falling. In fact, that may be a statistical quirk. Because, say, an Emirates passenger flying London-Dubai and then connecting for Dubai-Singapore (or wherever), would not show up in statistics as a UK-Singapore passenger, but UK-Dubai.

 

Is SIA management strong enough to make such important decisions? There are not good signs. With its Virgin Atlantic 49% share, for instance, I had been saying for seven years that the alliance was not working. SIA management was in denial for another five years before admitting they wanted to sell.

 

And note also that SIA did not give a presentation this year on its Apr-Jun results – which usually specifically shows what is up and down, and by what percentage. It produced just an SGX announcement and a news release. Hold your head down when you have done something wrong?

 

*LCA = low-cost-airline. (Not a no-frills-airline.) An full-service-airline but with lower operating costs (cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for instance), fewer fare types, which may have first and business cabins, and which allows bookings through travel agencies etc.) Usually similar to the parent airline, but a different name, and competition against parent airline allowed.)

 

 

The Fox

Remember, I’ll be famous after I’m dead.