Singapore Airlines said Monday it will cut 17 percent of its operating fleet and is exploring other cost-saving measures amid a global economic slump which has hit travel and cargo demand.
The airline, one of Asia’s major carriers, said in a statement that it will decommission 17 passenger aircraft over the financial year from April 2009 to March 2010, instead of just four as originally planned before the global downturn hit major markets.
An airline spokesman said Singapore Airlines (SIA) had 102 passenger aircraft as of February 1.
“The drop in air transportation has been sharp and swift,” SIA chief executive Chew Choon Seng said in the statement.
“Given the falls of over 20 percent that we have seen recently in air cargo shipments and the tradition of demand for air travel following closely behind trends on the cargo side of business, we have to face the reality that 2009 is going to be a very difficult year.”
SIA said it made the decision in view of falling demand which is reflected in advance bookings. The cuts will translate into an 11 percent reduction in capacity from the preceding 12 months, it said.
“It’s going to get worse,” said Shukor Yusof, an aviation analyst with Standard and Poor’s. “It is likely that layoffs will come next.”
Chew said job cuts would be only a last resort, but the airline management had met with the leaders of its labour unions about plans to cushion the impact of the downturn.
This includes asking staff for voluntary unpaid leave, early retirement, shorter work months and accelerated clearance of leaves.
“If there are to be cuts in salary, the management will be the first to take them,” Chew said.
SIA said recently it will push through with all its current orders, including 13 Airbus A380 superjumbos — the world’s largest passenger plane — 18 A330s and 20 Boeing B787-9 “Dreamliners”, so that it can retire older aircraft.
After the latest announcement there was no immediate word from the airline — the first to fly the A380 — on whether those plans remain.
SIA’s latest announcement came just two days after it said it will indefinitely suspend its thrice-weekly service from Singapore to Vancouver from April 25 due to poor passenger demand.
Chew said that unlike airlines of bigger countries, SIA does not have a domestic operation to soften the impact of the slump in international traffic, so the management must act decisively.
“We have determined the capacity to be operated that will enable the airline to remain viable in a shrinking market, but the removal of surplus capacity will result in redundant resources and will draw sacrifices from every one of us in the company,” he said.
“We will contemplate retrenchment only as a last resort but we do not have the luxury of time and we need to agree and act on some measures quickly so that we can push back the point of retrenchment as far as possible and improve our chances of avoiding it altogether.”
SIA reported a 42.8 percent fall in net profit in the third quarter to December from the year before as it carried fewer passengers and cargo. It also forecast a bleak outlook for this year.
The airline announced late last month the suspension of some international flights to India, Southeast Asia, the United States and Europe. It also said it was reducing an all-business-class service to New York and Los Angeles.
“Compared with Cathay Pacific Airways or Qantas, SIA’s latest results looked strong but the airline is flying into very turbulent, treacherous weather. And its profits are going to fall substantially,” Yusof said.
Singapore Air to decommission planes as travel drops
Chan Sue Ling
Singapore Airlines Ltd., Asia’s most profitable carrier, will slash seat capacity 11 percent as the global recession hammers demand for air travel.
The airline will take 17 passenger planes out of its fleet in the fiscal year beginning April, it said in a statement to the Singapore stock exchange today. The carrier had earlier planned to remove four planes from its fleet of 102 aircraft before the recession deepened.
Chief Executive Officer Chew Choon Seng has slashed flights and lowered surcharges to survive a global economic slowdown that has already pushed British Airways Plc, Korean Air Lines Co. and Japan Airlines Corp. to losses. Singapore Air, which last week reported its biggest drop in quarterly profit in at least five years, may need to accelerate capacity-reductions as cuts in travel budgets and job losses sap demand.
“The industry is saddled with overcapacity and we’re going to see serious cutbacks in capacity over the next two years,” said Jim Eckes, managing director of industry adviser Indoswiss Aviation. “There’s no good news right now.”
Asia-Pacific passenger traffic sank 9.7 percent in December, while freight volumes tumbled 26 percent, the International Air Transport Association said on Jan. 29. The traffic declines for both passengers and freight were the biggest of any region, the trade group added.
“The drop in air transportation has been sharp and swift,” Chew said in the statement today. “We have to face the reality that 2009 is going to be a very difficult year.”
Singapore Air, the world’s largest airline by market value, declined 1.5 percent to S$10.44 at the close of trading in the city today. The stock has declined 7.3 percent this year, extending last year’s 35 percent tumble.
January passenger numbers dropped 10 percent to 1.446 million, the airline said today in a separate statement. The carrier filled 74.1 percent of its seats last month compared with 80.5 percent it packed a year earlier.
China Eastern Airlines Corp., Qantas Airways Ltd., Cathay Pacific Airways Ltd. and other Asia-Pacific carriers have slashed capacity or grounded planes as the global slowdown saps demand.
Singapore Air last grounded planes when a respiratory virus halted travel in 2003.
The airline has reduced fuel surcharges thrice since September and cut back on flights to the U.S., Canada and India to reflect the lower demand for air travel.
The carrier hasn’t deferred deliveries of new aircraft yet, spokesman Stephen Forshaw said in a phone interview today. As at Jan. 1, the airline had 102 planes in its fleet, with another 72 on firm order or on lease, according to its Web site.
Current capacity plans by Asian airlines, excluding China, point to a contraction of seats of only 1.6 percent in 2009, a Jan. 22 report by Bank of America’s Merrill Lynch said. That compares with traffic declines of 8 percent, it added.
Singapore Air will consider job cuts only “as a last resort,” it said. The carrier held talks with labor unions on measures to reduce costs, including voluntary leave without pay, early retirement and shorter work months, it said.
“We will contemplate retrenchment only as a last resort, but we do not have the luxury of time and we need to agree and act on some measures quickly,” Chew said.