Published January 29, 2009

SIA to cut back on half-empty flights

Airline may slash up to 300 flights this quarter to increase its efficiencies

By VEN SREENIVASAN

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(SINGAPORE) Amid the harshest operating environment seen in years, Singapore Airlines is slashing up to 300 flights this quarter. It is cutting capacity on routes where loads are weak and on days when yields would be low.

Slowing down: SIA is also pruning its trans-Atlantic, non-stop, all-business-class flights to New York to five weekly services, instead of daily flights, from Feb 17

Service cuts will be selective and dynamic. On routes served by multiple daily flights, SIA spokesman Stephen Forshaw said: 'We will be monitoring demand continually and matching it against capacity.'

Passengers will have plenty of time to respond to changes, he said. 'We will need to make schedule changes to help contain costs, but the objective will be to make them with sufficient lead time for customers. We don't want to be making last-minute changes that are disruptive for customers.'

On a system-wide basis, SIA is expected to cut about 3 per cent of its 780 weekly flights. But on an available seat kilometre (ASK) basis, this could work out to less than 3 per cent as many of the cuts will be on short- and medium-haul routes.

Affected routes include New Delhi, Mumbai and Zurich, where weekly services will be cut from 14 to 12. Hyderabad will have three flights a week instead of four, while London will have 19 instead of 21.

SIA has also pruned its trans-Atlantic and trans- Pacific, non-stop, all-business-class flights to New York and Los Angeles to five weekly services each, instead of daily flights. There will be no flights on Tuesdays and Wednesdays. The cuts take effect from Feb 17.

'We don't want to be flying half-empty planes around the world any longer than we have to, because it increases our cost burden at a time when we can least afford that,' said Mr Forshaw.

In South-east Asia, two services between Singapore and Bangkok will be suspended from next month until the end of the northern winter. And routes including Amritsar and Singapore-Bangkok-Osaka have been scrapped.

The airline has also been cutting seat numbers by replacing larger planes with smaller ones. For instance, its Singapore-Hong Kong-San Francisco service is now operated by B777-300s instead of B747-400s, cutting 97 seats per flight.

All this comes as SIA is poised to take delivery of 19 285-seat A330-300s, six of which will arrive in the next 12 months.

The airline, which will unveil its third-quarter financial numbers in less than two weeks, has seen premium passenger numbers weaken steadily over the past four months amid the global economic slowdown. This is worrying because it gets almost half of its income from front cabins.

SIA has declined to reveal passenger numbers, citing the 'blackout period' prior to results. But the Association of Asia Pacific Airlines last week released data showing its member airlines, including SIA, carried 1.8 per cent fewer passenger last year than in 2007.

SIA has managed to keep passenger loads in the mid-70 per cent levels by dynamic capacity cuts and promotional fares.

But its cargo side continues to struggle, with load factors below break-even. The airline has grounded at least 13 freighters and has asked its 300 cargo pilots to take several days of voluntary no-pay leave.

Asia-Pacific carriers including SIA collectively account for 44.6 per cent of global freight. As such, they have been bruised by the 6.1 per cent fall in cargo traffic last year.

SIA Cargo sank into the red to the tune of S$67 million in the six months to Sept 30, 2008, compared with a S$17 million profit a year earlier.

While lower fuel prices have brought some relief to the industry, SIA is locked into a fuel hedge at US$115 a barrel - arranged when fuel soared past US$150 a barrel last year. Some analysts fear this could drag down the airline's earnings this year. SIA hedges up to 60 per cent of its fuel needs.

There seems to be little relief in sight for the industry overall. Passenger traffic is expected to fall 3 per cent worldwide this year and cargo could fall 5 per cent, according to the International Air Transport Association, which is forecasting an industry loss of US$2.5 billion in 2009 after a US$5 billion loss last year.