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Friday, 16 September 2016

A noteworthy contribution from Mike a visitor of the blog


Hi Mr. Luke,

I believe SIA at the moment is still in the greens although probably with less profit due to their intense fuel hedging done before the oil price drop. 

I do agree that Middle Eastern Airlines are doing very well, they grow at a much faster rate and have extremely good penetration into new markets like SEA. An example is Emirates which not only flies to capital cities like Kuala Lumpur in Malaysia, but it has started to fly to other cities in Malaysia too, such as Kuching in Sarawak, which is kind of surprising for a small country.

In SIA's defense, Emirates, Etihad and Qatar have a geographical edge against most other airlines, including SIA. Although SIA boast to be in the geographical center, but compared to Dubai and Doha, Singapore is not that much of a 'center' compared to the Middle Eastern cities.

The strategies used by the Middle Eastern Airlines are also different from SIA's. Using their geographical center, they use their city hubs as the concentrator for passengers, driving all the passengers through their cities before sending them out to their final destinations. SIA, however, does not do that, and it doesn't seem viable to do so either, SIA seems to use the 'direct flight' strategy more often. Because of the differences in strategy, it is no surprise that Emirates is able to ensure a filled outgoing flight using A380 while other airlines maybe struggling. No surprise that Emirates love A380 and is the largest user of the wide bodied A380 and B777.

SIA is also experiencing staunch competition from regional budget carriers like Airasia X and Lion Air. Very few airlines currently carry both the full service carrier and a budget carrier. SIA is one of them which has SIA, Silkair, Tigerair & Scoots. I believe in the next 5-10 years, whether the SIA group will be successful or not depends on the synergy of these subsidiaries within the group, and whether it was a good idea to have such clear distinction between the services by having the four entities rather than just 1 SIA which can cater to various passenger needs. Will the budget carrier subsidiaries drag passengers away from the full service carrier within the group is something we will have to wait and see. Such conflict of interest may not work to the advantage of SIA group as a whole.

Scoot does seem to be doing relatively good for a new airline adding new destinations relatively fast. Maybe the management of Scoot and Tigerair under one holding company would improve Tigerair's performance too which has been in the red for a few years.

Best wishes,
Mike 

17 comments:

Anonymous said...

Great news for consumers but not the competitors.No need to go through KL anymore for flights out of Malaysia and we now have EK for domestic and not just the usual MH and AK. The airline of choice for some Malaysians apart from their own this EK. Timber taukes in Sarawak will be very pleased.

http://www.thestar.com.my/business/business-news/2016/04/06/emirates-malaysia-airlines-add-15-destinations/

Anonymous said...

Emirates flights are multiple sectors and hence, the cheaper air fares. This is appealing in view of the global business slump. Direct flights as in SQ cost more but are more convenient for all, in particular, for business travellers. SQ needs to reinvent itself. Business is about ideas and innovation, not procedures and regulations. The former CEO of MAS, Mueller has left after a short spell and has now become the CIO (Chief Innovations Officer) of Emirates.

A320 neo sexy said...

Lower operating cost means cheaper fares,nothing fancy really.

http://english.astroawani.com/business-news/airasia-first-southeast-asia-operate-airbus-a320neo-aircraft-116852

EK fan said...

SQ focus is on business travel
not on the travel business.

They go knocking on corporations to sell JCL/FCL tickets.
They dont hold road shows for man-in-the-street travels.

If economies dont look bright, neither will SQ.
Business persons fly direct to BJS & SHA from the UK
They also frly direct from NYC, LAX, SFO, ATL to SHA, BJS,
AKL, SYD, BNE, MEL all have flights direct to China.

Why fly to SIN?

SQ is desperate to get married
Access to in-laws for opportunities is crucial.
Its now slow motion death.

Anonymous said...

Agree with Mike. The middle eastern carriers have extremely deep pockets and in addition, their labour costs are much lower as compared to SQ. All these are comparative advantages for them.

Enrich and Skywards member said...

EK is our adopted airline.
If anything happens to MH,
we have EK to fall back on.
AK is good but it is a low cost airline
and we need at least one full service
airline for domestic and international.
I see a lot of synergy between EK
and MH.

It'll be weird to have SQ
as our adopted airline.

Still remember that horrible
MH17 tweet from SQ
like it was yesterday :(

Mike Lim said...

Hi Mr. Luke,

I agree to a certain extend with what "EK Fan" stated. SIA do seem to recognise the importance of business travel. Therefore, they are reinstating direct flights to the US (LAX, JFK, unnamed city) using their new A350-ULR. This isn't new as SIA did service such routes using the A340 which was retired some time ago (Maybe Mr. Luke can give us some information of whether it was fun flying 18 hrs).

For the next 10 years, US will continue to be the largest air travel market and SIA has also tied up with United Airlines through codesharing to increase market accessibility over there.

However, unless SIA will have frequent direct flights, such business travels do not seem to add value to the profit margin of SIA. Although it is easier to just be on one flight all the way to the passenger's destination, it doesn't seem very useful unless you are able to hop off the plane straight into a business meeting looking all fresh and your brain working at full capacity. If not, taking a 1-3 hr stopover at a transit airport in their lounge to rest seems like a more comfortable and cheaper option. Either way, you will still end up in your hotel before heading to a meeting the next day. It does depend on individual preference.

Moreover, even with cheaper tickets, the Middle Eastern Airlines have been able to provide equivalent if not better First and Business class services to SIA's. Another reason why SIA is losing. Yes, cost cutting is essential for the airline business to increase profit margin, so, SIA does need to sort out their operating costs.

SGD100 million annually for staff training seems a bit too much isn't it? Probably, SIA needs to work harder on choosing their staffs carefully, not on looks but more on passion and dedication to continue serving the airline for a longer period. The average retention for CC is 10 years in SIA. Probably meaning a large group leaves after 20 and an equivalent leaves after 2 years of compulsory bond. With over 7500 staffs, it does seem like a worrying trend in some way, probably not much to SIA when their net income is about SGD800 million. However, if you compare spending SGD100 million on staff training annually to SGD800 million net income. It does seem like a lot of wastage.

Not renewing the lease of the A380 is a good move if it is struggling to fill the seats. Airplanes are able to fly safely with 1 engine, having 4 seems like the highest safety level you can get, if you fly a A380 or B747. However, modern jetliners are so safe that flying with 2 engines is more than sufficient. It is not normal to have a double flame-out anyway. So, it is usual to see airliners moving away from 4 engine jets, as can be seen with CX which retired it's fleet of 747 recently.

SIA is also going to change it's fleet into an all Airbus fleet I believe, with A350 set to replace the B777 models. This probably helps in maintenance/service due to the similarity in system and availability of technical expertise, and easier parts inventory management, especially with SIA Engineering tying up with Airbus to have a hub in Singapore. However, it is a bit peculiar why SIA is not standardising the models throughout the group. Silkair will have B737 max 8, while Tigerair will have A320neo and Scoot will have the B787 dreameliners. Interesting collection. Why not Airbus?

Best wishes,
Mike

PS: Thanks for highlighting my comment Mr. Luke. Waiting for more articles from you. By the way, is your personal email working, I wanted to ask a question if that's possible.

Boh Tong said...
This comment has been removed by the author.
Mike Lim said...

Thanks Mr. Boh Tong.

Another fan said...

Yup people in this part of the world
have more to choose from now.

No need to limit to SIA anymore.

Moreover,SIA caters for the wealthy.

Anonymous said...

Do not be fooled by that $100 million training cost.

The cost can easily be discounted by 40% or more. The Singapore Government
gladly disburses money to companies who submit claims for employee training.
Believe you me, SQ claims humongous amounts. Experts in doing so, including
negotiating deals with airline manufacturers and engine suppliers.

For cabin crew training, its their own in-house trainers who are salaried.
Courses can be mandatory or voluntary. The voluntary ones are done at the employee's own time, having to consume their own annual leave. A side effect when, free tickets
are not utilised, let alone sub-load.

If it does not earn money, or save money, SQ is not interested.
Not so romantic is it?

Anonymous said...

A little red dot always bragging about its achievements and taking credit. Just look a the revised criteria for the Elected Presidency. At managing a $500 million portfolio, even Obama, Winston Churchill, Aung Sang Suu Kyi and Ban Ki Mun won't quaify. Only Donald Trump would.

Not an IB said...

Anonymous Anonymous said...

A little red dot always bragging about its achievements and taking credit. Just look a the revised criteria for the Elected Presidency. At managing a $500 million portfolio, even Obama, Winston Churchill, Aung Sang Suu Kyi and Ban Ki Mun won't quaify. Only Donald Trump would.

18/9/16

Dun talk coc*.
We don't need
WP and SDP supporters
sprouting their rubbish
here.

https://duntalkcocklah.blogspot.my/

Anonymous said...

"I do agree that Middle Eastern Airlines are doing very well, they grow at a much faster rate and have extremely good penetration into new markets like SEA. An example is Emirates which not only flies to capital cities like Kuala Lumpur in Malaysia, but it has started to fly to other cities in Malaysia too, such as Kuching in Sarawak, which is kind of surprising for a small country."

Wat u mean small? We got 30mil here.How many u got in Singapore?

Anonymous said...

Whether it is from WP or SDP, it is not for anyone on this blog to give orders. The blogger concerned ought to behave and seriously consider washing his or her face in the toilet bowl.

Anonymous said...

Anti PAP cybernut detected!

Anonymous said...

A sore loser, like a leopard, will never change its spots. Go and wash your face in the toilet bowl.