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Monday, 12 September 2016

Once the most profitable airline is now struggling to make money

Some 48 years ago when I joined the airline  MSA (SIA's predecessor), it was very profitable. When it split with Malaysia, SIA carried on making big profits for many years until recently.
So what has gone wrong? Profits have dropped significantly and we are no longer the best and most profitable airline in the world.
My opinion is that when SIA was a smaller airline, it was leaner and stronger. However, we now see the likes of Air Asia and other budget carriers as well as the Middle Eastern Airlines offering cheaper airfares, better facilities and services.
It used to be us offering cheaper fares and freebies on our flights back then. Many of our competitors were upset with SIA. We offered free earphones for inflight music and movies as well free alcohol on all our flights whereas most of our competitors weren't allowed to do the same. We refused to join IATA because being a member, we weren't allowed to offer freebies to our passengers.
As we expanded our business and became renown for our services, we had little choice left but to join IATA. Becoming a member of IATA, we could get more landing rights.
As the years went by, we see a decline in our profits. Now it is the other way round, the budget carriers and Middle Eastern Airlines are taking a bigger share of the pie.
What can SIA do to take back the bigger share of the pie? Cut cost? Innovations? or whatever.....

21 comments:

Anonymous said...

An airline is doomed to fail the day they decided to cut cost, and to promote people vertically in the organisation. SIA's success formula was its cabin crew, but today its crew culture is grossly outdated yet the management chose to retain the old guards and allow them to rationalised all the wrong things. They promote outdated people and make them inflight auditor. They put crew with little corporate experience into CCE. They elect a paper union whom dare not push boundaries. Good luck to this airline. I won't be surprised to see it to fall from grace.

Anonymous said...

The future is budget carriers and Middle Eastern Airlines.SIA has a bleak future.

Anonymous said...

Service provided provided by budget carriers are merely basic and are only good for as long as unfortunate incidents do not happen as a delay for example. The budget terminal at Changi had to be torn down after a mere six years in operation.

Anonymous said...

SQ worships the business traveller.
They are golden gods.

EY travellers are served just to pay for fuel,
and allow newbie crew to have exposure.

Take note of all the destinations that it flies to.
All business. They love business class and will do
everything to get money from that class.

Elitism is where the money is.

Anonymous said...

"elitism is where the money is".

Yep. This is what happens when you put Singaporeans in charge. Money Money Money!

Anonymous said...

That's y it is easy for the business class passenger to get the stewardess' phone number.
Ugly oso nvm so long as got money.

Anonymous said...

The person that sits in business class is 99.9% miserly.
No cash, all credit and that seat paid for by a company.
Because, its all expense ( at least 80% ) paid, their minds
start to wander towards the kebaya.

And since that kebaya does not have much of a brain, it becomes
very impressed with the behaviour, the apparent wealth.
SQ of course cant give a damn.. they just get the money from
the sale of tickets from the sucker company. With krisflyer points
collected by that miserly person.

Its all designed to pander to the ego. And it works every time, including
hotels, restaurants, casinos, insurance, property, cars...

Its all about ego. ask the AOTC, CCE, AMs.. IA, IFs, CS, LS, and even the FSs.

So, monkey see, monkey does:

the LSS outbursts for her room with jacuzzi

We emulate what we deem as "success"..

Life is certainly shallow in this age.

Red said...

Not all the girls working in biz are 'easy'.Some got pride :)
In fact some even wear their rings to ward off potential suitors.

Anonymous said...

Bloody screw also have same mentality as our jcl n pcl pax. They stay 5 star hotels courtesy of SIA but act yaya. When go holiday, they stay hostels and stinge

Anonymous said...

Scrooge Zika carrying Singaporeans probably.Every cent must save.PPS worse.

Gong-Kia1 said...

You'll be surprised!

Out of 8,000 crew ( or thereabouts ) less than 10% ( 800, for those whose arithmetic is a little loose ).. will actually take a holiday on their free ticket.
Most just fly back home to Kuching, Penang, etc.

Though crew fly to expensive cities like SHA / LON / NRT / CDG.. they are not well
informed about hotels. They have never booked one on their own before.
Its either done by boyfriends, girlfriends or others.

Its also true for so called "PPS" pax.
Their accommodations have been booked, paid for by their employers.. just like crew.

So, these people are actually quiet "gong-kia".. despite their passports bearing stamps from East to West, North to South.

Handsome said...

Too many sohai
working in the
cabin it seems.

Anonymous said...

Who know why only 10% use their foc tickets and mostly to go back hometown? Cos bloody crew cant afford to pay hotels and transport to city hotel. When on holiday to overseas hotel, they even wanna save the 1 usd when tompang crew bus. What a bunch of cheapos

Anonymous said...

Seriously? If got free ticket should go for it.Just have to pay for food and accommodation.If not mistaken got discount for hotel for crew.Maybe since they fly for a living,the last thing they want is to fly some more when they're not working.Plus its boring to spend the holidays in Singapore with little to do or see.

Anonymous said...

SIA's decision in not renewing its lease on one A380 is a good one. Its lease is due to expire in Oct 20107. The remaining A380s on lease will remain status quo for the time being. In the eightis, the airline had leased a DC-10 form Martin Air, a charter airline from the Netherlands, pending the arrival of our own DC-10s. The lease on the said aircraft was enventually ended. It was an excellent move.

I tend to agree with some of the comments here that SQ is only concerned with making money and more money. What has gone wrong with all the market research and experts?

Anonymous said...

There are X number of crew retired.. ( including the old CCE/TC/AOTC)
Do you know how many live beyond 70?
A large number, my guess is about 60-70% dont make it to their 70th birthdays.

Why you may ask?

The stress, the food, the lifestyle, the worries about sudden loss of employment
either from retrenchments, terminations, or serious health issues.. aka cardic arrest
or stroke.

And we have 2,000-3,000 wannabies lining up.
The power of media, advertisements and perception of a life of luxury.
( more like unrootedness, I'd say )

Anonymous said...

ppl die evryday
work with airline
die not working oso
die it's just a matter of time

Long and short of it said...

This is hardly surprising because other big name airlines have also 'ditched' the Airbus.Unless you can fill up many seats,it is best not to use the 380.When MH expressed their intent more than a year ago to get rid of their 380s,Airbus should've done something.

RiP 380............was fun while it lasted. Sticking to Boeing for long hauls now.

Mike Lim said...

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

Anonymous said...

It is not an even comparison Vis-a-vis SIA and all the mentioned Middle East Carriers. All of the latter are 100% government owned airlines run on a different premise. They form part of a National Ecosystem that looks at the greater good of the country as a whole: As long as the whole country gains, what does it matter if individual entities do not make huge profits?

The likes of the Middle East airlines are not hugely profitable in terms of ‰ of profit of revenue and have never been so,and never will be; that is not their priority.

The new destinations announced by Emirates are nothing new, this strategy is more in line with making news as to making money. How many of the new destinations announced 2 years ago are still in operation? This is the Norm for budget carriers as well. New destinations are announced only to be cut back when the initial "buzz" wears off.

The airline business is a hugely capital intensive business where only the strong survive. The chapter on SQ or even the Middle East airlines is not closed by far. Only history will tell who will be around in 50 years time.

Stay tuned!

Fly Emirates said...

Emirates is the future.