Tag: budget

When you think of Singapore Airlines, visions appear of cushy premium cabins, bespoke leather seats, and free-flowing Champagne poured by the carrier’s throwback “Singapore girls” flight attendants.

It’s all that, yes. But the luxury carrier is working hard to diversify with budget airlines under its corporate banner. It owns low-cost carrier Scoot; 49 percent of Vistara, a joint venture in India with Tata Sons Ltd.; and NokScoot, a low-cost Thai airline Singapore owns in a joint venture with Nok Airlines. This collection of airlines—plus a new “ultra long range” Airbus A350 variant scheduled to arrive in 2018—enables Singapore to explore a range of expansion plans, many of which are currently focused on North America.

It’s no coincidence that the region continues to be the runaway success story of airline profitability. It will provide roughly two-thirds of the industry’s projected $29 billion net income next year, according to estimates released Dec. 8 by the International Air Transport Association.

Singapore’s portfolio of carriers offers “a lot more nimbleness and flexibility in addressing the needs of the markets,” Chief Executive Officer Goh Choon Phong said during an interview Dec. 6 in New York.

Squeezed on all sides

Last month, Singapore reported a 70 percent drop in net income and warned that 2017 could be challenging as well. The airline has struggled amid the expansion of low-cost carriers in its home region, and moves by a trio of Middle East-based full-service airlines to encroach on its core franchise of premium business travelers.

“It’s not going to be business as usual,” said Goh, an M.I.T.-trained engineer in computer science who chose an airline career over academia. “These are structural changes; these are changes that are not going to go away.”

Into this environment, the CEO has prescribed a diversification of revenue, a renewed focus on cabin comforts for big spenders, and new markets.

A chief pillar of the company’s expansion rests on further long-haul expansion, driven by firm orders for 67 new Airbus A350s and 30 of Boeing Co.’s largest 787 variant, the -10. The newest 787 is scheduled to enter commercial service in 2018. Of its A350s, Singapore will take seven from Airbus in an “ultra long range” configuration, which includes software changes and modest modifications to the landing gear. Other A350-900s can be altered to the ULR version, which is able to fly 8,700 nautical miles.

“We have called it a game changer for us and there’s a reason for that,” Goh said, alluding to the growth opportunities the A350 affords.

With these new, more fuel-efficient planes, Singapore executives have been keen to resume the nonstop flights from the city state to New York and Los Angeles, which operated for nine years before ending in 2013 because of the route’s extreme fuel costs. The airline is also considering the potential for new U.S. destinations, having for years studied traffic flows in places like Boston, Chicago, and Miami, Goh said. Many weren’t feasible, given the mix of large seat counts and the range limits of its existing aircraft. But the new, more fuel-miserly A350 may well change the math for such an expansion. (In March, for example, Singapore is swapping the 777 it flies to Houston with an A350.)

“The U.S. is an important market for us,” Goh said, but technological limitations required a stop between American cities and Singapore. No more.

Gateway to India and Southeast Asia

The airline is envisioning a day when the new fleet allows its hub at Singapore’s Changi Airport to become a connection for U.S. and Canadian corporate travelers bound for places such as India, Malaysia, Indonesia, and Thailand. It sees a precedent in the operations Emirates Airlines and Qatar Airways Ltd. have built at their hubs in the Persian Gulf, particularly for traffic to and from India.

Yet beyond the moneyed travelers who want frills on long flights, Singapore’s Scoot budget airline is also keen to expand. In June, Scoot will commence its longest flight to date, to Athens, a city where Singapore has ended service with its flagship. Scoot is increasing its all-787 fleet to 20 over the next few years, and is likely to look to markets where premium-cabin traffic is insufficient for flights by the flagship Singapore brand, Goh said.

“Scoot might also look to some kind of operation to the U.S,” Goh said. “At some point in time they will look at the U.S. to see if it makes sense.”

On the premium side of their house, Singapore executives have been cagey about the cabin configuration for the A350-ULRs to be deployed on the new U.S. nonstops to Los Angeles and New York. The latter will reclaim its title as the world’s longest route, at 19 hours or more, depending on winds. The airline plans a two-class service, but has declined to reveal the cabin mix or how many seats the planes will carry. They will have fewer than the 253 seats now on the three-cabin aircraft Singapore currently flies, with a stop in Asia, en route to Singapore, Goh said.

“The beauty of it is that this aircraft is not too big,” he said. “We can size it to best fit the traffic number that makes sense.”

Beyond the U.S., Singapore has identified India as a top priority in terms of greater market access. Within a decade, the nation is projected to become the No. 3 international travel market after China and America. Singapore’s Vistara venture will benefit from the Indian government’s recently altered “5-20” regulation that required local carriers to fly at least 20 aircraft for five years before they could offer international service. The change abolished the five-year flight period, and should help Vistara expand internationally sooner. It now has 13 Airbus A320s, with plans to reach 20 by 2018.

Some day, if it makes sense for Vistara, Goh says, the airline may acquire long-haul aircraft and set out for Europe and North America with nonstop routes. That’s a proposition that Emirates, Qatar, and Etihad can’t offer. “Logically speaking,” Goh says, “you can imagine Vistara should have a lot of potential for growth.”