Asian carriers in distress

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This topic contains 74 replies, has 19 voices, and was last updated by  KSHaggag 23 Aug 2015
at 19:38
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  • Anonymous

    rferguson
    Participant

    Plenty has been said about the challenges that have faced the euro legacy carriers from the increased competition they have seen on two fronts – the huge increase in competition from the ME3 on the longhaul side and LOCO’s on the shorthaul side. The U.S carriers faced their own dramas also. Most of the U.S carriers and some of the legacy euro carriers have now reformed their strategy and slashed costs. And returned to profitability. Others still struggle. Others have gone bust.

    I was surprised to read today that Singapore Airlines has not made a profit on longhaul operations since ’09! Here are a couple quotes from the article:
    “Our main takeaway from the briefing is that SIA’s future is grim if it doesn’t change the way it do business. The days of Singapore and SIA being the long-haul hub for the ASEAN region is over”
    “In particular, he highlighted that SIA’s long-haul routes have been almost consistently loss-making since FY09 as its competitors have refined their strategy and successfully established themselves into SIA’s markets.”
    The challenges that faced the established carriers in europe now seem to be taking hold in Asia although a little reversed – SQ makes it’s money on short and medium haul services but loses on longhaul services. For most of the euro carriers it’s the opposite.

    So we have MH that will soon be massively slimmed down. TG which we know is in a potentially worse financial position than MH. And now SQ whom analysts are saying should shrink and restructure to retain a bright future. I wonder if we will see the much awarded onboard product at SQ also taking a hit as costs are removed from the longhaul business? Or will we see the governments of these countries become more protectionist of it’s home countries (Thailand has already said it is considering it)?

    http://finance.yahoo.com/news/distressed-sia-tells-analysts-mayday-071200263.html;_ylt=AwrC1C0xDsFVZ2sA7EjQtDMD;_ylu=X3oDMTBydWNmY2MwBGNvbG8DYmYxBHBvcwM0BHZ0aWQDBHNlYwNzcg–


    Str8Talking
    Participant

    I have found a number of articles around the situation at SIA quite misleading. Firstly, if the short-medium haul is profitable, is it as a result of connecting traffic? Or is it just point to point traffic? In the case of the former, then slimming down or cutting back on long haul will surely affect the profitable short haul. Also, when talking about SIA, are they including Scoot and SilkAir? And dare I say Vistara? Or are they strictly speaking about Singapore Airlines on its own!?

    Historically, I found SQ to be a lot more expensive than the competition. Granted, in most cases they offered the best product, but you paid for it by quite a margin. With so much competition now and ever evolving products, it’s hard for them to maintain the prices they charged in the past and keep attracting the same number of customers.


    AMcWhirter
    Participant

    Interesting topic, rferguson.

    I’ve already written a piece about the SE Asian airlines and their hubs which will appear in the magazine next month.

    All I would like to say here is whether SIA will maintain its high economy class standards once premium economy is introduced.

    As for the long-haul flights …well of all the SE Asian carriers, SIA is the only one holding its own in face of Gulfie competition.

    But SIA’s passenger growth is not what it was. Think back to the early days of SIA and (at that time) the carrier was feared by the European airlines in the same way as the Gulfies are today !

    It seems that SIA started to lose its zeal when it joined Star and became part of the establishment.

    We’ve already reported on the problems at MAS and, tellingly, the CEO was quoted at this nonth’s CAPA Summit as saying, “Our network was set up 15 years ago. At that time the Gulf carriers combined handled 10 million passengers. Now it’s 100 milllion. The world has changed, it’s time to move on. Our network was built with Australia-Europe in mind and we now have to adjust.”

    Thai Airways would be bankrupt without govt support and all Thai aviation is being monitored right now. Not in the EU, I must stress, but in Asia itself and by the FAA in the US.

    As for SIA’s short- to medium-haul flights I believe the figures from Maybank include the entire SIA group of airlines and not just its core brand.


    JohnHarper
    Participant

    I have no doubt that SIA have market leading products in all classes and some of the best cabin crew in the sky. Mrs JH and I do fly with them relatively often and we are lucky because price does not need to be our first consideration.

    Over years though I have seen the cabins, particularly the premium cabins have lower and lower numbers as SIA refuse to in any way compete on price with the others somehow believing that they are the best and people will always choose to fly with them because of that. At the same time they have snipped at the edges particularly in business class but it’s also noticeable in suites and first. I’m not a Krisflyer member but I know too that has had enormous devaluations and made status very difficult to get and retain.

    It seems they are oblivious to the number of seats the ME3 have put on the market including from Singapore through and then through their hubs to the rest of the world. They still seem to charge a premium for the A380, maybe that’s alright in first but not in business when it’s exactly the same product as the 77W. Anyway, imagine EK charging a premium for the A380!

    Heads will have to come out of the sand in Singapore and I suspect some new blood is needed at the top. IIRC leaders have always been grown internally there and ways have never been questioned and faults never acknowledged – just look at the website fiasco that took years to fix and no one ever acknowledged the mess that was made. I don’t know how many times when we were still living in Windsor that Mrs JH tried to book me on SIA and failed to be able to and then booked me on EY or EK instead.

    They need to wake up, smell the competition and start competing on price. They still have some of the lowest costs in the industry and should be able to.


    canucklad
    Participant

    Loved your comment Alex…
    “It seems that SIA started to lose its zeal when it joined Star and became part of the establishment”

    Look at the “Star” stable and I wonder if many of them now regret joining….

    UA whinging about the ME3
    AC service degradation to an LCC
    SQ and TG losing market share, on routes both should USP themselves out of trouble against the ME3..
    And then you’ve got the inevitable family bickering between LH & TK.

    Wonder what would happen if SIA left Star and actually found their MOJO again ?


    MrMichael
    Participant

    JohnHarper, agree with you. I fly annually to Sydney/Brisbane from the UK and I think it is as far back as 2008/9 that SQ had a competitive fare, a couple of years after the intro of the a380. In fact I was one of the first 100,000 SQ a380 pax. I would also mention that TG have not had a competitive fare either since 2010. Both airlines had great reputations, TG lost out due to it failing to keep up. In 2010 when I last flew them the LHR/BKK sectors still had overhead screens in econ on its ageing 747,s. Singapore had a good product, but a 25% premium in fare was considerable.


    rferguson
    Participant

    Will be interesting to see how the Asian airlines react. I guess the likes of SQ will be reluctant to trim back their five star offerings to cut costs but what other options do they have? Cut routes instead?


    KSHaggag
    Participant

    I still strongly believe that it does not matter much to SIA whether they are a member of Star or not coz simply they don t cooperate much in this arena ,they are a carrier that keeps its distance from its partners historically ,since the good old days of Global Excellence between Swissair ,SIA ,and Delta ..
    The alarming point ,I do agree with Str8talking is that yes SIA fares in all cases have been quite higher in Business Class than its rivals .I do admit SIA is in a different league than the competition including the ME3 but hey CX which is a superb carrier is always extremely keen on pricing its products right .I very often try to book SIA but end up on my beloved CX still given the huge gap in prices .
    Come on ,SIA ..the glorious days are over but you are still a great queen in the sky ,facing the ordinary pack including the ME3 .


    KSHaggag
    Participant

    I still strongly believe that it does not matter much to SIA whether they are a member of Star or not coz simply they don t cooperate much in this arena ,they are a carrier that keeps its distance from its partners historically ,since the good old days of Global Excellence between Swissair ,SIA ,and Delta ..
    The alarming point ,I do agree with Str8talking is that yes SIA fares in all cases have been quite higher in Business Class than its rivals .I do admit SIA is in a different league than the competition including the ME3 but hey CX which is a superb carrier is always extremely keen on pricing its products right .I very often try to book SIA but end up on my beloved CX still given the huge gap in prices .
    Come on ,SIA ..the glorious days are over but you are still a great queen in the sky ,facing the ordinary pack including the ME3 .


    KSHaggag
    Participant

    Let s not forget that a new emerging black horse is Garuda ,having revamped itself and positioned itself as a quality ambitious carrier ,albeit it is still too young and too small compared to SIA but it won t be long before they compete fiercely with them .
    Being a Skyteam member ,this will give them a boost as a viable option on the Europe-Australia leg in Business Class in the short period to come .
    It will be interesting to analyze Garuda s growth one day soon .


    PeterCoultas
    Participant

    Interesting that, starting in the UK, the grouping SIA, Air NZ plus Virgin & Silk give an excellent value RTW fare, if with rather limited routings (especially now BMI have disappeared). Nothing remotely as cheap with the three alliances.

    It is also almost possible to do some routings solely using SQ flights if you accept small but easily filled gaps in europe and the USA.


    KSHaggag
    Participant

    I agree with you ,PeterCoultas .

    Add to this the new RTW fares initiated by Star Alliance incl SIA of course ,in Premium Economy : a FIRST among all alliances so far .
    Those carriers in the alliance offering Premium Eco are just 11 carriers but still good : SIA,NZ,LH,LO,UA,AC,TK,BR,TG among others .


    flyingcanadian
    Participant

    I fly around Asia several times a year, and although I find SQ’s service faultless, one does have to pay for it. Even on the shorthaul SIN-BKK/KUL, there is a US$150 DIFFERENCE on the Business Class fares.
    Agree, that Singapore is one of the most expensive cities to live in, and salaries are thus higher, promoting higher fares ex SIN, SQ should remember that not ALL their PAX live/work in SIN, and many transit through SIN and in order to attract more J/C PAX they should offer more attractive fares in that cabin. However, I cannot fault their service or their Lounges at Changi and worldwide!
    Have you seen the difference in their Premium Economy fares to Economy or even Business? if you are going to pay that in PE, for a bit more, just upgrade to J/C!


    KSHaggag
    Participant

    SIA was ,is ,and will remain the Grand Old Dame par excellence !
    They had always set the standards with great consistency across their network and cabins .
    It is the ONLY airline in the world I feel very enthusiastic to fly it in Economy Class because I am sure I will have a great experience even on the shortest flights e.g. SIN/BKK ,etc ..
    I am indeed excited about their upcoming Premium Economy to be launched in two days on the SYD route then eventually LHR ,HKG and many others flown with a 777-300ER .I feel it is going to offer real extra value compared to Economy because so far rare are those carriers that offered a real Premium Economy product to justify the fare differential over regular Economy :most of them have proved disappointing : I am a big advocate of Premium Eco products generally but all the people I have talked to about such products had shown their utter dissatisfaction at such products ,given the big differential they had to fork out .I feel SIA will get it right ..I hope the LH one is also good .
    Back to their fares ,still their Business Class pricing is far from aggressive let alone competitive ,though SIA is a 6th freedom carrier that relies on transfer traffic to feed its network and survive ;their home market is far too tiny ,yet a high yield one .On the other hand ,in many markets they are quite aggressive in Economy Class vs the competition .

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