[ Today ] Cash-rich Singapore Airlines aims for regional dominance as rivals pull back
Singapore Airlines, flush with US$16 billion (S$21.63 billion) raised since the start of the pandemic thanks to help from a state investor, is in a position of dominance among its Southeast Asian rivals as they downsize and restructure.
The crisis threatened the survival of hub carriers that lack domestic markets such as SIA, Hong Kong’s Cathay Pacific Airways and Dubai’s Emirates. Indeed, Singapore Prime Minister Lee Hsien Loong last year said the government would “spare no effort” to ensure SIA made it through the pandemic.
Its majority shareholder, government-owned investment arm Temasek Holdings underwrote one of the world’s biggest airline rescue packages. Thanks to that, SIA’s has enough funds to keep going for at least two more years without cuts, and is modernising its fleet to save fuel, reduce maintenance costs and meet environmental goals while other airlines shed aircraft.
“The crisis shows the importance of having a cash-rich state investor as its main backer,” said a banker, who was not authorised to speak with media and spoke anonymously.
Many of SIA’s rivals are trimming fleets to a level that could ultimately weaken their hubs and send more connecting traffic to Singapore.
SIA, meanwhile, is improving its fleet and bolstering its budget carrier, Scoot. In Europe and North America, leisure travel has led a recovery; if that holds true in Asia, budget carriers will be crucial for airlines.
Having culled older planes and cut 20 per cent of staff last year, SIA is under less immediate pressure for more downsizing. Chief executive officer (CEO) Goh Choon Phong in May described last year’s job cuts as a “very painful process” and said there were no plans for more.
SIA deferred S$4 billion of spending on new planes over three years after reaching agreements with manufacturers Airbus and Boeing.
But because of large pre-crisis orders, it is still spending S$3.7 billion on new aircraft and adding at least 19 planes to its fleet this year, including 13 widebodies, despite little demand.
With travel in a holding pattern and rivals distracted by financial issues, Scoot has been using some of SIA’s cash to boost staff training and invest in new software that helps it calculate more profitable fares for connecting flights.
“There has been a lot of investment, which is certainly geared toward a future recovery,” Scoot CEO Campbell Wilson said. “Those investments I hope will pay off as time passes.”