SINGAPORE: As the aviation industry continues to be plagued by rising fuel costs and weakness in the global economy, Singapore Airlines has seen its profits being squeezed as more travellers turn to cheaper alternatives.
The airline, which is Asia's second largest by market capitalisation, cautioned on Thursday that loads and yields for its passenger and cargo businesses are expected to remain under pressure.
In an effort to further slash costs, SIA has also recently reduced its cockpit crew.
Competition from gulf carriers and budget airlines has significantly affected the profits of legacy carriers. With costs of jet fuel set to rise even further, analysts say it is imperative for legacy carriers such as SIA to revamp itself, either with new product offerings or new destinations.
"SIA has always done exceptionally well with its offering of premium products... But perhaps it's time for them to re-look the premium economy segment... which is an area where many other competitors are looking at," said Shukor Yusof, an aviation analyst with Standard & Poor's.
"If they were to come up with something that would entice passengers that are currently flying low cost carriers and if they can manage the fares in a way that would attract large numbers on board, then it would work," he said.
Besides SilkAir, SIA has also started its long-haul low-cost offshoot Scoot, in an attempt to glean some profits from the low cost carrier segment.
However some believe SIA should continue to pump money to protect its premium seats segment.
"Their premium sector is what holds them up. They've high yielding passengers and if they try to reduce that, they will lose them to other premium carriers like Cathay, Qantas, (or) Emirates," said Shashank Nigam, CEO of Simpliflying.
"Singapore airlines, while they're part of Star Alliance, they're not very close to their members so certainly after having sold (their) Virgin Atlantic stake, they should be looking at other partnerships to enhance passenger experience," he added.
Besides teaming up with Emirates, competitor Qantas has also announced its intention to form stronger links to the key hubs of Singapore and Hong Kong, paving the way for more head-on competition with SIA.
Analysts say some of these enhancements should include more technology updates to appeal to the well-connected traveller.
- CNA/jc
Possible SIA revamp on the cards
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Possible SIA revamp on the cards
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Possible SIA revamp on the cards
