Soaring struggles: Singaporean low-cost Scoot airline welcomed with water canons upon arrival at Changi Airport. Goh said his team has a strong strategy to navigate the challenges ahead. — AFP
SINGAPORE: The year 2024 is coming to a close, and for Singapore Airlines (SIA), it has been a year of flying high before encountering turbulence.
In January, its KrisFlyer rewards programme crossed eight million members; in March, it carried out the biggest revamp of its premium economy class, now in its 10th year.
The good news was capped on May 15, when SIA posted a record S$2.7bil full-year profit for the year ended March and rewarded its staff with eight months’ bonus.
Five days later, Flight SQ321 with 211 passengers and 18 crew on board hit severe turbulence, resulting in one death and dozens injured. It was the first such fatality on a commercial flight in nearly three decades.
Financially, despite the industry seeing robust demand for air travel, SIA’s earnings as reported later in the year were hit by increasing competition and rising costs.
Net profit for the six months to end-September tumbled 48.5% to S$742mil. SIA shares, which reached a 2024 high of S$7.37 on Feb 20, closed at S$6.31 on Nov 29 as analysts and investors take stock of where the airline is now headed.
In an exclusive interview with The Straits Times, chief executive Goh Choon Phong said his team has a strong strategy to navigate the challenges ahead.
Its key pillars include leveraging its twin-carrier portfolio, enhancing its brand and product offerings, growing airline partnerships to expand its coverage, investing aggressively in digital innovation, and ensuring it maintains a strong balance sheet.
The latest piece in this jigsaw is its multi-hub strategy.
“We were very clear that we had to be first off the block when the recovery came,” he said.
“And as we emerged from the crisis, we had to continue to be a leader in the industry. We stuck to the three pillars of our brand promise – the product, the service and the network.”
But analysts said that after two strong post-pandemic years, the airline has started to feel the heat of competition and the impact of huge capacity injection into the aviation sector.
OCBC Investment Research noted a day after the company unveiled its half-year results on Nov 8: “We think that SIA is nearing the end of the runway for exceptionalism, given that passenger yields are likely to have peaked and are on a moderating trajectory as other airlines progressively return capacity to the market especially in the region.”
But Goh remains unfazed: “Competition has always been there. But the need to remain the industry leader drives all our initiatives.”
And there have been numerous initiatives over recent years. Over the past decade, the group has consolidated its four brands – SIA, Tiger Airways, Scoot and SilkAir into just two: SIA and Scoot.
The formula seems to have worked, both in terms of providing budget-based options for travellers and seamless connectivity across multiple destinations.
“Our ability to have an industry-leading full-service airline and low-cost carrier within the SIA group allows us to nimbly deploy the right vehicle on the right routes,” Goh said.
“This enables the group to expand in a way that wouldn’t have been possible with just one entity.
“The combination of SIA and Scoot provides us more options, particularly in terms of network coverage.”
Coverage and connectivity are also being expanded through revenue-boosting partnerships and codeshare arrangements with regional counterparts like Malaysia Airlines and Garuda Indonesia.
Other airlines in such tie-ups include Lufthansa, All Nippon Airways, Air New Zealand and Virgin Australia.
SIA is also looking to penetrate the huge South Asian market through its strategic partnership with the now-privatised Air India.
“We recently concluded a codeshare agreement with Air India that brings in an additional 11 Indian domestic cities that we do not serve, and another 40 international points,” Goh said.
“The commercial relationship between Singapore Airlines and Air India is growing stronger. In terms of routes involved, this is probably one of the biggest codeshare agreements for Air India.”
India has become a critical part of SIA’s multi-hub strategy of having a second strategic base to launch regional and international flights.
First, a bit of history: In 2013, SIA and India’s Tata Group jointly formed Vistara airline, which took to the skies in 2015.
In the years since, Vistara has established itself as a premium offering in the Indian market.
In November 2024, Vistara completed its merger with Air India, the country’s flag carrier. With an additional S$360mil investment, SIA holds a 25.1% stake in the enlarged Air India.
“When we first discussed starting Vistara with the late Ratan Tata in 2011, we knew it wouldn’t be an investment with short-term returns,” Goh said.
“We were looking at the bigger picture. Today, we are the only non-Indian carrier with a strategic stake in a significant Indian airline.
“Our ability to be at the table during this whole Indian aviation consolidation is only because we were able to start our investment much earlier.”
Goh reckons SIA may need to invest more in the growing Air India franchise, but did not elaborate on what the expected amount may be.
Another key initiative that Goh has been leading is the company’s digital transformation.
“We are an early adopter of generative artificial intelligence (GenAI), with more than 240 use cases and 28 initiatives to enhance revenue generation, customer experience, operational efficiency and employee productivity.”
SIA first identified the potential of GenAI in August 2022, and started implementing it in February 2023.
GenAI now powers search functions on SIA’s website to increase the relevance and efficiency of results, with a flight recommender providing personalised travel suggestions based on travel plans or user preferences.
Meanwhile, an internal GenAI-enabled intelligent assistant – dubbed Jarvis – helps more than 4,300 unique SIA employee users weekly, from a base of 5,600 ground staff.
“Our longstanding investments in GenAI, as well as our other digital capabilities, can give us an edge in this competitive landscape,” Goh said.
SIA does face other challenges beyond capacity and costs. These include supply chain crunches and delays in fleet upgrades due to production issues at Boeing.
The inability of the US plane maker to deliver its next-generation B777-9 on schedule has set back SIA’s plans to replace its ageing fleet of Boeing 777-300ERs and Airbus A380 planes by at least five years.
The knock-on effect of the pushback in delivery dates for the 31 planes has been delays in product upgrades, such as a new suite of long-haul cabin offerings.
This has led to criticism from analysts and observers that SIA is falling behind its competitors, especially the Middle Eastern carriers.
SIA’s current suite of first- and business-class offerings was introduced in 2013, and slightly upgraded in 2018.
It recently took delivery of its last new Airbus A350 plane with these older business-class seats.
While the company recently unveiled plans to spend some US$1.1bil on the roll-out of the next-generation premium products, this will not start any time before mid-2026. — The Straits Times/ANN
