Singapore Airlines’ more than US$17 billion deal is one of the company’s biggest orders yet.
Southeast Asia’s biggest carrier has been finding ways to boost earnings as profit margins continue to be squeezed by the slowdown in the global economy.
Analysts say SIA could still find other ways to increase its passenger yields, such as revamping SilkAir and partnering up with other Asian airlines.
Singapore Airlines is beefing up its fleet with newer planes.
It is also pumping money back into its core segment – the business class.
It will roll out an upgraded version of “next-generation’ cabins come September 2013.
Leithen Francis, editor of Aviation Week, said: “The decision to introduce a new business class offering will definitely perk up interest in the market place and encourage people to fly business class on SIA.”
SIA also signed a contract to overhaul its entire customer experience this month.
SIA signed a contract with Accenture for the development of a new IT system to enable the airline to deliver an enhanced travel experience that focuses on meeting more of its customers’ travel needs. Implementation is scheduled for the second half of 2014.
All this is done in an attempt to reverse dwindling fortunes as the airline industry suffers due to falling global demand.
SIA’s cargo business have already taken a hit and the airline had already grounded two of its cargo planes to cut costs.
Asia Pacific cargo freight continues to weaken as well, falling 0.4 per cent in April compared to a year ago.
It is an indication of tougher times ahead for the aviation industry, and a sign of the weakening global demand.
Just last quarter, the company reported a S$44.2 million loss in the three months ended March 31.
Shukor Yusof, aviation analyst at Standard & Poor’s, said: “It has not performed as well as many have expected it to be because of uncertainty in key markets in Europe, North America and sluggishness in those economies. Also, because its premium sector which is dependent on the profitability of SIA has been under pressure.”
Premium class travel makes up about 40 per cent of SIA’s revenue and that has been hit by companies cutting down on travel budgets.
SIA did report pretty disappointing results in the last financial year but analysts say that’s due mainly to the global economic situation that has affected other legacy carriers as well.
But if SIA were to revamp SilkAir to capture more business traffic in Southeast Asia, that could have positive impact on its bottomline.
Leithen Francis added: “SilkAir seems to be very much positioned as a leisure carrier but I think you’re going to see SilkAir make more of a concerted effort to really win over and cater to business travellers. There is definitely going to be a growing demand for business traffic on short-haul routes within Asia and that’s the market SilkAir caters to.”
To tap into China’s vast travel market, SIA recently signed a code-share agreement with Shenzhen Airlines.
Shashank Nigam, CEO of Simpliflying, said: “It really depends on what partnerships they strike. That’s going to be key for SIA because they’re not going on their own mettle. The fleet size will remain the same at 101 planes this year. So it’s really about striking partnerships in India, China and even the Middle East carriers, like what Emirates has done with Qantas.”
Analysts say they expect SIA’s passenger numbers for the next financial year (FY14/15) to grow by about 4 per cent to 5 per cent.