Singapore Airlines, Airlines, Covıd-19, Coronavirus, Aviation

Singapore Airlines, Airlines

Commentary: We must save Singapore Airlines from this existential crisis

Commentary: We must save Singapore Airlines from this existential crisis

24/9/2020 1:16:00 AM

Commentary: We must save Singapore Airlines from this existential crisis

Amid questions concerning how much more Singapore Airlines may have to lay off staff and cut costs, NUS Business School Associate Professor Nitin ...

A MULTIPLIER EFFECT FOR SINGAPORE’S AVIATION SECTORAnother reason for saving SIA is that its airline business has a multiplier effect sustaining a strong aviation ecosystem and air hub. As a national growth strategy, Singapore’s longstanding strategy in developing the aerospace and aviation clusters has paid off.

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Today, the sector is home to 130 firms includes numerous airlines that serve Singapore, world renowned aerospace names like Rolls Royce, Airbus and General Electric, many other businesses that perform related activities such as aircraft repair and refurbishment, creating more jobs and adding to Singapore’s GDP.

In fact, Singapore is Asia’s leading one-stop solutions provider for aircraft maintenance, repair and overhaul (MRO) needs, contributing 10 per cent to global MRO output. SIA and its affiliated companies such as SIA Engineering constitute important parts of this 22,000-strong cluster and the centre of many joint ventures in the sector.

Visitors look at Boeing 787 and 777 models on display at the Singapore Airshow. (Photo: AFP/Roslan RAHMAN)When air travel does resume at pre-coronavirus levels eventually, these services will be in demand.SILVER LININGS IN THESE DARK CLOUDSSIA and its investors can take heart from a few factors. First, SIA has a substantial cash hoard from its recent capital-raising exercise. While some of that money has been spent, many big expense items have been written off – including this coming fiscal year’s S$2.6 billion worth of hedged fuel.

Going forward, SIA’s losses are likely to be minimised as costs have been cut through slashing capital expenditure, as well as retrenchment and other exercises such as pay cuts when payroll accounted for 18 per cent of costs.All this means that SIA is unlikely to need further capital injections, unless the crisis drags on much longer than three more years .

Second, there are signs of opening up of international traffic, though it is too early to predict when air traffic will return to even a fraction of pre-COVID-19 levels.LISTEN: COVID-19: Aviation and flying never ever the same againIncremental revenues with the opening up of international routes will lead to a disproportionate impact in terms of reduction of losses because costs are largely fixed, assuming airlines will be allowed to fly over the next few months. However, traffic volumes may return very slowly because of concerns and fears.

I have also assumed that SIA management will continue to be flexible and dynamic as in the past, by running a lean and mean organisation and adjust its strategy to defer new plane deliveries and reduce fleet size, as well as shift the emphasis away from premium travel, which may be facing structural, long-term challenges.

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While the current crisis represents the biggest test in its almost 50 years history, investors, including the Singapore Government may be rewarded by being patient. Its move to limit support through rental waives, rebates and the Jobs Support Scheme that have a time bar tackles the issue of moral hazard.

As for Temasek’s backing of bonds for SIA, it would do well to remember that crisis can bring opportunities – if one takes smart bets. The US government had granted America West airlines a loan for US$429 million after the 9/11 attacks in exchange for equity. The stake was sold later for a 30 per cent return.

An Airbus A380-800 aircraft of Singapore Airlines takes off from Zurich airport, Switzerland October 16, 2019. (Photo: REUTERS/Arnd Wiegmann)While the current crisis has impacted SIA, it is poised to emerge better capitalised and in better shape than most other airlines, meaning also SIA may have fresh acquisition options of ailing airlines to diversify its portfolio and bolster its overall position.

Public health considerations have meant that international traffic has come to standstill. This can be debilitating in an industry as capital-intensive as airline, which will mean consolidation as demand is dampened over the next few years.These are unprecedented times but the problems, which are environment-related and not airline-specific, should not distract Singapore from the need to support its national carrier through this temporary turbulence.

Nitin Pangarkar is Associate Professor in the Department of Strategy and Policy at the National University of Singapore Business School and author of Flying High in a Competitive Industry: Singapore Airlines. Read more: CNA »

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Time to release our reserves for our patriotic flyers. Why must save leh? Everything also must save leh... so save who and what? Lol my sentiments exactly. Nothing in there for the citizens. I called up to request extra luggage for my son returning after serving NS, they don’t even bother to reply. The call center is man in India. They don’t care.

Who are the “we”? And who are paying for it? We as in Singapore or Singaporean? Convert to Singapire version DHL Make the fares solely for local singaporeans citizen privilege rates different from others.... Cpf money is used to support this cost intensive carrier. Must stop the handout. Airline must streamline to be lean and cost effective. Over the years, feed too many fatcats.

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