Singapore Air's charm fades as rivals cash

Singapore Airlines is missing the party in its own home. Tourist spending in the city jumped by 50 per cent since 2008, aided by new development and a 23 per cent rise in passenger traffic through Changi Airport. That growth hasn't been reflected in the carrier's passenger numbers, which are down by 2.2 million in the period. The 12 per cent drop is the largest of the 12 biggest publicly traded full-service airlines in the Asia Pacific, data compiled by Bloomberg show. Arabian Gulf rivals are vying for premium passengers and low-cost operators are poaching budget travellers. Singapore Air's slide contrasts with Cathay Pacific Airways, whose passenger numbers have risen 11 per cent since 2008 because its Hong Kong base and a tie-up with Air China help it sell tickets in the world's most populous nation. Article continues below Singapore Air, overtaken by Air China in 2009 as the biggest airline by market value, will probably report a sixth straight decline in quarterly profit when it announces fiscal full-year earnings on May 9, according to analyst estimates. "The fact is that they're hurting," Peter Harbison, executive chairman of Capa Centre for Aviation, a Sydney-based company that advises airlines in the Asia Pacific, said. "There's good cause for a fundamental review of Singapore's strategy." Adversity is an unfamiliar experience for Singapore Air. In an industry that has suffered almost 200 bankruptcies since 1979 in the United States alone, it can boast of having never made a full-year loss since it first sold shares to the public in 1985. Like the iconic, demurely smiling ‘Singapore Girl' stewardess who adorns the carrier's marketing material, its performance harks back to an age when aviation was more glamorous — and even profitable. "The economic downturn slowed some of our growth plans but we take a long-term approach," Nicholas Ionides, a Singapore-based spokesman for the airline, said. "We invest in both good and bad times." The carrier, controlled by Singapore state investment company Temasek Holdings Pte., may report a profit of S$108 million (Dh319.5 million) for the quarter ended March 31, based on the average of 23 analyst estimates compiled by Bloomberg. That compares with S$171 million a year earlier, as rising fuel costs and competition eat away at profits. The price of jet fuel in Singapore has risen 38 per cent since April 26, 2010, to $132.75 (Dh487.6) a barrel. Fuel now accounts for 40 per cent of Singapore Air's costs, compared to an average of 27 per cent since 2004 Singapore Air faces greater competition on Europe-Asia routes as Emirates and Qatar Airways Ltd. leverage more convenient hubs and win premium passengers with improved service standards. Regional and economy travellers are being targeted by low-fare airlines such as Air-Asia and Qantas Airways' Jetstar. "They're being squeezed at both ends of the plane," Andrew Orchard, an analyst with Royal Bank of Scotland in Hong Kong, said. "They have less growth now and a lot more competition." Qatar was last year named the world's best airline by rating group Skytrax, an award that Singapore Air received in three years out of five until 2008, and has not won since. Singapore Air's neighbours Thai Airways International and Malaysian Airline System will also both add Airbus A380s this year, rivalling the carrier's flagship plane. "Clearly the competition in some areas has got a lot better," Skytrax London-based spokesman Peter Miller said by e-mail. "We are seeing a more level playing field in product standards as many carriers seek to match Singapore." The change has been noted by Singapore Air's regular flyers. "They have this arrogant attitude that they're the best so people will continue to use them no matter what," Mark Roberts, 48, a mining metallurgist from Melbourne who flies business class to Asia and Europe about 15 times a year, said. Having flown exclusively with Singapore Air since 1998, in recent years he has increasingly chosen Thai Air and Emirates. "I felt like I was being taken for a fool" by changes in Singapore Air's loyalty programme and the last-minute swapping of older aircraft on premium-priced routes. "It's almost a lucky dip whether I get the product I paid for," he said. The Boeing 747s that occasionally flew the Melbourne-Singapore route were retired from the fleet last month, Singapore Air's Ionides said. At Changi Airport, Emirates and Qatar alone now operate 74 flights a week. Low-cost carriers, including Tiger Airways Holdings Pte., part-owned by Sing-apore Air, have boosted their share of passengers to 26 per cent last year, from 5.6 per cent in 2005, helped by the opening of a budget terminal. Singapore Air now accounts for about a third of Changi's passengers, from more than half in 2008. Singapore Air's management is moving to increase their presence in the low-cost market. The carrier already owns 33 per cent of Tiger Air and it's setting up a long-haul operator called Scoot. That new unit will start budget flights to Tianjin in China, Bangkok, Sydney, and Australia's Gold Coast this year. That may be timely as the business travel market, long the backbone of Singapore Air's profitability, is trading down. Rohit Deshpande, a professor of marketing at Harvard Business School who has studied the airline, cautioned against writing off a carrier that survived the 1997 Asian financial crisis, the September 11, 2001 terrorist attacks and the 2002-03 Sars epidemic. "I'm extremely bullish not only about their business model but about how smart they are in difficult times," he said.