Singapore Air turns to new jet to lure premium-paying flyers

[SINGAPORE] Singapore Airlines Ltd, hurt by competition from opulent Middle Eastern carriers and a rash of budget airlines, is trying to revive its fortunes the way it knows best: wooing flyers with new aircraft.

The carrier received its first Airbus Group SE A350 in Singapore Thursday. While the new aircraft with its extra-wide cabins and a new entertainment system will set Singapore Air apart from local rivals, it might be too little, too late to turn around its fortunes.

"This aircraft won't be enough to turn the fortunes around for the airline," said K Ajith, an analyst at UOB Kay Hian Pte in Singapore, who recommends buying the stock.

"That shouldn't be reason to be bullish on earnings or traffic. Bringing back the glory days - it all depends on competition."

Singapore Air - the only Asian carrier to fly the Concorde and the first in the world to fly the A380 superjumbo - needs new passengers to stem a slide in earnings. Operating profit has fallen 76 per cent from a peak eight years ago. Sales reached a high in the year ended March 2009 as the global financial crisis crimped premium travel. The carrier is counting on cabin comforts to lure higher-end passengers used to its fully flat beds as well as more price-conscious customers.

"At this point in time we are not really seeing a slower, weaker demand on business class," chief executive officer Goh Choon Phong told reporters after the plane arrived at Singapore's Changi Airport.

"But with the kind of outlook we're seeing in the world economy, we do expect that it will affect business demand at some point. That is something we will watch out for."

Game-Changer

Qatar Airways has flown the plane for a while, as has Finnair, which has a deep reach into Asia, so Singapore Air doesn't have any bragging rights for coming first. That's a departure from the A380 jumbo, spearheading a new dimension of luxury travel that included fully enclosed cabins in first class.

"This aircraft is hugely important for Singapore Airlines," said Shukor Yusof, founder of aviation consultancy Endau Analytics in Malaysia.

"The A350 will hopefully rejuvenate them and revive their fortunes in the premium and also the premium-economy sectors, which they are focusing on." The new plane will be a "game-changer" for the company amid increasing competition, Mr Goh said.

"We acknowledge that competition," he said in an interview on board the A350 in Toulouse, France, Wednesday.

"It's something I've been open about. That, plus the emergence of new, low-cost carriers, has structurally changed the landscape for us, especially in Southeast Asia."

Singapore Air will be the fifth airline to operate the twin-aisle A350. The aircraft will begin flying to Amsterdam May 9 and Dusseldorf in July, while an ultra-long-range version is planned for nonstop flights to New York in 2018.

Sundeck, Lazy Z

Mr Goh has ordered 67 A350s to expand the fleet and better compete with Emirates and Qatar Airways Ltd, whose passenger numbers have both more than doubled in the past decade. While rising incomes in Asia are spurring air travel, budget airlines are forcing full-service carriers to provide greater value for money in the fight for customers.

Airbus says the A350 consumes 25 per cent less fuel than Boeing Co's 777 aircraft, while its interior is 6 inches (15 centimeters) bigger than its nearest competitor. Singapore Air's 253-seat A350 has 42 business class seats equipped with the preset lounge-style positions of "Sundeck" and "Lazy Z" that are already in its 777-300ER aircraft. There are also 24 premium economy seats and 187 for economy.

The airline's A350 order includes seven ultra-long-range versions. It's also buying 30 787-10 planes from Boeing, scheduled for first delivery in 2018.

What will make Singapore Air stand out is its planned resumption of the world's longest nonstop flight to New York from the city-state in two years, and the start of direct flights to more US destinations, Mr Shukor at Endau Analytics said.

"Accessing more markets, particularly in North America, with direct flights using economical aircraft is essential to fight back," said Richard Aboulafia, vice president of Teal Group, a consultant in Fairfax, Virginia.

"So the A350 and 787 are extremely important" to opening new routes, he said.

BLOOMBERG