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SIA eyes additional direct services to US to woo premium passengers

It has ordered ultra-long-range jets to fly to three US cities for a start, but its chief says the group won't stop there if these services take off

Mr Goh said non-stop flights open a "whole horizon of connectivity" for SIA, and make its product more compelling for business travellers. With these flights, SIA hopes to claw back the market share it lost when it discontinued its non-stop flights.


SINGAPORE Airlines (SIA) could order more ultra-long-range (ULR) aircraft to launch additional direct routes to the United States if its non-stop services are successful, as the carrier seeks to fend off competition from rivals with a better proposition for premium travellers.

SIA chief Goh Choon Phong told The Business Times in an exclusive interview: "If it works, we won't stop there. We'll look at other opportunities - which means maybe more aircraft."

The airline now has seven of the A350-ULR variant on order, all of which are slated to arrive in 2018. It plans to use these aircraft to serve three American cities - New York, Los Angeles and one as-yet-unnamed city; Houston and San Francisco are the most likely candidates, said the CAPA-Centre for Aviation.

SIA's new Premium Economy cabin will make an appearance on the A350-ULRs. It is now looking into running either a two-cabin (Business and Premium Economy) or a three-cabin (Business, Premium Economy and Economy) configuration, Mr Goh said; the group is doing research and garnering feedback from customers.

SIA's current long-range flights are not non-stop: it flies to New York via Frankfurt and to Los Angeles via Tokyo.

The airline made a foray into non-stop flights in 2004, when it operated the world's longest flight to New York, using the four-engine A340-500. It started out with a mix of Business and Premium Economy seats, and later converted the flight into an all-Business Class configuration with 100 seats, and offered a similar direct flight to LA.

Then came weak demand in the wake of the financial crisis, coupled with stubbornly high jet fuel prices, which made it tough to operate the routes profitably. The group called it quits in 2013.

The game-changer with the new A350 ULR is that these planes, which SIA pushed European plane-maker Airbus to produce, are more fuel-efficient and can fly up to 19 hours.

They will be kitted out with new cabin equipment, currently under development.

Mr Goh said that the A340-500 previously used were fuel guzzlers: "Even at the current fuel price, we would be losing money. But the A350-ULR, even at significantly higher fuel price (vis-a-vis current prices), we'd still be okay."

The direct flights could mean better yields, since passengers would be willing to pay more, one analyst said.

The competitive edge for SIA will not lie in brandishing the prestigious title of running the world's longest flight. It will lie in offering customers a better proposition, possibly enabling it to claw back some of the market share it lost when it discontinued the non-stop flights. For the passengers, especially those starved for time, it means shaving a few hours off their travel time.

Rivals such as Emirates and British Airways already offer one-stop flights from their respective hubs in Dubai and London.

Mr Goh said: "With the non-stop, it opens up a whole horizon of connectivity for us in Singapore itself, and it makes the product very much more compelling for business (travellers)."

Meanwhile, SIA will use the fuel-efficient A350-900s to introduce new secondary points in Europe. It has already announced that it will operate the 253-seater wide-body aircraft for direct flights to Amsterdam from April 2016, and to Dusseldorf by July.

Meanwhile, in markets such as Africa and Latin America, fuel-efficient aircraft could open up new opportunities for the SIA group as well. SIA has 67 A350s and 30 Boeing 787-10s on order.

"The science of the aircraft means we can explore smaller markets," Mr Goh pointed out, adding that, given their distance from Singapore, partnerships will be very important.

He plans to continue growing SIA's ever-increasing list of codeshares and strategic alliances with other airlines. In the last five years, SIA has boosted its number of codeshare agreements from 2,000 to more than 8,000.

Amid a competitive operating environment, the group has, in recent years, introduced key growth initiatives such as overseas joint ventures, ancillary businesses, stronger partnerships with industry players and increased coordination among its portfolio of airlines. (Aside from its premium carriers SIA and SilkAir, the group has its budget units, Scoot and Tiger.)

Despite the fairly aggressive transformation underway, the airline is still open to other new investments, Mr Goh told BT. "If there is opportunity, we will look at it, we'll size it up. It has to make sense from two perspectives - it has to provide new growth for us and have some level of synergy with us."

Describing his vision for SIA a decade from now, he said he wants to build a strong portfolio of carriers, which should work together to benefit the group.

This will be complemented by robust joint ventures that are able to synergise with the core portfolio in Singapore, and which will be supplemented by new revenue streams.

"New revenue would include both new sources of revenue - whether merchandising sales or frequent-flyer programme monetisation - and also adjacent businesses," he added.

CAPA analyst Brendan Sobie said that while it might take a few years for the various growth strategies to bed down, "not doing anything would have been close to disastrous", as the group's profitability might be hit harder than it has already been.

"They've had a lot of threats in recent years from the low-cost carriers and the Gulf carriers."

Going forward, SIA will have to continue to adjust things and potentially introduce other major initiatives, depending on the market dynamics and opportunities which crop up, he added. "You can't sit still."