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SINGAPORE Airlines (SIA) and regional wing SilkAir are rolling out a new airfare pricing structure from Jan 20 next year, as the airline group seeks to capture more traffic and maximise revenues amid intensifying competition.
In a joint press statement on Friday, the two carriers said the move will see revisions to advance seat selection, frequent flyer programme mileage accrual rates, baggage allowance as well as change and refund flexibility for some fares. This comes after the group embarked on a wide-ranging transformation programme earlier this year in an attempt to boost revenues, reduce costs and enhance operations.
Notably a "lite" fare class will be offered for both Economy and Business Classes, enabling it to attract more price-sensitive passengers by unbundling services and/or restricting certain perks, analysts said.
For instance, Economy Class lite fares will require a US$5 fee per flight segment for advance seat selection, though this will be waived for families with children 12 years and under. Presently, there is no booking fee for seats on Economy Class. However, mileage accrual for the lite fare will clock 50 per cent, compared to 10 per cent mileage accrual for some of SIA's cheapest Economy deals presently.
Aside from the lite category, Economy Class will have two other fare types - standard and the highest category, flexi. No charges will apply for advance seat selection for standard and flexi fare types, although Forward Zone seats, which are "in higher demand", will be chargeable for standard fares. Forward Zone seats in Economy Class allow passengers to be among the first to disembark from the plane.
PPS Club members will receive complimentary advance seat selection across all seats in Economy, regardless of fare type, while KrisFlyer Elite Gold and KrisFlyer Elite Silver members will get complimentary seat selection for standard and forward zone seats, and for standard seats respectively.
Nonetheless, all passengers regardless of fare type will be able to make seat selections at no charge during the Internet check-in window up to 48 hours in advance of travel, subject to availability.
In Premium Economy - which will now come in standard and flexi categories - mileage accrual will be set at 125 per cent for the flexi fare, but 100 per cent for the standard fare. Currently, premium economy fares receive mileage accrual of 110 per cent.
Business Class will also come in three categories - lite, standard and flexi. For standard and lite fares, mileage accrual will be set at 125 per cent, but increase to 150 per cent for the flexi fare.
While a lite Business Class ticket could lure passengers with a cheaper fare, this ticket is also more restrictive as it does not allow cancellations nor an upgrade to First Class with miles.
In Suites and First Class, mileage accrual will be bumped up from 150 per cent to 200 per cent.
Finally, additional baggage allowances will be also offered to KrisFlyer Elite Gold and PPS Club members as a sweetener.
With the new fare structure, the airline is trying to capture some of the passengers that would have gone to rival full service carriers - such as the Gulf or Chinese carriers - or even the budget airlines, analysts said.
"Every empty seat is potential revenue lost," noted Mohsin Aziz, associate director at Maybank Investment Bank, adding that revenue per flight could improve assuming the airline successfully fills more seats by dangling cheaper fares. "They'll really have to entice (passengers)."
A number of other carriers, including Emirates, already charge passengers to select their seats for basic economy fares.
While the new structure is not a radical change, "it's about managing traffic better", said chief of transport equity research firm Crucial Perspective Corrine Png, adding that the lite category will help during off-peak periods and when load factors are low.
On the premium side, it may be more difficult to upgrade, she pointed out, adding that that should have incremental positive financial impact. With SIA's average net profit margin of 2 per cent, "every bit helps," she added.
Under the new pricing structure, only Premium Economy flexi fares can be upgraded to Business Class with miles, while Business standard and flexi fares can be upgraded to First Class. The move comes as airlines in South-east Asia grapple with a cut-throat environment, with yields coming under pressure and fuel costs widely expected to rise in 2018.
Meanwhile, from March 1 next year, revisions will also be made to fees for KrisFlyer redemption awards.
For example, a change of date on an SIA or SilkAir redemption award is currently free but a fee of US$25 will be levied for date changes on saver tickets from March. Tickets under the advantage category (former known as standard), however, will not attract a fee for change of date.
Shares in SIA closed at S$10.51 on Friday, down one cent.