SINGAPORE Airlines (SIA) will stop offering re-employment to captains when they turn 62, while those on existing re-employment contracts who are already 62 will be let go at end-March this year.
The move, which took the pilots by surprise, comes amid tough operating conditions and the airline's struggle with a surplus of pilots in recent years.
In response to queries from The Business Times, an SIA spokesman said: "The situation has not improved due to network changes, the challenging business environment and despite measures already taken to alleviate the surplus, including voluntary no-pay leave and voluntary movements to subsidiaries. Regrettably, we have to take this decision to reduce the surplus further."
President of the Air Line Pilots Association - Singapore (Alpa-S) Captain Mok Hin Choon, who was told of SIA's new policy on Monday, said the announcement caught the union completely off-guard. Since then, he has been fielding queries from concerned pilots who could find themselves out of a job in a little over two months.
"We're hoping to engage the company at the highest level to understand the sudden change in position," said Capt Mok. The union spoke to the Ministry of Manpower (MOM) on Wednesday, and is keen to have MOM broker discussions between itself and the airline.
"Air Line Pilots Association of Singapore has contacted MOM on this issue," an MOM spokesperson said. "MOM will be meeting up with the association to understand their concerns."
About 90 pilots are expected to be affected by the change in policy, according to the airline. SIA employs about 2,100 pilots, of whom around 1,000 are captains and 1,000 are first officers.
Previously, captains were allowed to fly beyond the retirement age of 62 but on a re-employment contract - which comes with a pay cut - that is offered on a one-year basis up till the age of 64. SIA's first officers have not been offered re-employment beyond age 62 since January 2013. The airline said that it will, where possible, provide assistance to affected pilots to find alternative employment.
Since 2012, SIA has undertaken a slew of initiatives to try and address the pilot surplus, including offering voluntary no-pay leave for first officers and captains, asking pilots to voluntarily cross over to subsidiaries such as SilkAir and Scoot as well as terminating pilots on fixed-term contracts. From April last year, it has also stopped offering re-employment to captains beyond age 64.
Still, one pilot, who declined to be named, said he was taken aback by the latest move. "I don't think many people expected it."
This comes as the group battles headwinds on different fronts, from volatile foreign exchange and fuel prices to cut-throat competition from full-service and budget carriers alike.
Aggressive capacity expansion from rivals such as the Gulf carriers are forcing yields to be sacrificed in order to fill seats, while regional wing SilkAir is affected by overcapacity in South-east Asia as the region's carriers have been expanding rapidly in recent years, ordering scores of aircraft.
"SIA has been cutting capacity, given overcapacity in the region," noted UOB Kay Hian analyst K Ajith. "Thus, rationalisation of its network and crew makes commercial sense."
To pursue new opportunities, SIA has established a new airline together with Tata in India, known as Vistara, giving the group a foothold in one of the region's fastest-growing aviation markets.
Meanwhile, it has bumped up its stake in subsidiary Tiger Airways to nearly 56 per cent, giving it majority control as Tiger seeks to steer itself back to profitability. SIA's medium/long-haul budget carrier Scoot is also working together with Tiger to boost connecting traffic across both airlines, while making inroads towards launching a joint venture in Thailand this year with Nok Air known as NokScoot.
For the second quarter of FY14/15, SIA's net profit fell 43 per cent year on year to S$90.9 million, as margins came under pressure and then-associate Tiger unveiled hefty losses.
The airline is poised to release its third-quarter results next month.
Shares in SIA closed at S$12.46 yesterday, down one cent.