SIA will need to overcome challenges to sustain ultra-long-haul operations

WITH the relaunch of its non-stop service to New York's Newark Liberty International Airport on Oct 11, Singapore Airlines (SIA) once again holds the mantle of operating the world's longest flight.

Come Nov 2, it will kick off direct flights to Los Angeles, while it will beef up capacity to San Francisco with three more flights added per week to its direct, daily service from Nov 28.

But with oil prices surging from a year ago and discounted fares at the roll-out, will ultra-long-haul operations go the distance?

The premium carrier first began flying non-stop to Newark and Los Angeles in 2004, then using a combination of business class and premium economy seats aboard a gas-guzzling, four-engine Airbus A340-500 aircraft.

Amid a robust economic environment, SIA later decided to double down by reconfiguring its A340s into an all-business class product with just 100 seats. The combination of surging fuel prices and waning travel demand after the 2008 global financial crisis prompted the carrier to pull the plug on the direct US services in 2013.

Fast forward to 2015 - when SIA announced it would revive the non-stop flights - and the operating environment had changed dramatically. Plane-maker Airbus promised better operating efficiencies with the ultra-long-range (ULR) variant of the twin-engine A350 aircraft, while fuel prices had eased significantly.

The appeal to travellers no doubt lies in the fact that it cuts travel time, while the airline could benefit by tagging on a premium to the airfare and potentially attracting new passengers who transit at other hubs besides Changi Airport.

This time around, SIA has carefully opted for a two-class configuration with 67 business class and 94 premium economy seats, likely opting to omit economy cabins since this lower-yielding segment tends to be more price-sensitive.

Passengers who want to fly economy or break up the journey with a stop-over can still opt for the airline's one-stop service to New York (via Frankfurt), to San Francisco (via Hong Kong) and to Los Angeles (via Tokyo).

Seattle could well be the next non-stop US destination on the list, according to a Straits Times report, although the carrier declined to comment on the likelihood of flights to the West Coast city.

But even as next-generation planes make ultra-long-haul more feasible, rising fuel prices complicate matters, especially when the costs of operating such routes are high, considering the volume of fuel that has to be carried and the number of crew required.

According to an International Air Transport Association (Iata) report, jet fuel prices are trending about 36 per cent higher year-on-year at over US$95 per barrel. In SIA's case, it has put in place fuel hedges, which could at least help cushion some of this impact.

Meanwhile, additional capacity is being added to the South-east Asia-US market as other airlines eye non-stop services.

South-east Asia-US nonstop seat capacity will increase 82 per cent between October and December, led by premium seats, says Centre for Asia Pacific Aviation (CAPA) analyst Brendan Sobie. United Airlines already operates non-stop Singapore-San Francisco flights twice a day using Boeing's Dreamliner. And Philippine Airlines has launched non-stop flights from Manila to New York, making it the only carrier to offer economy seats on a direct product between South-east Asia and the Big Apple (though it likely caters to a different segment of customer than SIA).

Delta Airlines could also use its new A350-900 fleet to launch non-stop services from Seattle to Singapore, reckons Mr Sobie.

Changi Airport Group (CAG) sees Chicago, Seattle, Vancouver and Toronto as other cities with potential for non-stop flights to Singapore, the airport operator told The Business Times in June.

Nonetheless, the A350ULR can easily be modified to "turn back" into an A350, analysts have pointed out. This could help the airline sidestep the risk of having a sub-optimal fleet if the seven A350ULRs ordered prove too many, suggesting that SIA has carefully covered its bases.

To raise awareness of its new services, SIA is currently offering premium economy promotional fares to Los Angeles and New York at S$1,498 and S$1,698, which is lower than what a premium economy fare with a stopover might typically go for. While the game plan will no doubt be to raise fares as the service matures, such promotional fares would mean lower yields in the near term.

Operating such routes require sufficient premium traffic to sustain them; nonetheless, Singapore is one of the few markets in South-east Asia that has the premium base to make this work.

Ultimately, these ultra-long-haul flights could help the airline group garner more premium traffic, but operating them profitably - as SIA found out the first time round - won't come without challenges.