SINGAPORE Airlines is committing to a strategy of working with international partners and operating overseas hubs after Covid exposed the financial dangers of not having a domestic aviation market.

The airline is open to opportunities and will evaluate potential synergies, chief executive officer Goh Choon Phong said in an interview with Bloomberg News.

Goh, a 58-year-old industry veteran who joined Singapore Airlines in 1990 and became CEO in 2011, is trying to guide the carrier out of the toughest period in its history. This time last year, it had just announced a record annual loss and was flying only a few thousand people a month compared with as many as 2 million in pre-Covid times. Unsure when matters might improve, the airline had to raise billions of dollars to get through the crisis.

Now that Singapore and most other countries around the world have opened again for quarantine-free travel, Singapore Airlines was able to increase traffic to more than 1 million passengers in April, the most since the pandemic began.

Importance of India

Goh highlighted India as a key growth area, saying it is expected to become the world’s third-biggest aviation market by the middle of this decade, if not before. 

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Singapore Airlines teamed up with Indian conglomerate Tata Sons to form full-service carrier Vistara, which started flying in 2014. Vistara now serves 9 overseas destinations and 31 in India, though it has yet to make a profit.  

“India is obviously a very important one because it’s going to be massive,” Goh said. “We want to continue to look at scaling up Vistara and ensuring that it grows well.” 

Apart from the huge domestic market - already the world’s third largest - India’s allure also lies in international passengers. Close to 4.8 million people traveled between India and Singapore in 2019, before the pandemic, data from India’s Directorate General of Civil Aviation show. 

With Vistara, Singapore Airlines aims to cater to Indians flying to Europe and the US, poaching them from Gulf rivals that dominate the Indian overseas air-travel market.

Goh refused to be drawn when asked if Singapore Airlines would be interested in buying a stake in Air India, saying the company doesn’t comment on confidential discussions it may or may not be having with partners. 

“What I can tell you is that both Tata Sons and ourselves are equally committed to ensure that Vistara continues to grow,” he said. 

Tata is majority owner of 4 airlines - Vistara, Air India, AirAsia India and Air India Express - prompting speculation that it may consolidate or reorganise them into low-cost and full-service models. India doesn’t allow foreign carriers to hold more than 49 per cent of a local airline, so any reorganisation may bring down Singapore Airlines’s stake in Vistara, unless it invests further.

Thai setback

When Singapore Airlines tried a hub expansion in Thailand, it wasn’t a success. 

Its budget carrier unit Scoot set up NokScoot Airlines, a venture with Nok Airlines, in 2014 to provide services for short- and medium-haul flights from Thailand. NokScoot’s board decided to liquidate the business in June 2020 after failing to fully start operations of the low-cost carrier.

“I’m not ashamed to say that we have tried for example, in Thailand, with NokScoot and of course, with the pandemic it became very difficult,” Goh said. 

“What is important really is the strategy of identifying the right partner to work with in the multi-hub scenario,” he said. “It may not work, but that should not deter us from doing what we think is the right strategy. And we must be willing to take some risk.”    

Codesharing and alliances

Another avenue of growth is establishing and deepening partnerships with other carriers through codesharing and joint-marketing activities, which helps expand networks at less of a cost. Singapore’s competition regulator granted conditional approval on May 10 for an agreement with Malaysia Airlines that includes revenue-sharing on some flights. The regulator is also assessing a similar partnership with All Nippon Airways.

Singapore Airlines, a member of Star Alliance, already has partnerships with Air New Zealand, Deutsche Lufthansa and Scandinavian carrier SAS. Through its various tie-ups, the airline has been able to add more than 200 new destinations to its network, according to Goh.  

“This thing about not having a domestic market is something you cannot overcome on your own,” he said. BLOOMBERG