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303 total articles
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SilkAir 737 MAX fleet to open up network options while boosting Boeing’s narrowbody presence in Asia
While Singapore Airlines regional subsidiary SilkAir is now celebrating delivery of its first of 23 737-800s, it is the second part of its largest ever aircraft acquisition programme that could be a game changer. The Singapore Airlines (SIA) regional subsidiary plans to take the first of at least 31 737 MAX 8s in 2H2017, enabling efficiency improvements and new medium-haul routes.
SilkAir will have the opportunity to use the MAX’s improved range to open new destinations in North Asia, Central Asia and Australia. The improved economics of the aircraft also potentially opens up destinations in India and China which are not viable with current generation narrowbody aircraft.
SilkAir is only one of four Asian carriers that has so far committed to the 737 MAX, along with Thailand’s Nok Air, Virgin Australia and Indonesia’s Lion Air. Nok, which announced its order at the recent 2014 Singapore Airshow, also expects to be one of the first carriers to take the MAX when it enters service in 2H2017.
Singapore Airlines (SIA) regional subsidiary SilkAir began a new chapter on 20-Feb-2014 as its first Boeing 737-800 entered service, taking over from slightly smaller A320s on four short-haul sectors. The carrier has just completed a momentous week as 21-Feb-2014 marked its 25th anniversary while on 17-Feb-2014 it rolled out a new brand campaign emphasising its full-service offering.
SilkAir has been extremely successful over the past decade, with steady profits and growth despite low-cost carriers invading its home market. LCCs now account for one-third of total capacity in Singapore and about half of the short-haul market, compared to virtually zero 10 years ago.
SilkAir, however, faces some of its biggest ever challenges as it begins its 26th year. Singapore’s short-haul market is suffering from overcapacity, impacting yields and load factors across LCCs and full-service carriers. SilkAir is fighting back with product, network and brand improvements but the market will not likely be able to fully absorb the capacity it is adding in 2014 as it places into service eight 737-800s.
Singapore Airlines (SIA) medium/long-haul low-cost subsidiary Scoot is preparing to begin operating 787-9s in 375-seat two-class configuration from late 2014. The carrier plans to quickly phase out its current fleet of six 777-200s, all of which will be replaced with 787s by mid 2015 with some expected to be transferred to planned Bangkok-based sister carrier NokScoot.
The transition to 787s will be an important development for Scoot as they will usher in significant efficiency improvements. Scoot has 10 787-9s on order along with 10 787-8s, which will be delivered from mid-2015. Scoot plans to configure its 787-8s with about 330 seats, giving the carrier the flexibility to use a smaller aircraft on its thinner routes.
Scoot is taking a hiatus from growth in 2014 but it will be a year of significant milestones as it takes its first 787 and launches its new joint venture in Thailand. Rapid growth will return in 2015 as Scoot plans to increase the size of its Singapore-based fleet by at least 50%.
Singapore Airlines (SIA) full-service regional subsidiary SilkAir is planning more rapid capacity and network expansion for 2014. The carrier plans to expand its fleet by four aircraft to 28 as eight 737-800s are delivered and four A320s exit.
2014 will also be a year of major milestones. SilkAir turns 25 years old in Feb-2014 and will celebrate the occasion by taking delivery of its first of at least 54 new 737s.
Normally low key SilkAir is also using its silver anniversary to come out of its shell with a major marketing campaign. Product improvements will be introduced and several more destinations will be added, starting with Mandalay in Myanmar and Kalibo in the Philipinnes.
Darwin is seeing a surge in capacity from foreign carriers as demand for international services expand to and from northern Australia, driven by growth in the energy and mining sectors. The increases offset an upcoming reduction in international capacity by Jetstar Airways as the Qantas low-cost subsidiary closes its Darwin base.
Seat capacity between Darwin and Southeast Asia has expanded by about 40% over the last year as three foreign carriers – Indonesia AirAsia, Malaysia Airlines (MAS) and Philippines Airlines (PAL) – have entered. Garuda Indonesia is also now looking at resuming services to Darwin in 2014.
Darwin was previously only served by one foreign carrier, Singapore Airlines (SIA) regional subsidiary SilkAir, which launched services in 2012. Jetstar also operates three international routes from Darwin – Bali, Manila/Tokyo and Singapore – but is dropping Manila/Tokyo and slightly reducing capacity on Bali and Singapore.
(updated following 13-Nov-2013 analyst briefing to include additional comments on SIA yields, Scoot and joint venture with Tata)
Singapore Airlines (SIA) has reported higher profits for the three months and fiscal first half ending 30-Sep-2013. But the carrier’s operating margin was once again low, particularly by SIA standards, as it continues to see a drop in yields.
Market conditions for SIA remain unfavourable. Competition in Southeast Asia has been intensifying while the cargo and long-haul passenger markets remain relatively weak. But the group has been trying to position itself for higher growth and profitability over the long term through a series of major strategic changes.
The last of several major strategic initiatives came towards the end of the most recent quarter as SIA unveiled plans to launch a joint venture full-service carrier in India with Tata. The new Indian carrier, which is expected to launch in 2014, follows the 2012 launch of Singapore-based long-haul low-cost carrier Scoot and an acceleration of expansion at regional full-service subsidiary SilkAir. Scoot is not yet profitable and SilkAir has seen its profitability decline in recent months but over the long-run the SIA Group will have a stronger portfolio with a potential for a return of higher profits.
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