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410 total articles
69 total articles
The much-celebrated growth of Chinese tourism is not occurring evenly. An additional 3.8 million Chinese visitors travelled to core Northeast and Southeast Asia in 2014 compared to 2013, representing 19% growth. But this growth was concentrated exclusively in Northeast Asia while Southeast Asia actually contracted. This excludes Thailand, which is earning its "Teflon Thailand" reputation: after flat performance over much of 2014 due to political uncertainty, Chinese visitors have sprung back up to all time highs. Its neighbouring countries are far less fortunate. It is little wonder Korea, Thailand and Japan are the largest growth markets for Chinese airlines.
Despite weakness in Southeast Asia, foreign airlines are typically not planning to further reduce capacity. As one example, Singapore Airlines instead plans to link outbound China traffic with other markets, such as Australia.
Rapid growth within Northeast Asia now means that Chinese visitors have come to define tourism profiles: they accounted for 18% of all visitors to Japan in 2014, 43% to Korea and 40% to Taiwan. Such high shares become contentious locally – and risks that countries and airlines need to carefully manage.
Singapore Airlines Group has reported improved profits for the quarter and year ending 31-Mar-2015 (FY2015) driven by a recovery in yields. The SIA mainline operation, full-service regional subsidiary SilkAir and SIA Cargo all recorded improvements in their operating performance for FY2015, although SIA Cargo remained in the red.
The SIA Group should be able to boost profitability further in FY2016 driven partially by fuel cost reductions. But market conditions remain relatively challenging and profits are unlikely to return to pre global financial crisis levels.
Mainline capacity will again be flat in FY2016 and there should be an opportunity to boost yields further at the parent airline as premium economy is introduced. But the group is accelerating capacity expansion at SilkAir and long-haul LCC subsidiary Scoot, which could put pressure on yields and load factors in some markets.
Singapore Airlines (SIA) reported a slight drop in operating profits at the group and parent airline for the fiscal third quarter ending 31-Dec-2014. But SIA and regional full-service subsidiary SilkAir both remained in the black for the quarter and calendar 2014 despite challenging market conditions which drove losses at most of its peers in Southeast Asia.
SIA has outperformed its neighbours by maintaining a disciplined and rational approach to capacity. The parent airline has shrunk since 2008 and the upcoming introduction of premium economy product could result in a further reduction in seat capacity and passenger traffic.
But premium economy could also drive an improvement in yields and profitability at the parent airline after several years of declines. Group profitability should also improve as SIA’s two budget airline subsidiaries, which are driving most of the growth, turn the corner.
Singapore Airlines (SIA) and its regional subsidiary SilkAir remained profitable in the quarter and half ending 30-Sep-2014 despite extremely challenging market conditions in Southeast Asia. But the group’s net profit has been on the decline due primarily to the heavy losses at LCC affiliate Tigerair.
SIA is now in the process of increasing its stake in Tigerair which pending approvals will result in the LCC becoming a subsidiary. SIA is not considering taking over Tigerair entirely and instead will focus on pursuing synergies, particularly with its long-haul LCC subsidiary Scoot, while supporting Tigerair’s ongoing turnaround efforts.
SIA’s long-term outlook is relatively bright but several components of its strategy, including its investments in the LCC sector and its new full-service joint venture in India, will likely continue to have a negative impact on earnings for the short to medium term. The fact the SIA Group has so far been able to stay in the black overall is a noteworthy accomplishment.
Singapore Changi Airport and CAAS are trying to promote new long-haul flights and more transit traffic in response to a significant slowdown in passenger growth. Singapore is eager to drum up new sources of traffic or growth as it invests significantly in airport expansion which will prove to be overly ambitious if growth cannot be restored.
Incentivising transit traffic is logical as a growth in transit numbers, long a staple under Singapore’s hub strategy, could help offset a recent drop in inbound visitor numbers. Following Kuala Lumpur's example, Singapore will probably need to focus on enhancing LCC transit traffic, an increasingly important segment which Changi has barely scratched.
Long-haul transit traffic growth will be much harder to achieve, even with incentives. Changi’s biggest growth opportunities are likely on medium-haul routes and connections within Asia-Pacific.
SilkAir is joining Singapore’s main LCC groups in slowing down expansion in response to overcapacity in Singapore’s short-haul market. SilkAir capacity growth has been in the low single digits in recent months and will likely stay at modest levels as it accelerates the retirement of A320s.
The full service regional subsidiary of Singapore Airlines, SilkAir has expanded rapidly over the past several years despite intensifying competition with LCCs. SilkAir has doubled in size since 2007 and has consistently outperformed Singapore’s two short-haul LCCs, Tigerair and Jetstar Asia, in the process securing valuable slots at Changi Airport for the group.
SilkAir has been planning to maintain annual double digit capacity growth, driven by the introduction of new 737-800s. But a slowdown is sensible given the current overcapacity situation in the Singapore short-haul market, which has led to a steep drop in profits at SilkAir as well as at LCC competitors.