SilkAir faces short-term challenges but upcoming product enhancement could lead to improved outlook

SilkAir is planning to upgrade its in-flight product in 2014 as the Singapore Airlines (SIA) full-service regional subsidiary starts to transition to a Boeing 737-800 fleet. SilkAir will also continue to grow rapidly in 2014 in line with the SIA Group's increased focus on Asia.

But SilkAir has seen profitability slip in recent months as competition has intensified in the regional market within Asia. A 12% capacity increase through the first seven months of the current fiscal year has not been absorbed, resulting in a drop in load factor and clouding SilkAir's short-term outlook.

The forthcoming product upgrade is designed to further differentiate SilkAir from LCCs and cement its position as a leading full-service regional carrier in the Southeast Asia region. But SilkAir has decided against following Cathay Pacific regional subsidiary Dragonair in improving its business class seat.