Singapore Airlines cutting capacity by 11% as global economic downturn bites

Singapore Airlines (SIA) has announced plans to reduce capacity in the coming financial year, commencing April 2009, by 11% year-on-year, as it fortifies its response to a “sharp and swift” downturn in demand. In the course of the year, 17 aircraft will be decommissioned from the operating fleet. Before recession hit major markets, the plan was for only four aircraft to be phased out – one for conversion to a freighter, and three to be returned to lessors at completion of lease contracts.

SIA's management has met with leaders of three staff unions and discussed the capacity cuts, which weak advance bookings.

CEO, Chew Choon Seng, stated the removal of surplus capacity will result in redundant resources and will "draw sacrifices from every one of us in the company". He added the airline would only contemplate retrenchment "as a last resort", but noted the airline "does not have the luxury of time and we need to agree and act on some measures quickly so that we can push back the point of retrenchment as far as possible and improve our chances of avoiding it altogether".

Such measures include accelerated clearance of leave entitlements, voluntary leave without pay, voluntary early retirement and shorter work months.

Mr Chew warned, "given the falls of over 20% that we have seen recently in air cargo shipments, and the tradition of demand for air travel following closely behind trends on the cargo side of the business, we have to face the reality that 2009 is going to be a very difficult year".

Mr Chew added, "Singapore Airlines does not have a domestic operation to soften the blow from the slump in international air traffic, and we have to act decisively to address the situation.

Singapore Airlines last week announced a net profit of SGD337 million for the third quarter (ended 31-Dec-08), down 42.8% year-on-year, as Group revenue declined 2.6% and costs rose 5.7%.

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