Singapore reopening has stepped up Singapore Airlines' recovery trajectory
Singapore Airlines (SIA) has accelerated its network recovery after the Singapore government opened the country's borders to international travel. This caused a notable spike in passenger capacity, although the airline was already on a long term growth path even before the government's latest move.
Singapore has been a leader in re-establishing international air links. It first set up a system of bilateral air corridors over several months. That has been replaced with a broader reopening from 1-Apr-2022.
These steps are helpful to SIA as it looks to rebuild its network and traffic. Full recovery may still be some way off, but SIA has probably moved further in this regard than any of its rivals in the Asia-Pacific region. Capacity gains have in turn resulted in its active fleet moving closer to pre-pandemic levels.
Once again, Singapore provides a clear example of how government policy settings are the major factor in airline recovery trajectories at the moment. A significant caveat is that capacity is returning far faster than demand, but this will still put SIA in a good position when international demand does come back more strongly.
- Singapore Airlines (SIA) has accelerated its network recovery after the Singapore government opened the country's borders to international travel.
- SIA's capacity has climbed to 56% of pre-pandemic levels, with the airline operating more than 2,000 weekly departures for the first time in over two years.
- The new Vaccinated Travel Framework has replaced the previous bilateral vaccinated travel lanes (VTLs) system, allowing vaccinated travelers to enter Singapore quarantine-free.
- SIA has responded to the new framework by significantly boosting its capacity, with increases in service on existing routes and the resumption of flights on suspended routes.
- SIA has steadily rebuilt its fleet, with 121 aircraft in service, close to its operational fleet size before the pandemic.
- SIA's aggressive approach to regrowth may affect profitability in the short term but positions the airline well for the recovery of international demand.
Summary:
- Singapore opened its border to all vaccinated travellers from 1-Apr-2022.
- Singapore Airlines (SIA) hiked its departures significantly to coincide with the opening.
- The SIA Group's capacity has now climbed to 56% of pre-pandemic levels.
- The ratio of SIA fleet in service is also at its highest level in two years.
VTLs served an important transition role, but broader changes have set foundation for traffic and capacity gains
In Mar-2022 the Singapore government said it would allow all vaccinated travellers to enter Singapore quarantine-free. Pre-departure tests are still required, but not arrival tests. Transit to other points via the Singapore Changi hub is also allowed, as long as entry requirements are met for the destination country.
This step meant that Singapore's extensive vaccinated travel lane (VTL) system became redundant, and was honourably retired after serving its purpose admirably.
Singapore had established bilateral VTLs with more than 30 countries since Sept-2021, which allowed travel to resume with some important markets. Nearly 600,000 travellers entered Singapore under the VTL program, according to the Civil Aviation Authority of Singapore.
The new system is known as the Vaccinated Travel Framework. The government has kept the option of precluding travellers from countries that it places in its restricted category - although there are none currently with this status.
SIA's steady capacity growth takes sharp jump to coincide with border opening
SIA has responded to the new framework by boosting capacity significantly.
The group's weekly departures rose particularly sharply for the week of 28-Mar-2022, when the system was changed. By the week of 4-Apr-2022, the SIA Group was operating 405 more weekly departures than it was three weeks earlier. It is also worth noting that for the week of 4-Apr-2022, the group operated more than 2,000 weekly departures for the first time since 16-Mar-2020, over two years ago.
These latest additions have elevated the SIA Group to 54.5% of its pre-pandemic weekly departures, and it goes without saying that this is a far higher level of international recovery than almost any other Asia-Pacific airline.
Singapore Airlines Group: weekly departing frequencies, 2019-2022 (YTD)
In terms of weekly seats, the SIA Group reached 56% of its 2019 level in the week of 4-Apr-2022. Among the group members, the increase was greater for the core Singapore Airlines than for the LCC Scoot.
The capacity and frequency increases so far this year have been exceeding traffic growth, however.
In Feb-2022 the group's passenger traffic was at just 19.5% of the same month in 2019.
Singapore Airlines Group: monthly passenger traffic, 2019-2022
It is also worth noting that Singapore's overall international capacity recovery has not been as swift as that of its flag carrier.
Singapore's international capacity was at 40.1% of pre-pandemic levels for the week of 4-Apr-2022. This indicates that overseas-based airlines are not rebuilding Singapore routes as quickly as SIA.
Added flights are boosting frequency on some routes, while others are being resumed
So where are the extra SIA departures going to?
Some of the airline's existing routes have seen increases in service, such as Sydney, Melbourne and Perth in Australia, London and other European destinations. Flights have also been added to certain Southeast Asian markets.
As well as these increases, SIA is restarting services on routes that have been suspended due to the pandemic.
Examples are flights to Newark in the US, Cairns and Darwin in Australia, Da Nang in Vietnam, Cebu in the Philippines, and Penang in Malaysia.
SIA has steadily rebuilt its fleet closer to pre-pandemic levels
SIA's consistent network growth has allowed the airline to return more of its aircraft to service.
The SIA parent airline now has 121 aircraft in service and 14 inactive. This is very close to its operational fleet size in early Jan-2020, before the coronavirus pandemic struck.
At that point the airline had 124 aircraft in service and 11 inactive. However, since the start of the pandemic SIA has also absorbed some narrowbodies that were operated by its former subsidiary SilkAir, which was shut down.
Singapore Airlines' fleet, active vs inactive, Jan-2020 to 2022 (YTD)
Scoot, meanwhile, had returned 40 of its fleet to service by 7-Apr-2022, with 19 inactive.
This compares to its pre-pandemic fleet of 49 aircraft. It now has a higher total number (active plus inactive) because it has also added some of the narrowbodies previously operated by SilkAir.
Scoot's aircraft fleet, active vs inactive, Jan-2020 to 2022 (YTD)
Capacity growth exceeds demand - but this probably isn't a bad thing at this point in the recovery
At this stage SIA is adding back flights faster than demand can keep up. This will affect the profitability of these routes, but SIA - like Qantas and others - has obviously determined that it is better to keep aircraft in the air than on the ground.
An aggressive approach to regrowth is a good move for SIA. It may cause some short term pain, but the airline will be able to re-establish its broad network relatively quickly.
Having a large number of spokes from its hub is vital for an airline like SIA that relies heavily on connecting traffic. And standing up its network and fleet will also mean it is ready when international demand recovery accelerates. This should happen over the remainder of 2022 as more countries relax travel restrictions and passenger confidence returns.
Other airlines have to be more cautious about resuming international routes. But SIA has a solid financial position that gives it substantial flexibility.
Having support from a government that is one of the most progressive in terms of reopening borders is also a big help. The Singapore government has long recognised the importance of the airline to the state's economic progress.