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Singapore Changi passenger growth slows to less than 1% as LCCs' expansion and tourism slow

Singapore’s aviation market grew by only 0.7% in 2014, the smallest increase since the global financial crisis in 2009. Passenger growth in 2015 will again be very modest as capacity is maintained roughly at current levels.

Singapore has been impacted by capacity adjustments by its struggling low-cost carrier sector. Singapore’s LCC penetration rate, which increased steadily from 2003 to 1H2014, declined in 2H2014.

Singapore also has been impacted by declining visitor numbers. All of four of Singapore’s largest source markets – Indonesia, Malaysia, China and Australia – recorded drops in visitor numbers in 2014. Passenger traffic to Thailand, one of Singapore’s largest outbound and transit markets, declined due to the civil unrest in Bangkok.

Singapore Changi passenger traffic surpasses 54 million in 2014

Singapore Changi Airport reported on 29-Jan-2015 a 0.7% increase in passenger numbers for 2014 to 54.1 million. The number of movements dropped 0.7% to 341,390.

While 2014 marked the first time Changi has handled more than 54 million passengers it was the slowest year for growth since 2009, when traffic dropped by 1% due to the global financial crisis. Changi rebounded in 2010 with 13% growth. Passenger growth was again in the low double digits in 2011 and 2012 before initially slowing to 5% in 2013.

Singapore Changi annual passenger traffic: 2008 to 2014

A significant slowdown in the LCC sector is the main driver of the sluggish growth. Over the last decade about two-thirds of passenger growth at Changi has been driven by LCCs.

Changi handled 30 million passengers in 2004 with less than 1 million being flown on LCCs. In 2014, LCCs accounted for over 16 million of the 54 million passengers.

Singapore LCC capacity grew by only 3% in 2014 

While Singapore-based LCCs Tigerair and Jetstar Asia were both launched in 2004 the biggest growth has occurred since 2007. In 2007, Changi handled 3.6 million LCC passengers and 33.1 FSC passengers. In 2012, Changi handled 14.4 million LCC passengers and 36.8 million FSC passengers.

Changi stopped providing an LCC/FSC breakdown in 2013. But 2013 recorded an 18% jump in LCC seat capacity, according to OAG, driven by rapid expansion at Tigerair and the mid-2012 launch of Scoot. CAPA previously estimated that LCC passenger traffic increased in 2013 by about 15% (as load factors declined) while FSC passenger traffic was roughly flat.

LCC seat capacity in Singapore increased in 2014 by only 3%, according to OAG data. 2014 marked the first time in 10 years that LCCs did not record double digit capacity growth in Singapore.

Singapore Changi annual LCC capacity (seats): 2003 to 2014

CAPA estimates that LCC passenger numbers were up by about 3% in 2014 while FSC passenger traffic again was roughly flat.

Singapore LCC penetration rate has declined from a peak of 34% in early 2014

The modest increase in LCC seat capacity for 2014 came from capacity that was added in 1H2014. As CAPA has previously analysed, LCC capacity in Singapore has been on the decline since mid-2014.

See related report: Singapore short-haul LCC market remains challenging despite adjustments at Jetstar Asia and Tigerair

Singapore’s LCC penetration rate peaked at almost 34% in Dec-2013.

Singapore monthly LCC penetration rate (% of seats): Jan-2013 to Dec-2013

After staying at about the 33% level in 1Q2014, Singapore’s LCC penetration rate dropped slightly in 2Q2014, to slightly less than 32%. But this was still about 2ppts above 2Q2013 levels.

In 3Q2014 the LCC penetration rate dropped to about 30%, representing a small decrease compared to 3Q2013. In 4Q2014 the penetration was slightly under 31%, compared to about 32% in 3Q2013.

Singapore monthly LCC penetration rate (% of seats): Jan-2014 to Dec-2014

On a year over year basis the LCC penetration rate was above 2013 levels the first six months of 2014 but below 2013 levels the last six months of the year. The LCC penetration rate for Jan-2015 and Feb-2015 was also below Jan-2014 and Feb-2014 levels.

For the full year Singapore’s average LCC penetration rate in 2014 was slightly over 31%. Through the first two months of 2015 the LCC penetration rate is slightly less than 31%, similar to the figures from 4Q2014.

Singapore LCC penetration rate: 2003 to YTD2015

Tigerair passenger numbers grow in 2014 but drop in 4Q

Singapore’s largest LCC, Tigerair, was still able to grow its passenger numbers in CY2014 by 7% to 5.3 million. As a result the carrier’s share of passenger traffic in Singapore increased from 9.1% in 2013 to 9.7% in 2014. In 2011, Tigerair’s Singapore share of passengers at Changi was only 8.1%. 

But Tigerair passenger numbers were down on a year over year basis the last two months of 2014. In 4Q2014 the carrier’s passenger traffic was down by 2% to 1.291 million.

In Dec-2014 Tigerair’s passenger numbers were down 5% to 468,000. As a result its share of total traffic at Changi slipped from 9.7% in Dec-2013 to 9.2% in Dec-2014.

Tigerair Singapore monthly passenger numbers: Jan-2012 to Dec-2014

As CAPA previously reviewed, Tigerair Singapore began cutting capacity and restructuring its network in mid-2014 as part of a turnaround initiative. Tigerair Singapore was unprofitable for five consecutive quarters, running from Jul-2013 through Sep-2014, as overcapacity in the Singapore short-haul market led to declines in yield and load factor. Tigerair Singapore was roughly break-even in the three months ending 31-Dec-2014 as the group was in the black for the first time in two years.

See related report: Tigerair Singapore CY2015 outlook brightens after return to profitability in fiscal 3Q

Tigerair Singapore recorded aggressive 24% ASK growth in calendar 2013 and 16% growth in 1H2014. But year over year monthly ASK growth slowed to the low single digits in 3Q2014 (but below 2Q2014 levels) and were down in Nov-2014 and Dec-2014.

Tigerair Singapore monthly ASKs: Jan-2012 to Dec-2014

These figures exclude Tigerair’s former affiliates in Indonesia and the Philippines, both of which served Singapore. Indonesian affiliate Tigerair Mandala particularly had a large operation in Singapore, with up to 10 return flights per day in early 2014. Mandala was shut down in Aug-2014 while Tigerair Philippines was sold to Cebu Pacific in early 2014.

A year ago, in early Feb-2014, Tigerair Group had about an 11.5% share of total seat capacity in Singapore, according to CAPA and OAG data. This included a 9.6% share for Tigerair Singapore, a 1.6% share for Mandala and a less than 0.3% share for Tigerair Philippines. Currently the group has only about an 8.8% share, including 8.6% for Tigerair Singapore and 0.2% for start-up Tigerair Taiwan.

Jetstar also makes adjustments in Singapore

Singapore’s second largest LCC group, Jetstar, also has cut capacity over the last year.

The Jetstar Group accounted for about a 7.8% share of total seat capacity in Singapore in early Feb-2014, including 5.8% for Singapore-based Jetstar Asia, 1.3% for Singapore-based Valuair and 0.7% for Australia-based Jetstar Airways. The Jetstar Group currently has a 7.4% share of seat capacity, including a 6.9% share for Jetstar Asia, 0.3% for Jetstar Airways and 0.2% for Vietnam-based Jetstar Pacific. (Jetstar Asia’s Valuair subsidiary was folded into Jetstar Asia in Oct-2014 while Jetstar Pacific launched services to Singapore in Oct-2014 with one daily fight from Ho Chi Minh.)

Jetstar Asia or parent Qantas has not yet reported traffic data for Dec-2014 or the full year. But Jetstar Asia recorded declines in passenger traffic for Oct-2014 and Nov-2014. For the first five months of the current fiscal year (Jul-2014 through Nov-2014) Jetstar Asia passenger numbers were flat at 1.3 million.

Jetstar Asia monthly passenger numbers: Jan-2012 to Nov-2014

Jetstar Airways also has significantly cut back its long-haul operation from Singapore, which now consists of one route (Melbourne). Jetstar Asia expanded its fifth freedom operation in 2014 with the launch of services to Fukuoka via Bangkok. (Unlike Tigerair, not all of Jetstar Asia’s passengers touch Singapore, making its share of total passengers at Changi difficult to calculate.)

The other main LCC group in the Singapore market, AirAsia, also has cut capacity in response to challenging market conditions. The AirAsia Group currently accounts for about 7.2% of seat capacity in Singapore compared to 7.4% one year ago.

AirAsia does not have a Singapore-based affiliate but its affiliates in Indonesia, Malaysia and Thailand all operate several daily flights to Changi. Indonesia AirAsia axed or reduced frequencies on several of its routes to Singapore in Jul-2014 while Malaysia AirAsia has cut back on the core Singapore-Kuala Lumpur route. Thai AirAsia capacity to Singapore is now back to early 2014 levels but was reduced for several months in 2014 due the civil unrest in Bangkok.

Scoot expansion to not resume until 2H2015

Scoot is Singapore’s fourth largest LCC and currently has about a 2.7% share of seat capacity. Combined AirAsia, Jetstar, Tigerair and Scoot account for nearly 90% of Singapore's LCC market and nine of the 15 LCCs serving Changi (see background information).

Scoot’s capacity has been flat over the last year as the long-haul LCC has not expanded its fleet or network since late 2013. Scoot carried 2 million passengers in 2014. As with Jetstar Asia, Scoot’s share of passengers in Singapore cannot be calculated as it also operates two fifth freedom sectors.

Scoot plans to resume growth in 2H2014 with the launch of several new routes. Scoot took delivery of its first of 20 787s at the end of Jan-2015 but the carrier’s first growth aircraft will not be added until mid-2014 as Scoot initially focuses on using its 787s to phase out its fleet of six 777-200s.

See related report: Scoot begins new chapter as Singapore Airlines long-haul LCC subsidiary takes first 787

Scoot (and Singapore LCC) passenger traffic could see faster growth in 2016 as transfer traffic grows

Jetstar Asia and Tigerair are not planning to expand in 2015. But further capacity or network adjustments are also not likely as market conditions are now starting to improve.

There could still be some passenger growth in 2015 from both Jetstar and Tigerair driven by an increase in load factors as market conditions improve. But such growth will be relatively modest.

Growth at Scoot could also unlock growth for partner Tigerair, which currently sees a very small volume of transit traffic. But again such growth is likely to be rather insignificant in 2015 as Scoot’s growth in 2015 will be modest. Much more rapid passenger growth from Scoot is likely in 2016.

Scoot’s passenger numbers should double by 2017. But even then, as a medium/long-haul carrier it is not likely to capture more than a 6% share of total passengers at Changi.

Jetstar Asia now achieves a much higher portion of transit traffic, with parent Qantas and Emirates its largest partners. Jetstar Asia sees further opportunities to increase transit traffic in Singapore while point to point growth opportunities are limited. If Changi is able to resume rapid passenger growth in the coming years the key will be the emerging LCC transit sector along with a higher LCC penetration on relatively underserved medium haul routes.

Singapore experiences a reduction in Southeast Asia passenger numbers in 2014

Singapore’s short-haul market within Southeast Asia is now relatively mature, limiting opportunities for further growth.

LCCs now account for about 50% of seat capacity in the Singapore-Southeast Asia market, leaving little room for further market share grab from full-service carriers. Opportunities for overall growth are also more limited compared to other short-haul markets in Southeast Asia because Singapore has a much smaller and slower growing population than its neighbours. It also already has a proportionally large middle class that is already taking several flights per annum.

Passenger numbers between Singapore and other Southeast Asian countries were down 0.3% in 2014 to 23.53 million. Southeast Asia had been the main driver of growth at Changi over the last several years, including growth of 8.2% in 2013.

Singapore Changi passenger traffic by region: 2014 vs 2013

Singapore visitor arrivals slipped by about 3% in 2014

The drop in regional traffic within Southeast Asia was driven partially by a drop in visitor numbers from Singapore’s two largest source markets, Indonesia and Malaysia. Through the first 11 months of 2014 visitor arrivals at Changi from Indonesia were down 4% to 1.642 million while visitor arrivals from Malaysia were down 3% to 839,000, according to Singapore Tourism Board data.

There was also a 3% reduction in Filipino visitor numbers at Changi through the first 11 months of 2014 to 477,000.

Thailand is a smaller inbound market but recorded an 8% increase in visitor arrivals at Changi to 382,000. But this was more than offset by a drop in outbound traffic from Thailand to Singapore. Thailand’s Department of Tourism recorded a 10% drop in visitor numbers from Singapore to 865,000. Thailand is also a major transit market for Singapore. Transit traffic likely slipped as total visitor numbers to Thailand dropped 7% to 24.8 million.

In Singapore total visitor numbers slipped 3% through the first 11 months of 2014 to 13.7 million including a 1% drop in visitor arrivals by air to 10.7 million. Visitor arrivals by air from Southeast Asia dropped by 1% to 3.5 million while visitor arrivals by air from North Asia dropped by 5% to 3 million, driven by an 18% decline from China to 1.3 million. Visitor arrivals from Australia were down 5% to about 900,000. Changi was still able to grow overall traffic to Southwest Pacific (Australia/New Zealand) and North Asia as an increase in outbound and transit traffic offset the drops in the inbound sector.

The overall drop in tourism figures impacted Changi's overall figures for 2015, particularly in the Southeast Asia and China markets. Visitor arrivals account for about 43% of total arriving passenger traffic at Changi. (The Singapore Tourism Board has not yet released full-year data for 2015.)

LCCs have cut Singapore-Southeast Asia capacity by 20% 

LCC capacity has been reduced in nearly every Singapore-Southeast Asia market over the last year. This is hardly surprising given the unfavourable market conditions.

LCC capacity between Singapore and other Southeast Asian countries peaked at about 180,000 weekly seats in Jan-2014. Capacity has since come down by about 15%, according to CAPA and OAG data. FSC capacity for the same period is down by only about 4%.

Singapore to Southeast Asia total LCC capacity (one-way seats per week): 19-Sep-2011 to 19-Jul-2015

Singapore-Indonesia has suffered the largest LCC capacity reduction, with seats currently down by about 30% compared to early Feb-2015 levels. LCC capacity in the Singapore-Malaysia market is down by about 10% year over year while Singapore-Thailand LCC capacity is down by about 8%. Singapore-Philippines LCC capacity is down by only 1%.

The Singapore-Indonesia market still managed a slight increase in passenger numbers in 2014 to 7.5 million. But the growth was entirely driven by Bali, which recorded 16% growth compared to 2013. Bali, the second largest destination in Indonesia from Singapore, is almost entirely an outbound market from Singapore. Other Indonesian destinations, which saw a drop in traffic, are more of an inbound market.

Singapore also attracts a large volume of transit traffic from Indonesia but most of this traffic is carried by full-service carriers. Current FSC capacity in the Indonesia-Singapore market is roughly flat compared to early Feb-2014 levels.

The fact nearly all the capacity reduction has come from LCCs highlight the challenges in the point to point sector, particularly inbound as LCCs cater to price sensitive Indonesians who previously made more frequent trips to Singapore, a popular destination for shopping and medical tourism. FSCs competing in the Singapore-Indonesia and Singapore-Southeast Asia markets typically rely more on transit traffic and business passengers.

Singapore to again experience modest LCC growth in 2015

Conditions in the Singapore-Southeast Asia market are starting to improve, brightening the outlook for Singapore’s short-haul market. Thailand in particularly has seen a recovery with Changi reporting an increase in passenger traffic to Thailand over the last three months of 2014 including a 6.6% increase in Dec-2014. Thailand ended 2014 as Changi's fourth largest market from Singapore after Indonesia, Malaysia and Australia. In 2013 it was the third largest market. 

But LCCs are not likely to again pursue rapid capacity growth, wary of the overcapacity situation which has plagued the Singapore short-haul market since 2H2013. Several routes continue to suffer from overcapacity and it could be some time before the capacity which was added in 2012 and 1H2013 is fully absorbed.

Singapore’s LCC penetration rate is likely to stay at approximately the 30% level for the rest of 2015 as all the main players maintain capacity at current levels. There could be modest growth in passenger numbers as LCCs in Singapore are starting to record higher load factors.

But Singapore is not likely to see a return of double digit passenger growth – or of LCC growth exceeding 20% - in the foreseeable future.

Background information

AirAsia, Jetstar, Scoot and Tigerair account for nearly 90% of LCC capacity in Singapore. The next largest LCC, Lion Air, also reduced capacity to Singapore in 2014 as it discontinued services from Singapore to Ho Chi Minh and Surabaya.

At various points over the last couple of years Air India Express, IndiGo and VietJet also have reduced capacity to Singapore. Each LCC is currently only serving Changi with one daily flight. Meanwhile, Golden Myanmar and China’s Spring Airlines have dropped services to Singapore entirely.

Air India Express, Cebu Pacific, IndiGo and VietJet are the only remaining LCCs outside the AirAsia, Jetstar, Lion, Scoot or SIA (Tigerair/Scoot) groups serving the market, an indication of the challenges confronting independent carriers. Cebu Pacific is by far the largest of these carriers but benefits from having an alliance with Tigerair.

Singapore LCC capacity by carrier: 26-Jan-2015 to 1-Feb-2015

Rank Airline Group Total Seats
1 TR Tigerair Tigerair (SIA 120,600
2 3K Jetstar Asia Jetstar 89,640
3 AK AirAsia* AirAsia  45,720
4 TZ Scoot SIA 36,682
5 QZ Indonesia AirAsia* AirAsia 34,200
6 JT Lion Air* Lion 20,342
7 FD Thai AirAsia* AirAsia 20,160
8 5J Cebu Pacific Air* independent 17,154
9 OD Malindo Air* Lion 6,948
10 JQ Jetstar Airways* Jetstar 5,536
11 IX Air India Express* Air India 2,604
12 IT Tigerair Taiwan* Tigerair (SIA) 2,520
13 BL Jetstar Pacific* Jetstar 2,520
14 6E IndiGo* independent 2,520
15 VJ VietJet Air* independent 2,520

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