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Struggling Singapore Airlines fights back

Struggling Singapore Airlines caught in the middle

Asia's second biggest airline desperately needs growth...

May 16, 2013 10:59 by



“SQ is giving its competition a very easy way to get experienced pilots,” said one SIA pilot whose contract was cancelled this year, speaking on condition of anonymity because his contract was confidential.

Analysts are looking beyond quarterly numbers for strategic changes. JPMorgan said SIA had net cash of S$3.8 billion as of December and could potentially announce a special dividend.

Some of that cash will help pay for new aircraft including the Airbus A350s and additional Boeing 777-300ERs, plus Boeing 737s for its regional carrier Silkair.

Fong said though SIA has been able to manage costs better than its competitors and had a strong balance sheet, it needed to come up with a clearer strategy.

Over the past year, SIA agreed to sell a 49 percent stake in Virgin Atlantic Airways Ltd, started a new budget airline Scoot, expanded capacity at Silkair, and is potentially increasing its stake in affiliate Tiger Airways Holdings Ltd.

 

NEW ALLIANCES?

Still, SIA needs to do much more, some analysts said.

“What could they do better? Maybe, if they could find a way to get into China more aggressively?” said Andrew Orchard, Hong Kong-based analyst at brokerage CIMB. “Would they want to do a bilateral partnership with a Middle Eastern carrier, take out some capacity that way?”

Orchard said SIA should consider quitting Star Alliance and joining the rival SkyTeam network as it could potentially work more closely with Chinese airlines and other partners.

SIA is doubling its stake in Virgin Australia Holdings Ltd to 19.9 percent. This comes months after struggling Qantas Airways Ltd and Emirates struck a five-year alliance, which includes switching the Qantas’ hub to Dubaifrom Singapore for European flights.

SIA’s moves to buy into Chinese and Indian carriers many years ago have not borne fruit. Goh has said the airline needs to increase exposure to these high-potential markets, but rivals have a head start.

Last month, Etihad agreed to buy a 24 percent stake in Jet Airways Ltd, India’s largest carrier, while AirAsia has struck a deal with the Tata group to start a local airline.

SIA’s shares, trading at their highest level in 1-1/2 years, have gained more than 6 percent so far this year as analysts upgrade earnings estimates due to lower fuel costs.

AirAsia’s cut-rate pricing on Southeast Asian routes and the emergence of new rivals such as the Lion Air group has hit SIA.

“Corporate travel in Asia has weakened but leisure travel is booming. That is helping to drive numbers but these are lower-spending travellers,” said Fred Seow, vice president of marketing at Asiatravel.com, which operates several hotel and flight booking websites.



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