Singapore Airlines benefitted from strong travel demand and its rapid recovery from the pandemic this summer. But it is watching industry dynamics closely this winter and doubling down on efforts to diversify its map and boost connectivity to maintain its advantage.
The Star Alliance carrier reported a S$799 million ($589 million) operating profit and 17.1% operating margin excluding special items in the September quarter, or the end of the first half of Singapore Airlines’ 2024 fiscal year. Revenues increased 4.3% to S$4.68 billion and expenses 1.9% to S$3.88 billion during the period.
Executives cited strong peak summer travel demand and the benefit of lower fuel prices for the September quarter results.
But Singapore Airlines is not sitting on its heels. The carrier, which to its advantage began rebuilding its global passenger network earlier than many of its competitors, is watching the industry closely. Competitors, including Cathay Pacific Airways and AirAsia, are rebuilding capacity quickly now that most East Asian markets have reopened to international travel. AirAsia targets a full recovery by the end of the year, and Cathay Pacific will fly 70% of pre-pandemic capacity.
“While the demand for air travel is expected to remain healthy leading up to the end of the financial year, significant capacity restoration across the industry, especially in the Asia-Pacific region, could put pressure on passenger yields,” Singapore Airlines said in its September quarter earnings release. The carrier and its budget subsidiary Scoot anticipate flying 92% of 2019 capacity levels in December; the airlines were 83% recovered in September.
Singapore Airlines’ group unit revenue, or RASK, was down 9% in the September quarter from its post-pandemic peak in the December quarter of 2022. However, RASK was 28% above the level in the fiscal year ending in March 2020.
To counter competitors’ recovery, Singapore Airlines is focused on a multi-prong strategy to maintain a competitive advantage. That includes extending its network of airline partnerships around the world, including with the Lufthansa Group in Europe, Thai Airways and Vietnam Airways in Asia, and United Airlines in North America. But top of its partnership list is securing approval for the merger of Air India and Vistara in India, which will give Singapore Airlines a 25% stake in Tata-owned Air India. The Competition Commission of India approved the deal in September, though more approvals are needed before the merger can close.
Another piece of Singapore Airlines’ strategy is expanding connectivity over Singapore’s Changi Airport. It and Scoot plan to serve 23 destinations in China and another 35 in Southeast Asia by December. In terms of China, competitors AirAsia and Cathay Pacific, including the latter’s budget subsidiary HK Express, will serve 15 and 17 destinations in December, respectively, according to Cirium Diio schedules.
AirAsia Group Head of Network and Regulatory Affairs Dilhan Haradasa said in October that the discounter would only add new markets, including in China, that are profitable. “We cannot afford to bleed money,” he said.
Singapore Airlines will continue to expand that connectivity into “regional secondary and tertiary markets” as Scoot takes delivery of nine Embraer E190-E2s in 2024. The aircraft seats up to 114 passengers in a single-class configuration, according to the planemaker. Scoot’s current smallest aircraft, the Airbus A320, seats 180 passengers.
Other potential issues Singapore Airlines is watching include “macroeconomic uncertainties and inflationary cost pressures.”