Singapore Airlines loses money on most of its long haul network?

chiraagnt · Fri Jun 17, 2016 3:30 am

Hi guys, I keep on seeing many ANetters and media outlets claiming that Singapore Airlines loses money on most, if not all, of its long haul routes. I'm just finding this a bit hard to understand, with Singapore Airlines still churning out some of the highest (if not the highest) profits in South East Asia and Singapore being notoriously known for its efficiency and one of the world's most well run airlines.

I do know the mainline's profits are roughly stable/improving due to low fuel prices while improving profits are due to Silkair/Scoot/Tiger/SIAEC and other subsidiaries while SQ Cargo seems to be the perennial loss maker.

If SIA is losing money on all of its long haul Ops, why does it continue to invest money to expand its long haul network (DUS, CBR, WLG, SFO, LAX). I mean while the passengers may be profitable on other sectors of their network(short haul), do the gains on other parts of their network offset the claimed heavy losses on their long haul network? Genuinely curious how the economics work, especially with SIA!

Thanks!

GuyBetsy1 · Fri Jun 17, 2016 11:04 am

The numbers tell it all. SQ makes huge amounts of profits every year. In fact it has not had a single year since incorporating that it has suffered a loss. So why would anyone think that they keep flying if they're losing money. Where there are low yields, SQ makes it up on cargo. But the majority of its flights are rather full. Ask anyone who has flown them if they like them.

ordbosewr · Fri Jun 17, 2016 2:12 pm

Before we debate something any facts that are available should be posted to help us make an informed discussion.

Does anyone have the financials for SQ that they can post?

infinit · Fri Jun 17, 2016 4:37 pm

It was a report from a Malaysian based bank that claimed SQ's long haul ops have been loss-making the last 6 years. That one report claimed that (with no data to back) and suddenly everyone here internalised it when SQ has never had a year where they made a loss...

Mortyman · Fri Jun 17, 2016 4:48 pm

Well, I flew Singapore Airlines back in 2013 from LHR to SIN and I got a row of 3 seats all to myself on the Airbus 380. I also got a row of 3 seats on their Boeing 777-200 between SIN and Ho Chi Minh ... So not full loads ...

But maybe I was just lucky ?

usflyer msp · Fri Jun 17, 2016 4:54 pm

I doubt that SQ loses money on most its long-haul routes. I would not be surprised, however, if they lost money on the routes to the Americas. SQ is very dependent upon fifth freedom traffic to make them work as 1 stop plus a connection in Singapore is not a compelling offer for most people in NA nowadays...

Polot · Fri Jun 17, 2016 4:55 pm

infinit wrote:
That one report claimed that (with no data to back) and suddenly everyone here internalised it when SQ has never had a year where they made a loss...

Well "long haul" is a very limited part of the SQ's operations. "Long haul" as the report used it was/is interpreted to mean Europe/Americas, with debate about whether that included East Aus/NZ.

chiraagnt · Fri Jun 17, 2016 5:28 pm

I'm assuming this is the post by the analyst claiming 'SIA’s long-haul routes have been almost consistently loss-making since FY09 as its competitors have refined their strategy and successfully established themselves into SIA’s markets.'

Source: http://finance.yahoo.com/news/distresse ... 00263.html

I find this analysis unique because CAPA just did an interesting analysis on Singapore Airlines, especially its ASEAN/India/China network and it's the market leader in all segments, whether it's just SIA mainline and Silkair combined or even more dominant when combining Scoot/TigerAir.

Source: https://centreforaviation.com/analysis/ ... t-1-280093

To my knowledge, CAPA has done various reports showing SIA Group is the largest long haul international group in Australia as well (Emirates is ahead but it has extensive transtasman flights).

With such dominance in key markets, I wonder why the analysis of its long haul Ops are so bleak. It is also the largest carrier to the Americas by far from ASEAN (also one of only two carriers that operate since Thai and Malaysia have ceased LAX) and PAL has more favorable geography/a different market segment to cater to.

Wonder if the A350s will be the true game changer for SIA?

Also, these are the latest statistics reported by CAPA and SIA for May 2016 (not too sure if this month is a good representative of seasonal demand/yearly demand).

Singapore Airlines reports (16-Jun-2016) the following traffic highlights in May-2016:

Passenger numbers: 1.5 million, +0.9% year-on-year;
Passenger load factor: 72.7%, -0.9 ppt;
East Asia: 74.9%, +4.2 ppts;
Americas: 76.1%, -4.0 ppts;
Europe: 67.0%, -3.1 ppts;
South West Pacific: 74.6%, -2.9 ppts;
West Asia and Africa: 71.2%, -2.1 ppts;
Capacity (ASKs): -1.6%. [more - original PR]
Source: http://centreforaviation.com/news/sia-r ... ort-565808

Southwest1137 · Fri Jun 17, 2016 5:37 pm

Wonder if the A350s will be the true game changer for SIA

I do think some people will be attracted to the new A350, and possibly media coverage might help out a little too.

IPFreely · Sat Jun 18, 2016 2:42 am

chiraagnt wrote:
Hi guys, I keep on seeing many ANetters and media outlets claiming that Singapore Airlines loses money on most, if not all, of its long haul routes.

There are posters on here who actually believe airlines happily lose money on some routes just for the "prestige" of flying those routes. Sounds like you are using one of these fools as your source. You probably need better sources.

HKG212 · Sat Jun 18, 2016 3:03 am

GuyBetsy1 wrote:
The numbers tell it all. SQ makes huge amounts of profits every year. In fact it has not had a single year since incorporating that it has suffered a loss. So why would anyone think that they keep flying if they're losing money. Where there are low yields, SQ makes it up on cargo. But the majority of its flights are rather full. Ask anyone who has flown them if they like them.

I believe the profits are posted by the SIA group, not specifically SQ. Load factors seem very low indeed (67% to Europe... how can you make money on that?), so the report seems credible. Given the decline of air cargo in recent years, I assume all profit is attributable to regional/low-cost operations.

The writing on the wall has been there for a long time, given Singapore's location, the rise of Middle East carriers, long-range aircraft, etc. That's why they tried so hard to gain fifth freedom routes. SIN will remain a mid-sized regional hub, but its days of long-haul hubbing prominence are over. Now, tell that to the "foresighted" guys at CAG planning the massive new Terminal 5...

hOMSaR · Sat Jun 18, 2016 3:09 am

HKG212 wrote:
Load factors seem very low indeed (67% to Europe... how can you make money on that?)

What fares are passengers paying on those 67% loads? How many are paid F/J fares?

IndianicWorld · Sat Jun 18, 2016 3:59 am

SQ is in a difficult position given the increased competitive pressures but it does appear to be holding its own fairly well.

Some routes will pay off but some will likely go over time but it seems to be making some strong statements of intent with aircraft ordering and route announcements.

The ME3 and other Asian carriers have made some significant inroads into SQ's traditional stronghold in Australia though but the deployment of TZ is broadening its base.

chiraagnt · Sat Jun 18, 2016 4:43 am

HKG212 wrote:
GuyBetsy1 wrote:
The numbers tell it all. SQ makes huge amounts of profits every year. In fact it has not had a single year since incorporating that it has suffered a loss. So why would anyone think that they keep flying if they're losing money. Where there are low yields, SQ makes it up on cargo. But the majority of its flights are rather full. Ask anyone who has flown them if they like them.

I believe the profits are posted by the SIA group, not specifically SQ. Load factors seem very low indeed (67% to Europe... how can you make money on that?), so the report seems credible. Given the decline of air cargo in recent years, I assume all profit is attributable to regional/low-cost operations.

The writing on the wall has been there for a long time, given Singapore's location, the rise of Middle East carriers, long-range aircraft, etc. That's why they tried so hard to gain fifth freedom routes. SIN will remain a mid-sized regional hub, but its days of long-haul hubbing prominence are over. Now, tell that to the "foresighted" guys at CAG planning the massive new Terminal 5...

To be honest, I doubt the ME3 and other Asian carriers can make that significant inroads into SQ's bread and butter routes to feed its long haul network like its broad Indonesian/Malaysian network using Silkair and Australian expansion like WLG or CBR. Qatar is already apparently struggling with Adelaide by adding a tag on to Melbourne from it while Emirates seems to be going strong with its second direct daily to MEL.

With regards to Terminal 5, in addition to SQ whose growth Changi Airport does depend on heavily, I believe Emirates uses Singapore as a 'mini hub' with its codeshares on Jetstar Asia, which are rather numerous. Many airlines like Garuda would like to expand in Changi as well but are unable to gain favorable slots such as Garuda wanting to start CGK-SIN-BOM flights. To an extent, Terminal 5 seems like overkill but with it only being ready past 2020, it seems like there's ample time for expansion. Plus Project Jewel and other renovations seems to be enhancing the appeal of Changi as a stopover point compared to say DXB or DOH.

I also believe SQ should invest in 777X (what do y'all think) as it's far range capabilities are quite numerous. I agree the A359 ULR takes up the same niche as the 777X but I still see Singapore possibly making an order in the future?

Singapore Airlines loses money on most of its long haul network?

Singapore Airlines loses money on most of its long haul network?

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