Singapore Airlines: Travel bubble with New Zealand key to quick restart of flights

Singapore Airlines plans to have its aircraft back in force in New Zealand – and a travel bubble would help.

The airline, a major operator in this market before Covid-19, has now been reduced to a little over a flight a day as its global network has shrunk. Flights to New Zealand have fallen from 25 a week to just nine.

Executive vice president (commercial) Lee Lik Hsin said more flights to this country would need new mechanisms to facilitate movement. At the moment, caps on spaces in New Zealand’s managed isolation system were keeping a lid on airline capacity.

“For further increases beyond this point, and specifically in relation to the New Zealand services, we do need changes to happen to the overall border situation,” he told the Herald.

“Whether or not that is a comfort level between the governments to create new flows or new mechanisms by which people from the two regions can move across to each other.”

Both New Zealand and Singapore have so far done well in controlling the pandemic. As of yesterday there had been 29 Covid deaths in Singapore and 25 in this country.

Lee said the arrangement with New Zealand could be like the delayed Hong Kong travel bubble. “There areideas coming up every other day.”

The airline, 54 per cent owned by the Singapore Government’s investment arm, was constantly discussing how to open up safely.

“That’s ongoing, and we hope to see more of those discussions come to fruition in terms of green lanes and travel bubbles and all of those situations where we can potentially increase travel.”

Lee is a former chief executive of Singapore Airlines’ (SIA’s) low cost arm, Scoot, and oversees cargo, customer experience, marketing planning, and the sales and marketing divisions.

He said the airline has a major freight division with dedicated freighters and was gearing up to distribute vaccines.

“We do participate in most of the major air trade links in regards to the potential vaccine manufacturing centres and we do have frequent flights going in and out of those points,” he said.

Lee said securing the cold chain for transporting some vaccines at minus 70C was “challenging”.

Early in the year, Singapore Airlines – an asset-heavy company with more than 220 aircraft heading into the pandemic – knew it would have to shore up its liquidity which now stands at about $SGD17 billion, or $18b.

With a scaled down operation it is now burning through less than $SGD300 million a month.

“And so if you do the math, we would be able to withstand this for quite some time,” said Lee.

“And given where things look in relation to vaccine development, I think we should be fine in terms of being able to weather this crisis and sustain ourselves at least until travel comes back to a higher level.”

As travel was paralysed and borders closed – including Singapore’s – the carrier saw passenger numbers plummet by 98.9 per cent in the first half of the year. It has no domestic network to operate and fell to a SGD$3.5b loss in the first half of its 2020-21 financial year.

Lee said the airline was flying about 20 per cent of available seat kilometres (ASKs) compared with a year ago. It was flying about 40 per cent of its network, at much-reduced frequency.

“The recovery has been somewhat tepid, you know, borders open, borders close and infections fall, infections rise is kind of a yo-yo.”

International Air Transport Association figures out this week showed that global demand among all member airlines (measured in revenue passenger kilometres or RPKs) was down 70.6 per cent compared to October 2019.

That was just a modest improvement from the 72.2 per cent year-to-year decline recorded in September. Capacity was down 59.9 per cent compared to a year ago and load factor fell 21.8 percentage points to 60.2 per cent.

International passenger demand in October was down 87.8 per cent compared to October 2019, virtually unchanged from the 88.0 per cent year-to-year decline recorded in September.

But Lee said with the rollout of vaccines, he hoped there would be a material impact soon for his airline from more passengers travelling.

Because of Covid-19 the airline had reviewed its entire customer journey.

Like other airlines, SIA had enhanced cleaning procedures and beyond that also changed its service offering to reduce overall contact, as well as making a big push into digital services, which reduces contact overall.

This included electronic menus as well as using a passenger’s mobile phone to control the in-flight entertainment system, so travellers don’t have to keep touching the physical controller.

“Health and safety obviously has become first and foremost in our customers’ minds, even for those very few customers who are travelling today,” Lee said.

Parked up

With global travel demand unlikely to return until 2024, by some predictions, Singapore Airlines will retire 26 aircraft which it has deemed “surplus to fleet requirements”.

This will be led by seven Airbus A380s, representing just shy of 40 per cent of the 19-strong fleet. Nearly all its Boeing 777s are parked up and the airline has taken an impairment charge on the older planes.

There would be earlier retirement of those aircraft because fewer were needed coming out of the pandemic. Instead, new-generation aircraft such as Airbus A350s and Boeing 787s would do the flying for Singapore Airlines.

“One of the exciting things is that coming out of pandemic, we are going to have an ultra modern fleet, with only the most advanced products,” said Lee. Fuel-efficient aircraft would help meet targets for sustainability, which would be back in the spotlight when airlines climbed out of the Covid crisis – the worst to hit commercial aviation.

The airline has lost 4500 positions, affecting about 2000 staff including 23 in New Zealand.

Lee said laying staff off was tough. “It was certainly a very difficult time for Singapore Airlines and we had never had an exercise of such a magnitude.”

During the year, Singapore Airlines hosted some novelty events, including meals on board an A380 parked at Changi, but Lee said they were one-offs.

“The next time we want to engage our customers in a material way is to fly with them on board.”

Lee said there were a number of theories about what the airline landscape would look like when travel was able to resume

“We are a portfolio group with both the traditional full service carrier in Singapore Airlines, and we also have the low cost carrier in Scoot. So we are able to pivot depending on how the market turns,” he said.

Some commentators believe traditional legacy carriers such as SIA will emerge strongest because of the greater focus on service and care, while others say it will be the low cost carriers which do best because of a larger component of leisure rather than business travellers, who would make more use of teleconferencing.

“At this point it is difficult to tell. Our belief is that there will ultimately still be a place for the different business models and so having both is really the best situation to be in.”

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