SIA cuts capacity to Asian cities from falling demand

Faced with falling passenger numbers, Singapore Airlines (SIA) has embarked on an
aggressive capacity reduction programme which will see cuts in some routes and total pullouts
from others. The airline said that the changes, which are being implemented progressively
throughout the five-month-long Northern Winter schedule beginning Oct 26, will 'better match
capacity with demand'. Services to Penang and Ho Chi Minh will be gradually reduced to 18
and 17 weekly flights respectively, while one service to Seoul will be initially reduced, then
scrapped completely from Feb 2 to March 28 next year, when the winter season ends. But SIA
will continue to operate 17 weekly services to and from the Korean capital during winter.
Osaka will be served once a day from Nov 2 by SQ618 (Singapore-Osaka) and SQ617
(Osaka-Singapore). Flights SQ622 (Singapore-Osaka) and SQ621 (Osaka-Singapore) will be
suspended. Frequencies to Bangalore and Chennai will also be reduced. Meanwhile, the
relatively recent service to Amritsar will be dumped from February next year, with passengers
booked on flights to the northern Indian city being transferred to SIA's New Delhi service. Also,
from February, SIA will link its Cape Town flights to Johannesburg. The Cape Town extension
will operate three flights weekly, while the daily service to Johannesburg will be maintained.
But while cutting intra-Asian flights, SIA has increased services to the Middle East. The
frequency of flights to Istanbul, via Dubai, has been raised to six flights per week from four. SIA
will also be introducing flights to Riyadh. All this comes just two weeks after SIA reported that
it had been hit by its first fall in passenger numbers in three years. The airline's passenger
numbers in raw terms dipped 1.6 per cent to 1.51 million last month from a year ago.
Meanwhile, with capacity (measured in available seat kilometres) rising 6.8 per cent during the
month, the passenger load factor declined 4.1 percentage points to 76.9 per cent last month.
The airline is now watching its US routes closely, including its new all-business class, non-stop
flights to Los Angeles and Newark. The only service which remains largely unscathed is its
'kangaroo-route' from Europe, through Singapore, to Australia. But the demand decline is not
unique to SIA. For the first time since the Sars outbreak in 2003, global airline passenger
traffic shrank last month, falling 2.9 per cent as the slump in demand outstripped capacity cuts.
Asia-Pacific carriers posted a 6.8 per cent drop in demand - the second-biggest after African
carriers. International load factors fell 4.4 percentage points to 74.8 per cent last month, from
79.2 per cent in August, no thanks to the widening economic impact of the global credit crunch.
Instead of celebrating a nearly 50 per cent fall in fuel price, the global aviation industry now
finds itself battling a sharp drop in travel demand caused by the global financial meltdown.
According to the International Air Transport Association, at least 30 airlines have gone belly-up
in the first nine months of this year, and another 20 are on its watchlist. SIA's stock tumbled 50
cents to $10.30 yesterday - its lowest level in almost a decade.

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