COVID-19 is helping Singapore Airlines get even stronger

COVID-19 is helping Singapore Airlines get even stronger

COVID-19 is helping Singapore Airlines get even stronger

Talking about how a particular airline can benefit from a global pandemic that crippled air travel, forcing airlines to take huge losses, cut their fleets and staff, in hopes of avoiding bankruptcy, may seem paradoxical, even ridiculous. , nowadays. situation.

However, we must heed the advice of Warren Buffett when he recommended “be afraid when others are greedy and greedy when others are afraid”.

Today, the world of aviation is truly dominated by fear and only one company has the confidence to get “greedy” and position itself to make the most of the recovery that is coming: Singapore Airlines (SIA).

Pressure makes diamonds

The global airline industry has seen massive and uninterrupted growth in recent decades; not even the financial crisis of 2008/09 could make a dent in it.

In the 15 years before the pandemic, the number of passengers has more than doubled to more than 4.5 billion, from just under two billion in 2004.

Number of airline passengers from 2004 to 2021 / Image credit: Statista

However, the problem with growing markets is that good conditions attract a lot of players as they all want a constantly growing slice of the pie. But as in all domains of life, only a few can truly excel.

This leads to overinvestment and mismanagement, especially by companies that are not necessarily well prepared to be in business in the first place. But because the industry continues to grow, it is easy to justify both loans and, in many cases, government spending, using taxpayers’ money.

As a result, many airlines, particularly national ones that are supported by the government, tend to underperform and operate at a loss, even if the industry is growing.

Therefore, crises, painful as they are, are often also necessary to demonstrate who is best suited to survive and eliminate the weak. COVID-19 has created that opportunity.

Suddenly, companies that have generally been afloat on public money for years simply cannot be saved in their current form.

The financial outlay would be too great, particularly given the billions of dollars needed to prevent entire economies from collapsing. In this situation, having a flagship airline becomes the last of your worries.

Unlike its regional counterparts, notably Thai Airways, Malaysia Airlines, Indonesia’s Garuda, or even Hong Kong’s Cathay, SIA has not only been among the best in the world, but also among the most profitable international airlines.

Despite pressure from premium Persian Gulf airlines (financed with unlimited oil money) and numerous low-cost airlines such as AirAsia, the company has been steadfast on its profits for years.

COVID-19 is helping Singapore Airlines get even stronger

Singapore Airlines Operating Profit from 2015/16 to 2019/20 / Image Credit: Statista

Today it also hurts; But years of efficient operations and current support from the Singapore government and Temasek Holdings are helping it capitalize on the COVID-19 disaster that is crushing everyone else.

A massive US $ 16 billion (S $ 21.63 billion) that you have raised so far with the help of Temasek not only allows you to continue operating (even if you have losses) until the pandemic is in retreat, but it is also used to make investments, while everyone else just hoping to survive.

Of course, Temasek itself is seeing interest not only in the survival of the airlines, but in their subsequent rebound and growth that will boost the profitability of its shareholders for years to come.

What does not kill you makes you stronger

Unlike most other carriers, the 20 percent staff cuts were the only bitter pill the company had to swallow last year.

No further reductions were planned as the company is expanding and modernizing its fleet to improve its fuel efficiency, preparing it for the inevitable upturn in business that is about to occur in the next few years.

Old planes are being retired early and new orders are being taken. SilkAir has joined SIA, while Scoot has just unveiled its new machines delivered by Airbus.

COVID-19 is helping Singapore Airlines get even stronger

“Wings of Change” – Scoot’s first Airbus A321neo at Changi Airport on June 28, 2021 / Image Credit: Airbus

What is a painful period for SIA, is almost a fatal blow to its immediate rivals.

Thai Airways, Malaysia Airlines and Garuda Indonesia have entered into agreements with creditors on restructuring and downsizing to ensure some form of survival in the future.

Garuda is expected cut your fleet in half by the end of 2022. Thai Airways planning reductions from 103 to 86 airplanes by 2025, while reducing employment by more than 50 percent.

Meanwhile, Malaysia Airlines seeks remove all your flagship A380s, potentially looking for deeper cuts as the airline fought long before the pandemic.

With competitors struggling, reducing their fleets and reducing staff, SIA is taking the privileged position to make the most of the air traffic revival after the COVID-19 winter blues.

When passengers are ready to fly again, SIA will have more and better aircraft, both in the premium segment and with its budget airline Scoot. It will boast more agile, modern and efficient operations than any other airline in the region.

This, in turn, will not only increase its position, revenue, profit and market share, but will also contribute to Singapore’s growing importance as an air hub for Southeast Asia, as well as a link between Europe and the Antipodes.

COVID-19 is helping Singapore Airlines get even stronger

Image Credit: Changi Airport

Changi Airport is also using COVID-19 downtime to accelerate the renovation of Terminal 2, while working on the massive Terminal 5, which will bring the airport’s capacity north of 130 million passengers per year once open in the 2030s (albeit with some delay due to the uncertainties the pandemic has caused at this time).

With a stronger domestic airline, a better fleet and more connections, Changi Airport will gain new advantages and strengthen its position as the dominant air transport hub in Southeast Asia.

However, the recovery schedule remains uncertain. It may take a few years before all restrictions are lifted and we are back to normal.

However, the situation will not only return to normal over time, it will also improve thereafter.

The money spent to keep SIA in tip-top shape will now pay off when the revival occurs. Since it’s not an undue burden on taxpayers or the Temasek state investor, it’s probably one of the best investments anyone can make right now.

Featured Image Credit: Asianaviation.com

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