No more need for SIA Cargo
- Author: Zachary Reyes May 20, 2017,
May 20, 2017, 6:20
The changes have started already, with SIA's announcement yesterday that SIA Cargo, its wholly owned subsidiary, will be re-integrated as a division within the group. SIA attributed the loss in part to the fourth-quarter net loss of S$138 million, reversed from a net profit of S$225 million in the FY2015-16 period.
More recently, however, the market has seen "structural change", resulting in SIA Cargo's fleet being trimmed to seven Boeing 747-400 freighters, while a greater proportion of its revenue now comes from utilising bellyhold capacity from the SIA group's carriers.
To that end, SIA said it had established a wide-ranging review of the airline group's network, fleet, product and service, as well as organisational structure and processes as part of efforts to build on the strategic initiatives now being implemented and achieve long-term sustainable growth.
Singapore Airlines (SIA) on Thursday announced a net loss of 138 million Singapore dollars (99.12 million US dollars) in the quarter from January to March, compared to 225 million Singapore dollars net profit in the same period a year ago.
In addition to a S$58 million decline in operating profit for the year, the airline said the fall in net profit was largely attributable to SIA Cargo's S$132 million provision for "competition-related matters", and the need to return U$117 million to the European Commission after it re-imposed a cartel fine.
"The addition of more modern, fuel-efficient aircraft with new-generation cabin products is enabling the Group to expand its network and enhance its competitiveness in both the full-service and low-priced market segments", SIA said. Load factor edged down 0.8 percentage points to 79.0 percent as a result. For instance, to boost revenue on the commercial side, a specialised pricing department has been formed to price airfares optimally on a global basis; a new revenue management system will leverage on algorithms to forecast demand. "The company will look at how best to support their retraining and redeployment", Mr Goh added. The sharp drop in oil prices in recent years has given carriers the wiggle room to price airfares more aggressively.
SIA Cargo was previously a division of SIA until July 2001, when it became a separate company within the SIA Group.
"Re-integrating SIA Cargo as a division within Singapore Airlines makes sense from a business standpoint". Despite the smaller freighter fleet, SIA Cargo's overall capacity still grew 4%-5% in each of the past two financial years. Staff members without confirmed alternative job positions will be given "opportunities for staff development" within the group, SIA added. This has forced SIA Cargo to right-size its fleet.