http://www.theaustralian.news.com.au/business/story/0,28124,25343988-36418,00.html
Singapore Airlines tipped to follow Qantas in cutbacks
THE news that Qantas was slashing its profit forecast and cutting 1750 jobs was the last thing that an industry already hit hard by the financial crisis wanted to hear.
Qantas's announcement on Tuesday came just three weeks after the International Air Transport Association almost doubled its estimates for global airline losses this calendar year from $US2.5 billion to $US4.7 billion ($6.7 billion).
Aviation expert Derek Sadubin has warned that many international carriers will suffer a bloodbath as demand plummets, fares are slashed further and balance sheets go into the red in the face of one of the worst downturns ever experienced by the industry.
He predicted that Singapore Airlines would be next major carrier to slash its workforce in the wake of Qantas Airways' hefty cuts to its workforce and profit downgrade.
"Singapore Airlines will be the next big carrier to cut staff numbers," said Mr Sadubin, chief operating officer of the Centre for Asia-Pacific Aviation, an independent advisory body.
"While SIA has so far avoided job losses by asking staff to take no-pay leave, the airline may have little choice but to reconsider its position and look at its options again."
Jim Eckes, managing director of industry adviser Indoswiss Aviation, also singled out SIA as well as Cathay Pacific Airways as the next two possible carriers to slash jobs and profits.
"All airlines in Asia will have to make similar tough decisions. With traffic falling so rapidly, it's going to be difficult for many airlines to make a profit," he said.
Ross Connor, head of research at independent research house IbisWorld, agreed that Cathay and SIA were likely to be the next two airlines to make major cuts to their workforce.
"There will be some big announcements in the next six months or so. The steps both Cathay and SIA have taken so far to avoid retrenchment, such as unpaid leave and pay cuts, are just not enough. It's only logical they will have to slash costs by laying off staff," he said.
SIA has already forecast it will reduce capacity by 11 per cent for 2009-10 and has mothballed 17 aircraft from its operating fleet -- 13 more than it had originally planned. Prior to the recession, the company wanted to decommission only four aircraft.
But tough times demand even tougher decisions.
"SIA Cargo has grounded one plane so far, at a desert in the United States. It will be parked there for an indefinite period, until it is required," a spokeswoman said.
"SIA Cargo cannot rule out that more may be required and will continue to review the need to do so if there is further weakening of demand.
"Another eight surplus aircraft will be parked in a desert in the US. The aircraft are a mix of Boeing 747-400s and Boeing 777s. This course of action was also taken during the SARS crisis."
The company says it is still on schedule to take delivery of its 2009 quota of ordered aircraft, including four Airbus A380s.
"While we cannot rule out some future deferrals, we have no current plans to do so," the spokeswoman said.
Yesterday, China Eastern Airlines revealed it had suffered a net loss of 15.3 billion yuan ($3 billion) last year because of plummeting passenger numbers, rising fuel costs and bad debts on fuel hedging contracts. China's third-largest carrier said its revenue dropped 3.4 per cent to 41.1 billion yuan last year. All major Chinese airlines have been hit by shrinking passenger traffic due to the slowing economy and bad bets on fuel hedging contracts.
China Eastern, the weakest of China's three biggest airlines, had already received 7 billion yuan bailout from the Government last year. The company is seeking more government help.
China Southern Airlines, the country's biggest carrier, reported a loss of 4.8 billion yuan last year.
The trail of red ink on balance sheets continues, with Japan Air Lines and Air Nippon Airways seeking emergency government loans to stave off growing losses and counteract rapidly falling passenger numbers.
The sharp drop in the number of premium class passengers has already taken its toll on other carriers, including Cathay and British Airways.
Cathay reported a $HK8.5 billion ($1.5 billion) loss and slashed dividends by 96 per cent for the year ending March 11.
CAPA's Mr Sadubin said it was unlikely airlines in Australia would be forced to consolidate because of the recession.
"Consolidation of airlines is difficult in Australia and Asia- Pacific, unlike in Europe where a number of airlines are merging to shake off shrinking demand and balance sheet losses," he said.
While the established carriers have suffered a drastic drop in premium passengers, despite offering some of the cheapest fares available, Middle Eastern airlines such as Emirates, Etihad and Qatar Airways are expanding into Australia and taking bigger market share.
"Emirates says capacity is up 14 per cent, Etihad is up by 18 per cent and Qatar by double digits," Mr Sadubin said.
"Middle Eastern carriers are becoming the new power players with their aggressive pricing, outstanding service and great product. There is a shift in the balance of power."
IbisWorld's Mr Connor said: "The Middle Eastern airlines are fairing better because they have government support and are in a growth mode."
--------------------------------------
Latest Updates At Singapore News Alternative:
1. The decline and fall of Singapore
2. Singapore scientists say can turn CO2 into biofuel
3. China's Talent Scheme Deals A Blow To Singapore's Foreign Talent Policy
4. China's White Rabbit candy returns back to Singapore after tainted milk scandal
5. Jakarta warns of spread in HFMD from Singapore
6. Hundreds of Indonesian workers stage protest rally outside Singapore embassy
7. NOL warns of hefty $240m first quarter loss
8. Hyundai wins building bid for Singapore oil cavern
9. No Quick Recovery For Singapore
10. Singapore warns foreigners against disrupting APEC
11. Temasek Foundation donates S$700k to Bhutan's Royal Education Council
12. Mutual insurer Skuld to close Singapore office
13. Singapore Airlines tipped to follow Qantas in cutbacks
14. Singapore mulls ban on unlicensed borrowing as loan shark violence surges
15. Indian National Wins Global On-line Promotion by Singapore Tourism Board
16. Chinese Bias for Baby Boys Creates a Gap of 32 Million
17. Singapore's metamorphosis unveiled at Arabian Travel Market 09
.
Singapore Airlines tipped to follow Qantas in cutbacks
THE news that Qantas was slashing its profit forecast and cutting 1750 jobs was the last thing that an industry already hit hard by the financial crisis wanted to hear.
Qantas's announcement on Tuesday came just three weeks after the International Air Transport Association almost doubled its estimates for global airline losses this calendar year from $US2.5 billion to $US4.7 billion ($6.7 billion).
Aviation expert Derek Sadubin has warned that many international carriers will suffer a bloodbath as demand plummets, fares are slashed further and balance sheets go into the red in the face of one of the worst downturns ever experienced by the industry.
He predicted that Singapore Airlines would be next major carrier to slash its workforce in the wake of Qantas Airways' hefty cuts to its workforce and profit downgrade.
"Singapore Airlines will be the next big carrier to cut staff numbers," said Mr Sadubin, chief operating officer of the Centre for Asia-Pacific Aviation, an independent advisory body.
"While SIA has so far avoided job losses by asking staff to take no-pay leave, the airline may have little choice but to reconsider its position and look at its options again."
Jim Eckes, managing director of industry adviser Indoswiss Aviation, also singled out SIA as well as Cathay Pacific Airways as the next two possible carriers to slash jobs and profits.
"All airlines in Asia will have to make similar tough decisions. With traffic falling so rapidly, it's going to be difficult for many airlines to make a profit," he said.
Ross Connor, head of research at independent research house IbisWorld, agreed that Cathay and SIA were likely to be the next two airlines to make major cuts to their workforce.
"There will be some big announcements in the next six months or so. The steps both Cathay and SIA have taken so far to avoid retrenchment, such as unpaid leave and pay cuts, are just not enough. It's only logical they will have to slash costs by laying off staff," he said.
SIA has already forecast it will reduce capacity by 11 per cent for 2009-10 and has mothballed 17 aircraft from its operating fleet -- 13 more than it had originally planned. Prior to the recession, the company wanted to decommission only four aircraft.
But tough times demand even tougher decisions.
"SIA Cargo has grounded one plane so far, at a desert in the United States. It will be parked there for an indefinite period, until it is required," a spokeswoman said.
"SIA Cargo cannot rule out that more may be required and will continue to review the need to do so if there is further weakening of demand.
"Another eight surplus aircraft will be parked in a desert in the US. The aircraft are a mix of Boeing 747-400s and Boeing 777s. This course of action was also taken during the SARS crisis."
The company says it is still on schedule to take delivery of its 2009 quota of ordered aircraft, including four Airbus A380s.
"While we cannot rule out some future deferrals, we have no current plans to do so," the spokeswoman said.
Yesterday, China Eastern Airlines revealed it had suffered a net loss of 15.3 billion yuan ($3 billion) last year because of plummeting passenger numbers, rising fuel costs and bad debts on fuel hedging contracts. China's third-largest carrier said its revenue dropped 3.4 per cent to 41.1 billion yuan last year. All major Chinese airlines have been hit by shrinking passenger traffic due to the slowing economy and bad bets on fuel hedging contracts.
China Eastern, the weakest of China's three biggest airlines, had already received 7 billion yuan bailout from the Government last year. The company is seeking more government help.
China Southern Airlines, the country's biggest carrier, reported a loss of 4.8 billion yuan last year.
The trail of red ink on balance sheets continues, with Japan Air Lines and Air Nippon Airways seeking emergency government loans to stave off growing losses and counteract rapidly falling passenger numbers.
The sharp drop in the number of premium class passengers has already taken its toll on other carriers, including Cathay and British Airways.
Cathay reported a $HK8.5 billion ($1.5 billion) loss and slashed dividends by 96 per cent for the year ending March 11.
CAPA's Mr Sadubin said it was unlikely airlines in Australia would be forced to consolidate because of the recession.
"Consolidation of airlines is difficult in Australia and Asia- Pacific, unlike in Europe where a number of airlines are merging to shake off shrinking demand and balance sheet losses," he said.
While the established carriers have suffered a drastic drop in premium passengers, despite offering some of the cheapest fares available, Middle Eastern airlines such as Emirates, Etihad and Qatar Airways are expanding into Australia and taking bigger market share.
"Emirates says capacity is up 14 per cent, Etihad is up by 18 per cent and Qatar by double digits," Mr Sadubin said.
"Middle Eastern carriers are becoming the new power players with their aggressive pricing, outstanding service and great product. There is a shift in the balance of power."
IbisWorld's Mr Connor said: "The Middle Eastern airlines are fairing better because they have government support and are in a growth mode."
--------------------------------------
Latest Updates At Singapore News Alternative:
1. The decline and fall of Singapore
2. Singapore scientists say can turn CO2 into biofuel
3. China's Talent Scheme Deals A Blow To Singapore's Foreign Talent Policy
4. China's White Rabbit candy returns back to Singapore after tainted milk scandal
5. Jakarta warns of spread in HFMD from Singapore
6. Hundreds of Indonesian workers stage protest rally outside Singapore embassy
7. NOL warns of hefty $240m first quarter loss
8. Hyundai wins building bid for Singapore oil cavern
9. No Quick Recovery For Singapore
10. Singapore warns foreigners against disrupting APEC
11. Temasek Foundation donates S$700k to Bhutan's Royal Education Council
12. Mutual insurer Skuld to close Singapore office
13. Singapore Airlines tipped to follow Qantas in cutbacks
14. Singapore mulls ban on unlicensed borrowing as loan shark violence surges
15. Indian National Wins Global On-line Promotion by Singapore Tourism Board
16. Chinese Bias for Baby Boys Creates a Gap of 32 Million
17. Singapore's metamorphosis unveiled at Arabian Travel Market 09
.
