Saturday, 19 May 2018
SINGAPORE: Silkair To Merge With Singapore Airlines After $100 Million Major Cabin Upgrade
The programme will comprise investment of more than $100 million to upgrade the wholly owned subsidiary’s cabins with new lie-flat seats in Business Class, and the installation of seat-back in-flight entertainment systems in both Business Class and Economy Class.
This will ensure closer product and service consistency across the SIA Group’s full-service network.
Aircraft cabin upgrades are expected to start in 2020 due to lead times required by seat suppliers, including to complete certification processes.
The merger will take place only after a sufficient number of aircraft have been fitted with the new cabin products.
Specific details will be announced progressively as the programme develops and timelines are finalised.
Consistent with ongoing efforts to optimise the SIA Group’s network, there will also be transfers of routes and aircraft between the different airlines in the portfolio.
Singapore Airlines is one year into our three-year Transformation Programme and today’s announcement is a significant development to provide more growth opportunities and prepare the Group for an even stronger future, said SIA CEO, Mr Goh Choon Phong.
Importantly, it will be positive for our customers. It is another example of the major investment we are making to ensure that our products and services continue to lead the industry across short-, medium- and long-haul routes.
SilkAir is the regional wing of Singapore Airlines, operating a fleet of 11 Airbus A320-family aircraft and 22 Boeing 737-800 and 737 MAX 8 aircraft.
It is currently transitioning to an all-737 fleet, and serves 49 destinations in 16 countries.
Aircraft cabin upgrades are expected to start in 2020 due to lead times required by seat suppliers, including to complete certification processes, according to Singapore Airlines.
The merger will take place only after a sufficient number of aircraft have been fitted with the new cabin products, and specific details will be announced progressively as the programme develops and timelines are finalised, it added.
There will also be transfers of routes and aircraft between the different airlines in the portfolio, which Singapore Airlines said was consistent with ongoing efforts to optimize the SIA Group’s network".
Singapore Airlines CEO Goh Choon Phong called the announcement a significant development to provide more growth opportunities and prepare the Group for an even stronger future.
The changes will be positive for customers, Mr Goh, adding that it was a major investment to ensure that Singapore Airlines' products and services continue to lead the industry across short, medium and long-haul routes.
Speaking at the carrier’s results briefing, Mr Goh also said the merger between Singapore Airlines and SilkAir is not a consolidation exercise.
He said the SilkAir brand is not as well known in areas like Europe compared to here in Asia and as such, the merger will allow SIA to better position the brand in those regions.
SilkAir has always played a critical role for SIA as a regional feeder. Even with the merger, it won’t detract from that role.
However, we believe that with the merger and one single brand, it will make it much easier for customers to understand that both narrow body and wide body planes belong to the same organisation and brand.
That is not to say there is no place for SilkAir, Mr Goh told media and analysts at the briefing.
He also said that no employee will be made redundant.
Our view is that with the integration and the growth opportunity, there should be more opportunities for our staff to go into different roles, he said.
However, where there are overlaps, we will look at how to redeploy staff and also how to provide re-training. This is not something new for us, we have gone through mergers between Tiger and Scoot.
Mr Goh also clarified that when the merger is successfully completed, SilkAir will no longer exist as an airline or brand.
SilkAir operates a fleet of 11 Airbus A320-family aircraft, 22 Boeing 737-800 and 737 MAX 8 aircraft.
It is currently transitioning to an all-737 fleet, and serves 49 destinations in 16 countries, according to Singapore Airlines.
The move comes as Singapore Airlines undertakes a three-year transformation programme designed to cut costs and boost revenue amid competition from Chinese and Middle Eastern rivals and low-cost carriers.
Singapore Airlines on Thursday topped market expectations by reporting a 150 per cent rise in full-year net profit to the highest level since 2011.
This is as passenger and cargo revenue rose and the transformation programme produced early results.
But SilkAir was a weak spot, reporting a full-year operating profit of S$43 million for the 12 months ended March 31, down 57 per cent from a year earlier.
The cabin upgrade will close a gap with rival Cathay Pacific Airways, whose regional arm, Cathay Dragon, operates jets with cabins more similar to its parent than the wider gulf between Singapore Airlines and SilkAir products.
Upgrading the narrowbody product and folding SilkAir into Singapore Airlines is sensible and was inevitable, CAPA Centre for Aviation Chief Analyst Brendan Sobie said.
The product gap between SilkAir and Singapore Airlines has become too wide.
As part of its transformation programme, Singapore Airlines had already handed some of SilkAir's routes to budget carrier Scoot and merged part of SilkAir's finance team with its parent.