SIA wary of capacity growth in Asia

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Singapore Airlines will take measured approach to capacity growth in the coming 12 months.

“We expect capacity at SIA to be fairly flat,” says SIA chief executive Goh Choon Phong. “There is some opportunity for growth, such as putting A380s on Indian routes, but there could be other adjustments.”

Goh made the comments at a media and analysts briefing about the carrier’s 2013-14 fiscal year ended on 31 March.

One such adjustment was the carrier’s recent decision to downgauge some of its Sydney services to Boeing 777-300ERs from Airbus A380s on 30 May. Another was the withdrawal of the A380 from Melbourne routes from 26 October.

Several questions posed to Goh and his colleagues had to do with capacity growth in the region, which appears to have particularly affected SIA’s regional unit, Silkair.

The SIA Group’s earning statement for FY2013-2014 shows Silkair’s passenger load factor dropped four percentage points to 69.6%. This resulted from the unit’s addition of 11.7% capacity against traffic growth of just 5.6%.

Although Silkair remains profitable, its contribution to SIA’s bottom line fell 64% to S$35 million ($28 million) in FY2013-14.

For FY2014-15, SIA says Silkair’s capacity will grow 13%.

“Silkair will continue to grow, but whether it’s growth is high or low is relative to what it was before,” says Mak Swee Wah, SIA’s executive vice president commercial.

“Given the capacity situation we have moderated growth somewhat. We will also be more selective as to where the markets are. The capacity situation in SEA [Southeast Asia] is also changing, with carriers talking about scaling back, so if there are opportunities we will strengthen our presence there. I think we will still have some growth, but not as high as a few years ago.”

As of 31 March, SIA operated 103 aircraft, which should rise to 105 by 31 March 2015. Although the carrier will receive eight new jets (five A330-300s and three 777-300ERS), and decommission eight (seven 777-200s and one A330-300), it will also take delivery of two 777-200s returned from Royal Brunei Airways.

Silkair will see its fleet rise to 27 aircraft from 24 now. It will receive seven 737-800s and retire four A320-200s. Silkair chief executive Leslie Thng declined to comment on whether the regional unit is looking at retiring more A320s than planned at present.