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Singapore Air Vows to Expand Capacity Despite Rising Competition

Singapore Airlines Ltd. aircraft at Changi Airport in Singapore, on Wednesday, March 30, 2022. Starting April 1, Singapore will scrap its so-called vaccinated travel lanes and admit all vaccinated travelers who test negative before entering Singapore by air or sea and they will be exempted from quarantine or testing on arrival. Photographer: Ore Huiying/Bloomberg (Ore Huiying/Bloomberg)

(Bloomberg) -- Singapore Airlines Ltd. says it doesn’t plan to rein in expanding its capacity despite previously warning of a tougher outlook as competition from rivals intensifies. 

The airline does not intend to “hold back” on growth regardless of what its competitors are doing, Chief Commercial Officer Lee Lik Hsin said at a briefing in Singapore on Monday. It increased capacity 9.7% in the second quarter compared to a year ago.

Shares in the city-state flag carrier slumped as much as 6.2% in early trading in Singapore Monday, their biggest intraday fall since Aug. 1, on a worse-than-expected second-half financial outlook. Shares later clawed back some of their early losses.

Singapore Airlines reported a 59% plunge in its net income in the second quarter on Friday as intensifying competition lowered airfares and eroded profitability. The airline warned earnings would remain under pressure through the end of the fiscal year.

Yields, a key indicator of profitability, will continue to “moderate”, Lee said, though remained at relatively “healthy” levels compared to before the Covid-19 pandemic.

The airline said Monday it is witnessing a “broad-based” decline in yields throughout its aircraft from business to coach affecting virtually all routes. It says rivals are pouring in additional capacity that is putting pressure on airfares.

Still, Chief Executive Officer Goh Choon Phong pointed out at Monday’s post-results briefing that the carrier’s load factors, how busy passenger planes were, remained high and demand continued to be robust.

Singapore Airlines also said it is feeling the impact of the aviation industry’s widespread supply-chain headaches, estimating it is likely to have five fewer aircraft than planned by the end of the current fiscal year, with 204 jets in fleet, due to delivery delays.

The airline outlined efforts to mitigate supply chain issues, including extending the use of existing planes, building up a buffer of spare parts and utilizing more maintenance facilities locally instead of overseas.

Singapore Airlines last week pledged to invest S$1.1 billion ($828 million) to overhaul the seats in its long-haul aircraft, including all-new first- and business-class products, to maintain its world-leading premium offering.

Goh said he was confident strategic initiatives ranging from the product investment to greater adoption of artificial intelligence to partnerships would stand the carrier in good stead to minimize the challenges facing the aviation industry.

©2024 Bloomberg L.P.