Rough skies for Singapore Airlines

  Asia Times
June 20, 2003

By Tony Sitathan

SINGAPORE Airlines (SIA), biting the bullet on mounting losses for 2003, has finally decided to lay off close to 500 people from its workforce of 30,000. Although there were several earlier reports in the media that close to 2500 would be axed, a smaller number of employees were terminated in SIA's first major retrenchment exercise in 20 years.

The exact number of layoffs stands at 414 employees from the airline, its Singapore Airport Terminal Services, its SIA Engineering division and other subsidiaries. Some fear that more bad news is to come while the national airline consolidates its operation for the rest of the year.

Singapore Airlines has entered one of the roughest storms in its history in this financial quarter, with losses exceeding S$204 million (US$117 million) in April and close to S$166 million in May. With no end in sight, more hemorrhaging is expected in the near term. SIA's passenger numbers slipped almost 60 percent to record only 506,000 since May last year.

SIA's management had earlier predicted the possibility of retrenchments after indicating the company was facing its first-ever quarterly financial losses in the three months to June this year. The SARS (severe acute respiratory syndrome) crisis has been blamed for reducing visitor arrivals to Changi Airport by more than 70 percent since.

A special early-retirement package has been offered to selected employees with at least 25 years of service, and those employees had an earlier option to accept a scheme offering a month's pay for each year of service, up to a cap of 25 months. "It's not such a bad deal for old-timers like me who have chalked up close to 23 years of service with SIA," said a ground technical serviceman. "I however regret that the younger blood have no option but to resign. It would be a strain on them and their families."

However, several union leaders maintained that they were told only belatedly of the scheme and of the actual retrenchment numbers. Many were concerned that more of their union members would be forced into retirement or be retrenched by SIA without giving them time to prepare the ground.

One union leader said management has to work more closely with the unions so that more time can be channeled to prepare the workers for alternative employment. "It's a real concern that we do not have the time to prepare these retrenched workers. A buddy system in place to help a fellow employee can only do so much. We need to register them with prospective alternative employment schemes or counsel those affected by this retrenchment," he said.

The Air Line Pilots Association Singapore (ALPA-S), which represents 1600 pilots and has previously locked horns with SIA's management over a wage dispute, also said special arrangements and more time need to be given before any pink slips are handed to its members.

Analysts have predicted that S$200 million will be saved annually with layoffs of up to 10 percent, although SIA does not intend to lay off that much of its workforce. SIA chief executive officer Chew Choon Seng revealed in a prepared statement that the airline would consider retrenchment only as a measure of last resort, and that point has been reached. "It is unfortunate, but there is no alternative if we are to ensure that the company survives this downturn and to position ourselves to compete effectively in the marketplace of the future," he said.

What then is the future of SIA, considered the bellwether airline that other airlines seem to talk about and hope to emulate?

"If you listened to the speech by Alan Greenspan, the Fed [US Federal Reserve Board] chairman, to the oversight economic committee in the United States some three weeks ago, there was some bitterness expressed by Alan Greenspan on how airlines were being managed in the United States and why there is a grave concern that they do not seem to be commercially viable as investment vehicles," said Lance Gordon, an airline investment analyst with an international brokerage firm in the United States. "That was after the September 11, [2001], incident and the recent Gulf war. Now we have another panic in our hands and an international health scare called SARS. Someone please tell me if there is any light at the end of the tunnel. And if there [is] how soon can we see it?"

SIA seems to be already plugging in the holes and planning for its future. Its business-class passengers at least have something to cheer about. It recently completed the installation of the Raffles (business) Class lie-flat seat, called the SpaceBed, on all its 14 Jubilee B777-ER fleet. Quite a contradictory piece of news, since the SpaceBed comes with all the frills of a new-generation inflight entertainment system with audio-visual on-demand capabilities and more than 200 entertainment options. Spoiled for choice, passengers get to enjoy 29 movies, 30 hours of short features (or more than 50 TV programs), more than 50 music compact-disc (CD) albums, and more than 30 Nintendo games.

The cost of providing this "vertically challenged" solution is to the tune of S$173 million. However, this piece of good news couldn't come at a more contradictory time, as SIA has indicated that it intends to promote a no-frills airline within its fold. It is intended to compete head-on with the likes of Asia Air in Malaysia and other regional budget airlines.

While analysts have said that having a no-frills airline would cannibalize SIA's main ticket sales to regional destinations and damage SIA's international reputation as a premier airline charging premier fares, the bigger question is whether SIA can afford to make any more mistakes when it might just be too costly to undo the damage.

"Trying to gain market share in one sector and being a no-frills carrier is something that SIA has no experience in doing, and what works for other airlines may not necessarily work for SIA, [which] has earned a name as a premier airline," said Adrian Rene, an brand-image consultant with a company based in Hong Kong. "Imagine saying you are British Airways today and Virgin Atlantic tomorrow. That could be a rude shock to some of its loyal customers."

Whether right or wrong, the writing is already on the wall for close to 500 employees of SIA. Let's hope there are no more storms to weather for the time being.