Singapore Airlines To Cut Capacity By 11 Percent

Singapore Airlines plans to cut its capacity by 11 percent in the year from April as travel and cargo demand wanes, and has begun talks with trade unions in an effort to avoid layoffs.

The world's biggest airline by market value said on Monday it only filled 63 percent of the space available on its planes for passengers and cargo in January, down from 68 percent a year ago, as global airlines suffer from the financial crisis.

"Going forward, even Singapore Airlines, the most profitable airline, is not immune to the global slowdown," Daphne Roth, head of Asian equity research at ABN Private Banking said. "I think it is the right direction but it would not help to avoid a drop in profit," she added. Monday's announcement came after the company posted a 43 percent drop in quarterly profit last week, hurt by hedging losses and slowing demand for travel and cargo.

It said 17 aircraft will be decommissioned from the operating fleet, up from its previous plan of phasing out four planes before recession hit major markets. "The drop in air transportation has been sharp and swift... We have to face the reality that 2009 is going to be a very difficult year," chief executive Chew Choon Seng said in the statement.

Singapore Air, 55 percent-owned by state investor Temasek, had previously said it may continue to scale back flights and reduce capacity. On Saturday the company, which has a market value of USD$8.3 billion, said it would indefinitely suspend its flights between Singapore and Vancouver via Seoul from April 25.

The company has seen declining passenger demand and had already cut flights to various Asian cities. On Monday, its shares closed 1.5 percent down, slightly underperforming a Singapore market 1.3 percent weaker.

UNION TALKS

Singapore Airlines said it had met leaders of the three staff unions on Monday and discussed the company's plans for mitigating the impact of the global economic downturn.

Chew said the company "will contemplate retrenchment only as a last resort".

"But we do not have the luxury of time and we need to agree and act on some measures quickly so that we can push back the point of retrenchment as far as possible and improve our chances of avoiding it altogether," he said.

Thousands of industry jobs will be at risk as global passenger traffic will fall 3 percent this year and airline losses will total USD$2.5 billion, the International Air Transport Association (IATA) said in December. Passenger traffic at Singapore's Changi Airport, a regional hub, is expected to fall by 8.5 percent and cargo traffic by 5.1 percent in 2009, a cabinet minister said last week.

Source: AirWise