AirAsia to start Singapore hub soon, widening its network

By Jahabar Sadiq
Editor

May 08, 2012

KUALA LUMPUR, May 8 — AirAsia has received Singapore’s approval to start a hub in the island republic soon, say sources, allowing the Malaysian airline to expand its network in the growing regional low-cost market segment just a week after Putrajaya aborted its share swap with loss-making Malaysia Airlines (MAS). The Malaysian Insider understands that Singapore has informed AirAsia it will get an air operator’s certificate (AOC) as soon as possible, ending years of lobbying by Asia’s biggest low-cost carrier to set up operations in the city-state, a leading Asian financial centre.
“Singapore has agreed in principle to issue the AOC. It will be issued soon,” an industry source told The Malaysian Insider.

 AirAsia chief executive Tan Sri Tony Fernandes was quoted last February as saying he aims to get clearance this year from the Singapore aviation authorities to fly to more destinations from Singapore.
Fernandes told Channel NewsAsia he proposed to make the country a regional hub for his low-cost airline, alongside Malaysia, Indonesia, the Philippines and Japan, naming India and China as key countries to which AirAsia is seeking approval to fly to.
AirAsia will focus on creating an ASEAN brand with an operational hub in all Association of Southeast Asian Nations countries within the next five years, he said. It currently has local joint-venture units in Indonesia, Japan, the Philippines and Thailand, apart from long-distance low-cost carrier AirAsia X.
The budget carrier began flying two flights a day into the city-state from Kuala Lumpur in 2007, seven years after it began operations as a low-cost airline. It now flies 12 times a day from Kuala Lumpur apart from other direct flights to cities in Indonesia, Malaysia and Thailand.
“This is a good boost for AirAsia as the current economic climate means more people will fly low-cost airlines for leisure and even business from Changi, which is an international hub,” another source said, adding AirAsia can compete with Singapore Airlines’ budget carrier unit Scoot.
The Singapore budget airline’s first route will be a daily Singapore-Sydney service from June using a Boeing 777-200, said company officials, with a Singapore-Gold Coast route to follow. The airline said future international destinations will include China.
AirAsia’s biggest market remains Malaysia but it has seen growth in Indonesia and Thailand, which have large domestic operations. It has just started its operations in Japan and the Philippines and is said to be eyeing Myanmar, which has opened up its economy in the past year.
Fernandes, who took over AirAsia for RM1 and debts in 2001 when it was a two-plane operation, has turned it into Asia’s biggest low-cost carrier within a decade. His success prompted Malaysian sovereign wealth fund Khazanah Nasional Berhad to finally agree to work with him to turn around MAS, which lost RM2.52 billion last year.
But the share swap signed last August faced fierce opposition from some politicians and the flag carrier’s unions, who represent the majority of the 20,000 airline staff, pushing the government to abort the deal on May 2.
The unwinding of the share swap saw Khazanah transfer its 10 per cent or 277,650,600 ordinary shares in AirAsia back to Fernandes’ Tune Air Sdn Bhd, while Tune Air transferred its 20.5 per cent or 685,142,000 ordinary shares in MAS back to Khazanah. It was a cashless transaction and based on the same swap ratio of 2.05 based on the prices when the share swap was announced in August 2011, where MAS was valued at RM1.60 per share and AirAsia’s share at RM3.95.
OSK Research had pointed out that AirAsia was to benefit more with the unbundling of the deal, saying “as Malaysia is predominantly a low-cost passenger market with a penetration rate of over 57 per cent, this gives AirAsia the upper advantage given its low-cost structure and vast route network, hence limiting the pressure from MAS in view of its ailing financial condition.”


http://www.themalaysianinsider.com/malaysia/article/airasia-to-start-singapore-hub-soon-widening-its-network/http://www.themalaysianinsider.com/malaysia/article/airasia-to-start-singapore-hub-soon-widening-its-network/

Turbulent skies ahead for Singapore Airlines?

Near-term earnings will be shaky due to plummeting yields and anemic demand for European long-haul flights.
While Singapore Airlines has been cutting down its staff bonus and jet fuel costs, it still won't be enough to make up for tepid passenger and cargo market demand. The revenue contributions from Scoot won't kick in until after FY13, which certainly doesn't help the near-term prospects for the airliner.
Here's more from CIMB:

Continued pressure on yields due to promotional activities, and an increasingly weak outlook for European economies suggest that SIA could struggle for a while yet with long-haul travel demand. We think that LCCs remain in a better position to weather the downcycle.

We downgrade our relative call from Neutral to Underperform on better expected returns for FSSTI. We raise our forecasts by around 30% for FY12-13 on better yields as we were too bearish a few quarters ago.

SIA will be announcing FY12 results on Wednesday evening, followed by an analysts’ briefing on Thursday morning. We expect a 4Q core net profit of around S$120m, and a full-year core net profit of around S$400m. Our previous forecasts were too low, and we are raising them in anticipation of the results.

SIA’s 4Q (January-March 2012) ASK capacity grew by 4%, while its RPK demand rose 7% yoy, with its passenger load factor improving 2.1% pts to 77.6%. This was due to an easy comparison base that was affected by Japan’s earthquake. Meanwhile, 4Q’s cargo AFTK capacity dipped 2% but RFTK demand fell an even faster 3% yoy, leading to a 0.7%-pt decline in the cargo load factor to 61.9%. Yields for both the passenger and cargo segments should decline yoy due to
the current weak environment.

However, the impact on profits is partially mitigated by lower staff bonuses than last year, while jet fuel prices also weakened from US$135 in 3Q to US$127/barrel in 2Q.

We do not expect the results to catalyse its share price, as its near-term outlook remains hazy. We also do not expect Scoot to be a material earnings contributor in FY13, since it is a longer-term project.

http://sbr.com.sg/aviation/in-focus/turbulent-skies-ahead-singapore-airlines

THE CONCORDE STORY

<iframe width="420" height="315" src="http://www.youtube.com/embed/b6OCuJZ9bX4" frameborder="0" allowfullscreen></iframe>


The Aérospatiale-BAC Concorde is a turbojet-powered supersonic passenger airliner, a supersonic transport (SST). It was a product of an Anglo-French government treaty, combining the manufacturing efforts of Aérospatiale and the British Aircraft Corporation. First flown in 1969, Concorde entered service in 1976 and continued commercial flights for 27 years.

Among other destinations, Concorde flew regular transatlantic flights from London Heathrow (British Airways) and Paris-Charles de Gaulle Airport (Air France) to New York JFK, profitably flying these routes at record speeds, in less than half the time of other airliners.

With only 20 aircraft built, their development represented a substantial economic loss, in addition to which Air France and British Airways were subsidised by their governments to buy them. As a result of the type's only crash on 25 July 2000 and other factors, its retirement flight was on 26 November 2003.

Concorde's name reflects the development agreement between the United Kingdom and France. In the UK, any or all of the type—unusual for an aircraft—are known simply as "Concorde". The aircraft is regarded by many as an aviation icon.

http://www.youtube.com/watch?feature=player_embedded&v=b6OCuJZ9bX4#!

Air pockets ahead for Changi

22 March 12  The Straits Times  by Karamjit Kaur

CHANGI'S quest to stay at the top of the world airports league is about to hit some air pockets. And just as a smooth touchdown depends on a match of skill and chemistry between the pilot and the control tower, the key to Changi's continued success will be how well Singapore's aviation regulator and the airport operator fly together.

The challenge for Changi is how to keep up with the rise in passenger numbers and expectations.

Earlier this month, the Transport Ministry set up an 11-member working group helmed by Minister of State Josephine Teo to assess Changi's infrastructure and other requirements in the coming decades. Recommendations will be made within a year.

Plans have meanwhile been unveiled to close down the Budget Terminal in September to make way for a newer, bigger facility slated for opening by 2017.

Until then, life is going to get busier at Terminal 2, which will absorb the budget traveller traffic. The terminal which handled 13 million passengers last year will see the traffic swell overnight to about 18 million.

Still, that is not as bad as it might seem. T2 can take up to 23 million passengers a year. In 2007 - the year before T3 opened - it handled 21.5 million passengers.

What this episode does highlight, though, are concerns about Changi's long-term capacity - the focus of the Transport Ministry's working group.

The Centre for Asia-Pacific Aviation (Capa), an industry think-tank, said recently that if Changi continues to grow its traffic by 8 per cent a year - the average since 2004 - the airport will hit full capacity by the time the new terminal opens.

Singapore needs not one but two new terminals by the end of this decade, Capa said, and a third runway as well, to cope with increasing flights.

The team planning Changi's future has a tough job, for two reasons.

One is the sheer logistics. The next phase of Changi's expansion will go beyond the current airport boundary. There is no space for another terminal on existing airport land.

The next big terminal is likely to be erected next to Runway 3, more familiar as the venue for the biennial Singapore Airshow.

If cleared for take-off, the project will be massive and costly. Not only is there a main road - Changi Coast Road - separating the area from existing airport land, Runway 3 is not connected to the other two runways.

Planners will have to find a way to move aircraft, travellers, bags and cargo between the two locations. This is a formidable, but essentially a design, challenge. Options include flyovers as well as underground links.

The second issue, which might call for even more heavy lifting by the Transport Ministry's panel, is how to reconcile the divergence in the interests of the two stakeholders - the Civil Aviation Authority of Singapore (CAAS) and Changi Airport Group (CAG).

In 2009 when CAAS was split into two arms - one to regulate the industry and the other to run the airport - the rationale was to ensure Singapore remained a premier aviation hub.

As a corporate entity, the airport would be more independent and able to react nimbly to increasing competition, the Government said then.

But it would not be focused solely on the bottom line and the assurance to travellers was that the change would not affect the level of service they had come to associate with Changi.

Three years later, aviation insiders say the regulator and the operator do not always see eye to eye.

The ends remain the same - more airlines and flights, and happy travellers - but the means sometimes differ. And this is especially so when it comes to capacity issues.

For more than three decades, Changi's mantra - now that of the CAAS - has been to build ahead of capacity.

When T3 opened in 2008, some travellers described it as a 'ghost town' because it was so empty. Airport retailers were not happy either. Four years later, the terminal is utilising just 57 per cent of its annual passenger handling ability.

Overall, Changi's total traffic takes up 64 per cent of available capacity now.

Travellers don't like crowded terminals. They want room to move around and enough chairs to sit on while waiting for flights.

But even as it is important to please the customer, airport operators are also mindful of the need to ensure the efficient use of assets and resources so they can run viable - and more importantly, profitable - operations.

The question for Changi Airport Group then, is whether it is cost-effective to operate the airport at such low capacity levels, as is the present case, or whether it should pack more people into the terminals.

Other major airport hubs in Hong Kong, South Korea and London reportedly run at more than 80 per cent of total capacity, and are profitable.

The same goes for runways.

Even as calls are being made for Changi to operate a third runway - in line with the 'build ahead of capacity' mentality - an observer with CAG's hat on would point out that while Changi Airport handled 302,000 take-offs and landings last year, Heathrow, which also has two runways, did 476,197.

So instead of rushing to invest in a third runway, perhaps the focus could be on improving efficiency with the current two.

At the end of the day, even if there are some flight delays and terminals become more crowded, would it really hurt Changi's image that much?

The team planning Changi's future will have to tackle the differences between CAAS and CAG when deciding when to build the new terminal and who will pay for it and the related infrastructure works. All these issues will have to be considered carefully, with one eye on the need to ensure the airport's continued success and the other on Changi Airport Group's business interests.

Where the line is drawn will determine the Changi Airport that will greet travellers 10 to 15 years from now.

http://www.singaporeairfreight.com/SingleNews.aspx?DirID=137&rec_code=797131

SERVICES MARKETING ~ People, Technology, Strategy

Christopher Lovelock Jochen Wirtz SEVENTH EDITION 

http://www.bschool.nus.edu.sg/Departments/Marketing/Jochen%20papers/sm7_cover_table%20of%20contents_samplechaptersandcase_2010_lgt.pdf


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