Edit 18th May 2018: Singapore Airlines formally announced the merger of SilkAir into SIA this morning. See our article for full details and analysis.
After posting a shock loss of S$138 million for the Q4 2016-17 period, the Singapore Airlines Group embarked on a turnaround plan, led out of a specially created “Transformation Office”. According to Reuters, the company has identified 56 separate initiatives to help it cut costs and operate more efficiently as part of the process. Fuel savings, better rostering of crew and less food waste are just some of the means being implemented.
But of greater interest is that part of that turnaround in August this year was to consolidate the financial operations of full-service regional subsidiary SilkAir into the Singapore Airlines office.
The group has also been embarking on some airline consolidation, already budget carriers Tigerair and Scoot have been merged into a single carrier, retaining the branding of the latter, and soon Singapore Airlines Cargo will be integrated into the mainline operation.
This leaves SilkAir sticking out like a sore thumb. This recent CAPA article suggests that serious consideration will be given by the group to a merger between SilkAir and the parent airline as part of the ongoing group review.
It also suggests that SilkAir could upgrade it’s recently enlarged Business Class cabin on the 737 MAX with a flat-bed seat, possibly to match the regional business product being planned for the 787-10.
This would allow the group to have a consistent regional business seat on longer flights, with the 737 MAX able to provide capacity on “thinner demand” routes up to seven hours from Singapore, while the 787-10 and regional A350 aircraft service the higher demand flights.
Flat-bed business on a 737 MAX?
It sounds a bit illogical, given the space seats like this occupy, to install them on a narrow body aircraft. SIA / SilkAir wouldn’t be the first to do so however, several US carriers like jetBlue, Delta Air Lines and American Airlines already have flat-bed seats on their A321 aircraft for transcontinental flights, and although the A320 family cabin is a little bit wider than the 737, flydubai recently became the first 737 MAX operator to install a flat-bed business seat in the aircraft.
Malaysia Airlines also announced earlier this year that it will install a flat-bed business class product, with each seat featuring direct aisle access, on their 737 MAX aircraft being delivered from 2021. That’ll be some interesting competition close to home, which SIA surely won’t ignore.
What’s interesting about the flydubai configuration though, is that it occupies exactly the same floor space on the 737 MAX 8, with 10 flat-bed seats, as SilkAir have chosen to use for their current 12 business class recliner seats, with what we consider to be unnecessarily excessive legroom, some 10 inches more than for their existing business class seats.
SilkAir even dropped an economy row of six seats to accommodate the change, an odd decision, unless there are other plans for this cabin area, which seems likely.
Family business
It actually makes perfect sense to bring SilkAir into the fold. SilkAir has been operating as an independent but wholly owned subsidiary of Singapore Airlines since 1992 (formerly known as Tradewinds, setup in 1975). Most large “flag-carrier” airlines have full-service regional divisions or fleets, but almost all of them are operated under the same branding, such as British Airways’ A320 family fleet, Lufthansa’s varied narrow body fleet, and the Qantas 737 family.
Benefits?
Economies of scale is the principal benefit for SIA. It’s easier to leverage greater discounts as a larger airline. Our sources within Singapore Airlines have pointed to the existence of independent contracts for SilkAir, so it’s effectively operating as an independent airline in many respects.
Adding the SilkAir and Singapore Cargo aircraft to the Singapore Airlines fleet under a single Air Operator’s Certificate would take them to around 150 aircraft, broadly the same size as regional full-service rival Cathay Pacific, opening up better group supply contracts and enhanced buying power.
For the traveller?
Having two different airlines that share little branding, but are actually the same company, is confusing for some passengers. SilkAir is not a household name outside Singapore, and particularly outside South East Asia.
Currently there is also little product consistency between the two, and we think this will be one of the major changes. That’s good news for regional travel throughout Asia.
Our conclusion
With the financial side of SilkAir already consolidated, we see a full merger as a real possibility. Some informal conversations we have had with SilkAir staff also confirmed that this plan is considered “all but a done deal” internally and that the announcement is due next year, with SilkAir to be fully integrated into Singapore Airlines.
The restructuring and alignment of both economy and business class fare types across the two carriers announced on Friday last week (15th December), and summarised in our article here, is yet another indication that SIA may be setting up to fully absorb the regional carrier into their own operations next year.
The branding would change to SIA, cabin crew would wear the kebaya, and the service product would be consistent across the fleets.
(Cover Photo: Andrew Thomas)