SIA: an island of calm in the Asian storm June 1998

Singapore Airlines too is affected by the Asian crisis but gives the impression that it will emerge more powerful than ever from the Asian turmoil.

Currently, SIA’s stock–market valuation at US$7.2bn is 25% above that of Cathay, MAS, Thai and Korean combined — probably a realistic assessment of its position in the Asian market. Its net profit for 1997/98 was S$1.17bn (US$705m), roughly the same as the 1996/97 result, though this was due to a very strong first half performance.

SIA’s management recognises the poor short term traffic and yield outlook but the airline was confident enough to order five firm plus five A340- 500s for about $2.2bn in May. With a concentration on long–haul routes it is less exposed to the regional depression. It may even be able to benefit from the economic crisis in Malaysia and the political crisis in Indonesia — Singapore is the natural hub for many services within Malaysia and within Indonesia.

SIA is contemplating alliances but certainly not as part of a rescue strategy. Following the dismantling of Global Excellence it signed an alliance with Lufthansa but has not enrolled in Star. An extensive code–sharing agreement with Ansett/Air New Zealand is awaiting regulatory approval. Speaking recently in the UK Dr Cheong Choong Kong, CEO of SIA, commented, rather enigmatically, on the prospects for SIA joining Star: "At this stage [that] would not be an illogical conclusion … but not a foregone one." SIA gives the impression that its ambitions do not fit in with being just another Star member; rather it sees itself at the centre of a future Asia–based global alliance.

SIA’s position in Asia is rather like what BA’s used to be in Europe — a fully commercial, globally- orientated carrier surrounded by weak state–restrained competitors. And its recent demand for compensatory fifth freedom rights from London in order to operate transatlantic service from the UK was a clear message to European carriers that it will not be confined to its regional market.