SINGAPORE -- Singapore Airlines Ltd. said it will further cut capacity and is in talks with its staff and unions for early retirements and other cost-cutting measures as the global recession crimps demand for travel.
"In view of falling demand, as reflected in advance bookings, Singapore Airlines plans to cut capacity in the [fiscal year starting April 2009], by 11% from the preceding 12 months," the airline said in a statement.
The latest reduction is in addition to a 3% cut in total flights the airline announced last month. Singapore Airlines then said that it was cutting 214 flights to destinations in China, India, Australia, the U.K. and Switzerland. Over the weekend it said it was suspending its three-times a week service to Vancouver.
The carrier didn't say how many flights would be suspended with the latest capacity cut.
Singapore Airlines has been steadily reducing its flights since late last year to many regions as the global slowdown reduces demand for business and leisure travel.
The airline, described by analysts for years as the best-run and most profitable in the world, has also been hit by a double-digit fall in cargo volume as Asian exports to Western countries have been falling.
"The drop in air transportation has been sharp and swift. Given the falls of over 20% that we have seen recently in cargo shipments, and demand for air travel following closely behind trends on the cargo side of the business, we have to face the reality that 2009 is going to be a very difficult year," Singapore Airlines Chief Executive Chew Choon Seng said in the statement.
Major Asian carriers make around 40% of their revenue from cargo.
"We have already taken action, such as expanding and stepping up training and retraining programs, and we 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," Mr. Chew said.
Singapore Airlines said it is discussing with unions shorter work months and unpaid leave, as well as early retirement. "If there are to be cuts in salary, the management will be the first to take them," the airline said.
Singapore Airlines, which is 54%-owned by Singapore's state-owned investment company Temasek Holdings Pte. Ltd., said it will decommission 17 aircraft from its fleet of 102 aircraft during the year. "Before recession hit major markets, the plan was for only four aircraft to be phased out -- one for conversion to a freighter, and three to be returned to lessors at completion of lease contracts," the airline said.
Singapore Airlines has also been hit hard by oil-hedging losses as jet fuel prices have fallen to less than half from levels in mid-2008.
The company said last week that it booked a 341 million Singapore dollar (US$226.2 million) hedging loss in the third quarter. For the fourth quarter ending March 2009, it has hedged 44% of its fuel requirements at US$131 a barrel. Jet fuel is currently trading around US$53.50 a barrel.
