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SilkAir Orders 23 737-800s + 31 737 MAX 8s

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Singapore Airlines' regional carrier SilkAir has signed a letter of intent to purchase up to 68 new Boeing aircraft for its growth and fleet renewal plans.

 

The agreement includes a firm order for 23 Boeing 737-800s and 31 Boeing 737-8 Max aircraft, and purchase rights for another 14 aircraft.

 

Under the deal, SilkAir also has the flexibility to switch its order to other variants of the 737 product range.

 

The firm order for the 54 aircraft is valued at $4.9 billion at list prices.

 

Deliveries are scheduled to start in 2014 and continue through to 2021, doubling the carrier's fleet. The deal also swings the carrier away from operating an all-Airbus fleet.

 

"The order is the largest in SilkAir's history and remains subject to the negotiations of a final purchase agreement," the carrier said in a statement listed on the Singapore Exchange.

 

"The selection of the B737 follows detailed evaluations and extensive negotiations with both Airbus and Boeing. The order will enable us to maintain a young and modern fleet, with an aircraft that has a proven track record of strong customer appeal, excellent reliability and low operating costs," said SilkAir chief executive Marvin Tan.

 

He adds that the new aircraft will allow SilkAir to expand its network and increase its capacity on existing routes.

 

SilkAir issued a request for proposals in early 2012, assessing both narrowbodies and regional jets. It now operates a fleet of 21 A319s and A320s, with three more A320s due for delivery by the end of 2013.

 

Many of the aircraft joined its fleet before or during the mid-2000s, according to Flightglobal's Ascend database.

 

Source: http://www.flightglo...37-800s-375076/

 

Press Release: http://www.silkair.com/mbe/en_UK/content/corporate/newsflash/NF1001_03082012.jsp

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SilkAir is going back to Boeing after more than a decade. Congrats to Boeing and I hope MI will install AVOD in all seats too. It is vital to compete more effectively with the likes of MH and GA.

 

This order also means that SQ will continue to operate only wide-bodied aircraft :D

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If I am not wrong, some of MI's A320 is A320-100s. I was on one of those A320-100 two years ago and they looked a bit tired.

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If I am not wrong, some of MI's A320 is A320-100s. I was on one of those A320-100 two years ago and they looked a bit tired.

No, those A320-100s were only with Air France and British Airways. All have been retired and scrapped. MI has earlier built A320s with oldest being 13.9 years old. Powered by IAE V2527-A5 which is quite new.

Edited by JuliusWong

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No, those A320-100s were only with Air France and British Airways. All have been retired and scrapped. MI has earlier built A320s with oldest being 13.9 years old. Powered by IAE V2527-A5 which is quite new.

 

Thanks Julius. I think I am confused between their A320 and A319... their A319 seems to be the -100s, not that any -200 are available on the A319.

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If I am not wrong, some of MI's A320 is A320-100s. I was on one of those A320-100 two years ago and they looked a bit tired.

Agreed. The newer ones have a complete different cabin design throughout. The cabin is very bright, airy and clean. Seat pitch however is terrible. Most rows feature only 30" pitch. They still have a few 320 in the older configuration with 16 Business Class seats and I flew on one back to BKI in May. Definitely more legroom in Y. But like you said, the cabin interior looked kinda tired and dated.

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With Airbus A320s being considered the workhorse of low cost carriers (LCCs) by many passengers, perhaps SilkAir was also keen to move away from operating an exclusively A319/A320 fleet.

 

I for one have hoped for such a fleet roll-over and I am glad to see it finally happen.

 

KC Sim

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Jetliner feud deepens as Boeing grabs key Airbus client

 

 

Planemaker Airbus was reeling on Friday from the defection of a high-profile customer to Boeing, prompting European accusations of aggressive tactics amid renewed evidence of a jet price war.

 

Silkair, the regional arm of Singapore Airlines (SIAL.SI), said it had placed the biggest order in its history with a tentative deal to buy over 50 Boeing 737 jets worth $5 billion.

 

This came as figures showed Boeing outselling Airbus by more than two to one in the first seven months of the year, reversing a deficit seen last year when Airbus broke industry records with a fuel-saving version of its competing A320 jet.

 

The world's dominant planemakers have been locked in a see-saw contest for market share since late 2011, slashing prices to take maximum advantage of the chance to lock in customers for the A320neo and Boeing's response, the 737 MAX.

 

"They are in a huge market share war between the MAX and the neo, and I think that's going to be reflected in price," said Alex Hamilton, director of research with EarlyBirdCapital.

 

Such 150-seat medium-haul jets are the bread and butter of low-cost airlines and feed the hubs of large network carriers, with potential sales of $2 trillion over the next 20 years.

 

SilkAir said it had agreed to buy 23 Boeing 737-800 aircraft, Boeing's current benchmark model, and 31 of the upgraded versions called 737 MAX 8, plus options for more.

 

The A320neo and 737 MAX offer fuel savings of roughly 15 percent together with other improvements, sparking a rush of demand from airlines seeking to ease their highest cost in an industry that suffers from chronically slim profit margins.

 

The airline did not disclose the price of the deal, but carriers typically receive hefty discounts, sometimes bringing total concessions to greater than 50 percent of list prices, according to analysts and estimates derived from leasing data.

 

Airbus (EAD.PA) and Boeing have each accused the other of heavy-handed pricing as the frontier between the big Western jetmakers - which typically split the market for medium-haul jets - takes some time to stabilise after the upheaval of new products.

 

"We have no comment to make on the purchase decision by Silkair. However, Boeing has clearly made an extremely aggressive offer to win this deal in an attempt to catch up with the huge success worldwide of the A320 family," said Airbus spokesman Stefan Schaffrath.

 

Boeing (BA.N) spokesman Marc Birtel said: "Our customers recognise the difference between products and make decisions that suit their needs. Price alone is not always the discriminator for the services and packages that appeal to our customers. While we will be competitive in negotiations and want to win, there are limits to how deeply we'll discount an order."

 

Shares in both companies rose amid a broad market rally.

 

FLIP FIGHT

 

After a number of losses to Airbus, including part of a historic order by American Airlines last year, industry sources have said Boeing would fight back as the pair engage in the sport of "flipping" or converting selected customers.

 

Such deals must overcome the cost of retraining pilots.

 

The latest scalp comes days after Boeing grabbed an $11 billion Aeromexico deal and is a boost for new Boeing Commercial Airplanes Chief Executive Ray Conner after last month's debut Farnborough Airshow yielded a smaller spree than some predicted.

 

Other big contests are looming in Turkey and Asia where the head of Philippines Airlines told Reuters it would soon decide whether to pick Airbus or Boeing. Industry sources say the carrier wants dozens of A320-type jets plus around 10 mid-sized.

 

In Turkey, Airbus is said to be heavily wooing low-cost Boeing operator Pegasus but faces an uphill battle at the other end of the scale as Boeing pushes its 747-8 to Turkish Airlines.

 

Separately, China Southern (1055.HK) said its subsidiary Xiamen Airlines had also agreed to buy 40 Boeing (BA.N) 737 aircraft as it expands internationally.

 

That deal will be seen as more routine as major Chinese carriers tend to give roughly equal treatment to Airbus and Boeing over time for narrowbody jets, though a diplomatic row over carbon rules has disrupted orders for larger Airbuses.

 

But it added to a grim day for Airbus as the EADS unit said it had sold 301 jets in the first seven months, giving it less than a third of the market as Boeing rebounds from a record loss in last year's ritual order race.

 

Boeing sold 736 aircraft in the same period and is set to recover the No. 1 spot in 2012 for the first time since 2006.

 

Both planemakers launched their upgrades from mid-decade in a successful bid to clip competition from China and Canada, only to slip into a battle for market share to avoid the other side running away with the very real cost benefit of higher volumes.

 

Insiders say a serious concern is that lopsided shares in a duopoly such as Airbus and Boeing's can lead to panicky pricing.

 

Whereas deals may be won or lost within $1 million on a jet notionally worth $80 million but often sold for half, industry sources said the gap between the two sides was wider than normal.

 

Aerospace analyst Scott Hamilton said Boeing had on occasions underbid Airbus by 10 percent as it catches up with the European company's success in the past 12 months, though European sources concede blood has been spilled on both sides.

 

EasyBird's Alex Hamilton said price fears should ease as immediate demand for the latest jets exhausts itself and the cycle - driven by Asian growth and U.S. modernisation - peaks.

 

Source: http://www.reuters.com/article/2012/08/05/uk-airbus-idUSLNE87400E20120805

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With such big orders I could see that some of the existing SQ destinations in SE Asia will be handed over to MI, just like what they did to SUB, PEN, KUL and HAN....

 

Must be about time for MI to join Star Alliance :p

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With such big orders I could see that some of the existing SQ destinations in SE Asia will be handed over to MI, just like what they did to SUB, PEN, KUL and HAN....

 

Must be about time for MI to join Star Alliance :p

KUL??

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Must be about time for MI to join Star Alliance :p

Or make it an associate partner of Star Alliance, like what KA is to OneWorld :D

 

I understand many Star Alliance frequent flyers aren't very happy that they can't earn any miles using FFP from other Star carriers when flying a MI operated flight. SIA really should do something about it soon.

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SilkAir fleet expansion may hurt MAS

 

By Isabelle Francis | The Edge Malaysia – 12 hours ago

 

 

PETALING JAYA: The aggressive expansion of Singapore Airlines Ltd’s (SIA) short-haul premium unit SilkAir is expected to heighten competition for Malaysian Airline System Bhd (MAS).

SilkAir’s recent orders for 68 new aircraft, to be delivered between 2014 and 2021, will eventually boost its current fleet of 21 planes to 89 which is close to MAS’ fleet size of less than 100. MAS is undergoing a fleet renewal programme which will result in a smaller but younger fleet.

With the orders for more planes, aviation analysts said there is a possibility of SilkAir dominating SIA’s route network of less than four hours flight radius in Asia. This could increase rivalry with MAS which is already betting hard on the region to boost revenue amid the slow collaboration progress with AirAsia Bhd.

Nevertheless, industry experts believe that MAS’ priority now is to solve its internal issues and strengthen its balance sheet instead of reacting immediately to competitive pressures from SilkAir.

“MAS must focus on its own internal problems first. That [has] precedence [over] competing with SilkAir or its other peers,” said a Maybank analyst.

SilkAir has agreed to buy up to 68 new aircraft worth some US$4.9 billion (RM15.2 billion) from Boeing, making it the largest purchase in the airline’s history. The purchase comprises a firm order for 54 aircraft and an option for another 14. The firm order is for 23 Boeing 737-800s and 31 Boeing 737 MAX 8s, with the flexibility to switch to other variants within the B737 range.

SilkAir’s sizeable order reflects a change in the playing field for premium players in response to increasing competition from low-cost carriers. However, such a shift in SIA’s group strategy to focus more on load factor is expected to further erode SilkAir’s passenger yields, which are already under immense pressure.

“[sIA] had in the past stated that once an airline starts to offer discounts on air fares, it would be hard to re-adjust yields to their previous levels. That said, we may see this becoming the case for SIA in the longer term,” said OSK Research.

OSK aviation analyst Ahmad Maghfur Usman said MAS, on the other hand, cannot afford to adopt SIA’s strategy as it does not have the luxury to lower its yields in order to fill more seats.

“MAS already has problems. Its yields are already so low. To lower it further means to make a loss,” he said. MAS’ low passenger yields have always been the culprit for its lack of profitability, although recently, it saw an improvement of 12% to 25.5 sen per RPK (revenue passenger km) in the first quarter ended March 31, 2012 following a reduction in capacity. MAS was still in the red with a net loss of RM172 million on the back of RM3.1 billion revenue during the quarter under review.

In recent months, SIA had adopted a load active strategy through more promotions, which analysts had expected to add pressure on overall yields in the near term. Its latest strategy is contrary to what premium carriers normally do --- raise yields to maximise profit.

Going back to Silk Air’s expansion, its current 21-strong fleet comprises A319s and A320s, with three new A320s due to be delivered in 2013. The average age of SilkAir’s fleet is six years and three months, while SIA operates 100 aircraft averaging six years and two months.

The new 737-800 and the 737 Max 8s ordered by SilkAir is expected to be more fuel efficient with between 3% and 4% lesser burn rate against their respective Airbus peers. This would be positive in terms of managing SIA’s fuel costs more efficiently over the longer term.

Meanwhile, OSK’s Ahmad said although SilkAir and budget carrier AirAsia serve overlapping routes, it is unlikely the former’s fleet expansion will give the latter stiffer competition.

“SilkAir is not a low-cost carrier as it targets more of the mid-segment market,” he said.

 

This article appeared in The Edge Financial Daily, August 7, 2012.

 

Source: http://my.news.yahoo...32--sector.html

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Or make it an associate partner of Star Alliance, like what KA is to OneWorld :D

 

I understand many Star Alliance frequent flyers aren't very happy that they can't earn any miles using FFP from other Star carriers when flying a MI operated flight. SIA really should do something about it soon.

Or make it an associate partner of Star Alliance, like what KA is to OneWorld :D

 

I understand many Star Alliance frequent flyers aren't very happy that they can't earn any miles using FFP from other Star carriers when flying a MI operated flight. SIA really should do something about it soon.

 

I have had no problem with my SIN-KUL flight which tied in with my SIN-NRT itinerary. Our flight MI340, was booked under SQxxxx code on our itinerary, so I was able to get some KF miles. :)

 

I suspect to get OW miles, you will need to book KA flights under CXxxxx flight number in order to qualify?

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I have had no problem with my SIN-KUL flight which tied in with my SIN-NRT itinerary. Our flight MI340, was booked under SQxxxx code on our itinerary, so I was able to get some KF miles. :)

 

 

But if you're flying business class class, you may end up at the generic lounge used by MI as opposed to SQ's.

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But if you're flying business class class, you may end up at the generic lounge used by MI as opposed to SQ's.

 

I used to collect VS miles but they dont apply for MI flights even under a SQ flight number

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I have had no problem with my SIN-KUL flight which tied in with my SIN-NRT itinerary. Our flight MI340, was booked under SQxxxx code on our itinerary, so I was able to get some KF miles. :)

No problem if you are using SIA Krisflyer. Even if you were booked on a MI coded flight, you would still had no problem earning Krisflyer miles on the SIN-KUL sector which was operated by MI.

 

The main problem is that if you are a member of other Star Alliance carriers FFP such as Lufthansa Miles & More or Asiana Airlines Asiana Club, you won't get any miles at all if the flight is operated by MI, even if they sold you the flight under a SQ flight number.

 

 

I suspect to get OW miles, you will need to book KA flights under CXxxxx flight number in order to qualify?

No. KA flight number will do too as KA is an associate member of OW. I am using my BA Executive Club whenever i fly KA/CX and i do get miles credited to my BA Executive Club even on a KA operated, KA code flight :) You can even check your KA/CX flight details on your BA Executive Club portal on ba.com :good:

 

 

But if you're flying business class class, you may end up at the generic lounge used by MI as opposed to SQ's.

Yes. And let say one is flying to NRT from KUL via SIN but the flight from KUL to SIN is operated by SilkAir and he is using his Lufthansa Miles & More card, he will only get air miles for the SIN-NRT sector but not the KUL-SIN sector, even if the KUL-SIN is booked under SQ flight number. In order for one to be eligible to earn air miles using his Lufthansa Miles & More on all flights all the way to NRT, all sectors must be flown on SQ operated flights.

 

 

I used to collect VS miles but they dont apply for MI flights even under a SQ flight number

Yeah, that's the main problem. Luckily there is no such problem on KA flight. Many Star Alliance frequent flyers on other Star carriers FFP aren't too happy with it when most of the SQ flights between SIN/KUL are now replaced with MI flights.

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The Singapore Airlines Group is accelerating expansion at full-service regional subsidiary SilkAir, which has quietly emerged as a strong competitor in a short-haul market dominated by low-cost carriers. While sceptics in 2004, when the Singapore market was revolutionised with the launch of three new LCCs, questioned whether SilkAir would be able to survive the onslaught of low-cost competition in its home market the small carrier has instead thrived as Singapore’s LCC penetration rate has exploded. SilkAir has steadily outperformed its LCC competitors, including SIA affiliate Tiger Airways, as well as SIA’s mainline operation.

 

SilkAir is now preparing to undergo the biggest expansion phase in the 20-year history of the SilkAir brand. The SIA Group is planning to increase capacity (ASKs) at SilkAir by about 23% in the current fiscal year commencing 01-Apr-2012 (FY2012), outpacing the planned 3% capacity increase for SIA mainline as well as the expected capacity growth of the three main LCC groups serving the Singapore market: AirAsia, Jetstar and Tiger. Continued high double digit annual capacity growth is expected over the next decade as SilkAir’s fleet expands from 21 aircraft currently to a projected 54 aircraft by the end of 2021.

 

The carrier earlier this month announced by far the biggest aircraft deal in its history, signing a letter of intent with Boeing to order 23 737-800s and 31 737 MAX 8s with purchase rights for an additional 14 aircraft.

 

The expansion at SilkAir represents sound strategy for the SIA Group given that SilkAir has emerged as the most profitable brand (based on profit margins) in the Group’s four-brand portfolio. The SIA Group has turned to SilkAir to take over or supplement SIA’s intra-Asia routes, several of which have become unprofitable as LCC competition has intensified.

 

As LCC competition has intensified, narrowbody aircraft have become more suitable for an increasing number of SIA’s regional routes. With SIA only operating widebody aircraft (the Airbus A330 is SIA’s smallest aircraft), the Group looks to SilkAir’s all-narrowbody fleet whenever there is a need to downsize a particular regional route.

 

SilkAir also continues to expand by opening up new destinations for the Group, following its original model of serving smaller boutique markets that help feed SIA’s long-haul network. SIA, over the next decade, plans to continue rapidly expanding SilkAir in traditional SIA business-focused markets as well in traditional SilkAir markets, which are typically more leisure-focused.

 

SilkAir’s lower cost structure is also a big advantage as the Group looks to improve profitability on short-haul routes. While SilkAir is by no measure an LCC or even a hybrid carrier, it has a much lower cost structure than SIA. Having the option of shifting some flying to a lower cost unit while maintaining a level of service sufficient for its long-haul passengers, including premium passengers, has been critical for the SIA Group as LCCs have quickly expanded in the Group’s home market of Singapore. SilkAir’s break-even load factor in the fiscal year ending 31-Mar-2012 (FY2012) was 59.7% compared to a much higher break-even load factor of 78% for parent airline SIA.

SIA Cargo, SIA Engineering and new long-haul LCC Scoot, but Scoot figures were only reported for the first time in 1QFY2013 as the carrier launched services in Jun-2012.)

 

SilkAir’s exceptional performance in challenging market conditions during FY2012 was no anomaly as the subsidiary has been profitable every year since FY2002. SilkAir, which at the beginning of the millennium struggled in the red while SIA was highly profitable, has now outperformed the rest of the group for three consecutive years based on operating profit margins.

 

SilkAir recorded a SGD121 million (USD98 million) operating profit in FY2011 – its best ever result – and an SGD49 million (USD40 million) operating profit in FY2010. But the FY2012 performance was the most impressive in relative terms as SilkAir posted a 12ppt higher operating margin than SIA the parent airline and the overall SIA Group. SilkAir recorded an operating profit margin of 14% in FY2012 compared to a margin of less than 2% for the parent airline and Group. In FY2011 SilkAir recorded an operating profit margin of 18% compared to 7% for the parent airline and 9% for the SIA Group.

 

http://centreforavia...-sias-gem-80190

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FY was meant to be the equivalent of MI for MH but Tony F killed that one off because he knew it would be a threat to AK.

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SilkAir’s break-even load factor in the fiscal year ending 31-Mar-2012 (FY2012) was 59.7% compared to a much higher break-even load factor of 78% for parent airline SIA.

 

Really interested with this data. Hopefully local analysts will force MH and AK to reveal their break-even load factor too in their financial disclosures.

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Seem like the general trend nowadays is to go cheap !

Here you have MI outperforming the parent

LCC's flourishing everywhere

At the other end of the spectrum, news is Hong Kong Airlines will 'suspend' her all business flights to London

CX has just posted a horror story (by their standard)

:)

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Seem like the general trend nowadays is to go cheap !

Here you have MI outperforming the parent

LCC's flourishing everywhere

But the air fare of MI is anything but cheap, and you get minimum foods on all of their flights, tiny legroom with drop-down LCD screens every four rows and the cabin crew service is definitely no SQ.

Edited by Isaac

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FY was meant to be the equivalent of MI for MH but Tony F killed that one off because he knew it would be a threat to AK.

I am not sure if that was the intention. FY turboprop is more like MI but FY jet is clearly promoted as an LCC. If FY jet had operated like FY turboprop, I think TF would not have regarded that as "wasteful" competition.

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