Singapore Airlines Limited

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Singapore Airlines Limited

Airline House
25 Airline Road
Singapore, 819829
Singapore
Telephone: ( + 65) 6541 4700
Fax: ( + 65) 6546 7469
Web site: http://www.singaporeair.com.sg

Public Company
Incorporated: 1972 as Singapore Airlines Limited
Employees: 28,558
Sales: SGD 13.34 billion (2006)
Stock Exchanges: Singapore
Ticker Symbol: SIA
NAIC: 481111 Scheduled Passenger Air Transportation; 481112 Scheduled Freight Air Transportation; 488999 All Other Support Activities for Transportation; 561510 Travel Agencies; 561520 Tour Operators

Singapore Airlines Limited (SIA), the national airline of Singapore and a major carrier in the Pacific region with routes to Europe and North America, is known for its unparalleled customer service as well as for its continuing efforts to upgrade its aircraft and technology. SIA is 56 percent owned by the Singapore government and itself owns 49 percent of U.K. airline Virgin Atlantic Airways Limited. A long established strategic seaport, Singapore is an important transit point for travel to other areas of the Far East. Even during times of severe recession, SIA has been one of the world's most consistently profitable airlines. The "Singapore Girl" flies to more than 90 cities in nearly 40 countries and carries roughly 17 million passengers a year. It cooperates with United Airlines and other carriers through the Star Alliance.

IMPERIAL ORIGINS

SIA was incorporated in 1972, and its origins date back to the formation of Malayan Airways Limited (MAL). In 1936 the British government and Imperial Airways localized air transport in Singapore and Malaya (now Malaysia) by forming MAL. This new airline was owned and operated by Imperial Airways and the Ocean Steam Ship Company and was formally incorporated in Singapore in October 1937. During this time, however, an Australian company, Wearne Brothers, began scheduled airline services between what was to be MAL's prime route, Malaya to Singapore. The first chairman of MAL, Frank Lane, concluded that the market could not accommodate two carriers operating this route. Consequently, MAL remained inactive for the next ten years. World War II and the Japanese occupation of the region ruled out commercial air transport, and during this period Wearne Brothers went bankrupt and ceased operations. In 1946 Singapore's airport reopened, and Britain's renamed national carrier, British Overseas Airways Corporation (BOAC), agreed to relinquish its control of MAL to a local concern, the Singapore Straits Steamship Company. In May 1947 MAL began scheduled services with two Airspeed Consul airplanes, six pilots, six radio operators, a dozen administrative personnel, and a few ground crew members. One month later a third aircraft was added.

The new airline was successful; commercial air transport increased dramatically after World War II, and initial services between Singapore and the Malaysian city of Kuala Lumpur were fully booked at MYR 35 each way. By the end of 1947 MAL had introduced three DC-3s into its fleet, and within a year of its first flight the airline was carrying 5,000 passengers every month. Over the next two years Bangkok, Rangoon, and Borneo were added to the destination list, and three more DC-3s were purchased. Rapidly growing as a major air transport center, Singapore began to attract such established carriers as Air India. In 1955 the new Paya Lebar Airport, capable of accommodating jets and large planes, was completed.

In August 1957 Malaya received its independence from Great Britain, signaling dramatic changes for MAL. The government of Malaya took a holding in the company, and the Singapore Straits Steamship Company sold its shareholding to BOAC and the Australian airline Qantas. As a result of this restructuring, the Malayan government, BOAC, and Qantas each held a 33 percent stake in MAL. The airline added two Viscounts to its fleet in 1959 and began offering service to Hong Kong in 1958. Furthermore, MAL entered the jet age with the loan of a Comet from BOAC to service its international routes. Profitable every year since 1948, the company was proving to be a sound investment for its partners.

In 1963 the Federation of Malaysia was formed, comprising the former British colonies of Singapore, Sarawak, and Sabah. The airline was renamed Malaysian Airways Ltd. Under the leadership of Keith Hamilton, who joined MAL in 1960 after 12 years with Qantas, the company opened an office in New York to promote travel to Malaysia. In 1965 Singapore achieved its independence from Malaysia and the governments of Malaysia and Singapore acquired joint majority control of the airline in 1966, renaming it Malaysia-Singapore Airlines (MSA). The year 1968 marked the opening of a new 16-story headquarters building in Singapore, the commencement of service to Tokyo, and the purchase of three Boeing 707s and five 737s, making MSA competitive with other large jet operators. By 1971 service to Rome, London, Frankfurt, and Sydney was available.

BIRTH OF SINGAPORE AIRLINES

In April 1970 Malaysia announced that it would establish its own national carrier for domestic and international flights. This resulted in the dissolution of MSA and equal distribution of assets between Malaysia and Singapore. Singapore received all the Boeing aircraft, the facilities in Singapore, and overseas offices in 18 countries. Malaysia received the remaining aircraft, facilities within Malaysia, and a cash payment from Singapore to make up the difference. In June 1972 Singapore Airlines Limited was formed; its first chairperson was the former joint chief of MSA, J. Y. Pillay. In July 1972 Singapore Airlines (or SIA as it came to be known) purchased its first Boeing 747s, which would become the mainstay of its fleet. The purchase of these aircraft coincided with an increase in frequency of flights to such destinations as Zurich, Athens, Frankfurt, Osaka, London, and Kuala Lumpur, which it serviced 11 times daily. An immediate concern of SIA was to become known as a leader in international air travel. To this end, the company conceived a marketing strategy that stressed its commitment to passenger comfort and service and established the airline's distinctive group of air hostesses. Nicknamed the "Singapore Girls," the stewardesses, wearing custom-designed sarongs, became recognized for their friendly and efficient service.

In addition to its marketing campaign, SIA launched a successful behind-the-scenes lobbying effort to convince various countries to grant the airline access to their airports. To cope with its growing number of flights and planes, SIA established a subsidiary called Singapore Airport Terminal Services Ltd. (SATS) in 1973. The company also embarked on a large-scale training program for all of its staff that included a SGD 20 million training center and several state-of-the-art flight simulators. By 1975 SIA's lobbying, marketing, and staff training efforts began to pay off with a 54 percent increase in passenger traffic that year alone. The fleet consisted of seven Boeing 747s, 14 707s, and five 737s.

COMPANY PERSPECTIVES

Singapore Airlines has evolved into one of the most respected travel brands around the world. We have one of the world's youngest fleet in the air, a network spanning five continents, and the Singapore Girl as our symbol of quality customer care and service. Customers, investors, partners, and staff—everyone expects excellence of us. And so, in our lounges, our conferences, working relationships, and in the smallest details of flight, we rise to each occasion and deliver the Singapore Airlines experience.

In addition to facing a large increase in passenger traffic, SIA had to accommodate a surge in operating costs, brought about not only by increased expenditures but also by huge increases in the price of oil in 1973 and 1977. SIA survived this crisis by adopting a company wide cost-cutting program and relying on its loyal customer base. In 1976 SIA's annual passenger volume passed the two million mark, doubling the 1973 volume, and SIA ranked third among airlines in the Far East Asia region, behind Japan Air Lines and All Japan Airlines. In 1977 SIA's lobbying of the United States government to grant access rights paid off, and it began service to San Francisco, Guam, and Honolulu. Also during this year SIA and the Singapore government announced plans for a vast new airport in the city of Changi, featuring a new headquarters building for SIA, a freight terminal for SATS, and an in-flight catering center. The government provided a five-year plan for the construction of the airport, which was scheduled for completion in 1981.

In July 1977 SIA announced a joint operation with British Airways to provide Concorde jet service between Singapore and London, an arrangement intended to bring prestige to SIA and help British Airways fully exploit the potential of its new supersonic aircraft. Featuring the SIA yellow-and-black logo on one side and the British Airways logo on the other, the aircraft had its maiden flight on December 9, 1977, but service was halted after three flights because of protests from the Malaysian government over environmental damage the Concorde caused while in Malaysian airspace. Full service resumed 13 months later on a thrice weekly basis via an alternate route and with a stop at Bahrain in the Persian Gulf. The service was terminated, however, in November 1980. Nevertheless, the project was deemed a marketing victory, and SIA became known as one of only four airlines to operate the supersonic aircraft.

GLOBAL EXPANSION

In the early 1980s SIA continued to expand its services in the United States. Weekly flights to Los Angeles via Tokyo began at the end of 1980. The following year marked the opening of Singapore's new airport at Changi, offering improved service to visitors in Singapore and giving SIA the opportunity to expand its fleet. During this time, the comforts of the new airport, along with SIA's renowned customer service, resulted in SIA being named the top airline in the Asia Pacific region by customer preference. In response to a growing demand, six Boeing 747-300s (known as "Big Tops") were acquired, as well as seven Airbus A310s, to help SIA in its large-capacity routes. The purchases were part of a plan conceived in 1978 to replace the airline's entire fleet to decrease maintenance costs and increase punctuality. The workhorse of SIA's fleet was the Boeing 747, which accounted for 90 percent of the airline's flight revenues; the company had purchased more than 50 of the aircraft, including a single order for 20 in February 1986, worth $3.3 billion to Boeing.

The Singapore government, which held 73 percent of SIA, floated part of its holding on the Singapore Stock Exchange, giving foreigners the opportunity to own up to 20 percent of the airline. Employee holdings remained significant at 17 percent.

By 1987 SIA's destination network spanned 54 cities in 37 countries, and the airline had installed one of the world's most modern computer centers, with a staff of 350, to coordinate and control its flights and other operations. In recognition of the airline's 40th anniversary that year, SIA engineers restored the airline's first plane, the Airspeed Consul. In 1989 SIA teamed with Delta to create a formidable global alliance. By 1998 the carrier was also inking agreements with Lufthansa and Air Canada. It aggressively promoted similar arrangements with Ansett and Air New Zealand, which greatly increased SIA's presence in the South Pacific.

KEY DATES

1947:: Malayan Airways Limited (later Malaysian) launches services between Singapore and Kuala Lumpur.
1966:: Governments of Malaysia and Singapore acquire majority control of MAL, rename it Malaysia-Singapore Airlines (MSA).
1968:: Sixteen-story headquarters opens in Singapore.
1972:: Singapore Airlines Limited (SIA) is incorporated after MSA is dissolved.
1975:: Travel and tours unit Tradewinds Pte Ltd. is formed.
1981:: Singapore's Changi Airport opens.
1989:: Regional SILKAIR subsidiary is formed, originally named Tradewinds.
1992:: SIA Engineering is spun off.
1997:: SIA gains access to cities within the United States due to bilateral open skies agreement.
2003:: SARS throws Asian aviation industry into crisis.
2004:: Low-cost affiliate Tiger Airways begins operations; SIA outsources IT and other functions, sets long-distance flight records.

Although the carrier continued to grow in the 1990s, controlling costs remained a necessary priority. SIA used its younger, lower-cost Silk Air subsidiary to cover gaps in its route network. The company continued to expand its network, which included 68 cities in 40 countries in 1994. In response to rising labor expenses, SIA began shopping overseas for personnel, establishing a software developer in Bombay and investing in a Chinese maintenance facility and a Cambodian start-up airline. It continued to seek opportunities to invest in other Asian carriers, such as China Airlines and Thai Airways International.

In 1992 SIA spun off its maintenance unit, SIA Engineering, which also continued to grow, building a new hangar at the Changi Airport. In 1998 SIA Engineering entered into joint ventures with Hamilton Standard and Pratt and Whitney. In 1995 the ground-handling subsidiary, SATS Airport Services, opened a $150 million multi-tier airfreight terminal.

SIA lobbied worldwide for freer markets in the 1990s, which it said held the key to industry profits. The traditional system of regulation, bilateral agreements between individual nations, could only hinder the world's airlines with inefficiency, according to company officials. In 1993 SIA earned an operating profit of $548 million. This figure reached $657 million in just two years.

Still, the pressures of competition induced SIA to install a "cabin management interactive system" in every seat. The CMIS gave passengers a six-inch screen with a choice of six movies, as well as video games, telephones, etc. The consoles cost $4 million per plane to install. Other liabilities accrued when the carrier had problems selling jets as they reached an age of five years. It finally resorted to leasing the aircraft in slow resale markets.

The Asian financial crisis severely cut into SIA's earnings in the late 1990s, prompting it to examine its global route network for poorly performing routes. Service to Berlin was canceled in early 1999. Still, SIA used its ample cash reserves to further upgrade passenger amenities, spending $300 million to renovate the cabins of its aircraft. The first two 747s to receive the upgrade were painted in an exotic livery reminiscent of a tropical sunset. SIA prefixed its traditional slogan "A great way to fly" with "Now more than ever."

CHALLENGES IN THE
NEW MILLENNIUM

From 1994 to 1998, SIA had ordered more than $25 billion worth of new aircraft. In 2000, SIA signed up to be the launch customer for the Airbus A380, designed to be the world's largest airliner. The development of this ambitious aircraft dragged on for years, however. In the meantime, SIA continued to order proven planes such as the B777.

SIA used the latest aircraft to pioneer ultra-long-range (ULR) flights. It set records for longest commercial routes with a nonstop service between Singapore and Los Angeles, a 7,600 nautical mile (14,100 kilometer) haul, launched in February 2004. This was soon topped with a Singapore-Newark connection. SIA helped passengers endure the flights of up to 18 hours with generous seat spacing, while the planes were staffed with extra crew members to allow for sleep breaks.

SIA acquired a 25 percent stake in Air New Zealand for $220 million in 1999; however, much of this valued disappeared when the Kiwi government renationalized the tottering flag carrier in early 2001 following the collapse of its Ansett subsidiary. Seeking to expand its influence, SIA also formed strategic partnerships with other carriers around the world. It bought 49 percent of Virgin Atlantic Airways for $960 billion in 1999; most of this was written off after the September 11, 2001 terrorist attacks on the United States. SIA also invested in airlines in India and the Philippines, and made inroads into mainland China through a cargo joint venture.

The airline longed to win approval for a connection between the United States and Australia via Singapore, but faced resistance from government-backed Qantas, which was reluctant to share the lucrative Sydney–Los Angeles route. SIA was able to add new transatlantic and transpacific routes to the United States, however.

SIA managed to post an annual profit even in the aftermath of the 2001 terrorist attacks. Its net income of SGD 632 million ($358 million) for the fiscal year ended March 31, 2002, was 61 percent lower than in the previous year, however. Revenues dropped 5 percent to SGD 9.4 billion.

COST CONTROL AFTER SARS

SIA cut back its schedule by nearly a third in April 2003 as the SARS epidemic scared many passengers away from Asian flights. Other factors, such as a tsunami in Asia and a terrorist bombing in Bali, had also affected leisure and business traffic.

Cheong Choong Kong retired as group CEO after almost 20 years in June 2003. His successor, Chew Choon Seng, later told Air Transport World that the SARS crisis had refocused the company on the need to control expenses. There were layoffs and SIA farmed out some of its non-core operations, such as IT and some accounting services.

According to Chew, the region's crop of low-cost carriers (LCCs) did not compete extensively with Singapore Airlines. However, SIA was investing in its own LCC with a 49 percent shareholding in Tiger Airways, which launched with midsize Airbus A320s in 2004. Perhaps a more serious long-term threat was Emirates, which also had a stellar reputation for service and was rapidly expanding its global reach from its Dubai base.

While cutting costs, the group was willing to spend on upgrading amenities to help maintain passenger loyalty. It rolled out Boeing's in-flight Internet service, Connexion, on some planes while improving other inflight entertainment elements. Singapore Airlines continued to accrue quality awards from dozens of magazines.

SIA was again one of the world's most profitable airlines in 2005, banking net income of SGD 1.4 billion ($825 million) on revenues of SGD 12 billion ($7 billion). Group revenue rose to SGD 13.3 billion ($8.2 billion) in 2005-06 while net income slipped to SGD 1.2 billion ($808 million) thanks largely to fuel costs, which rose to more than SGD 4 billion for the year.

Dylan Tanner

Updated, Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

Singapore Airport Terminal Services Limited; Singapore Airlines Cargo Private Limited; SIA Engineering Company Limited; SilkAir (Singapore) Private Limited.