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February 17, 2009

Global slump forces Singapore Airlines to cut fleet
Singapore Airlines said Monday it will cut 17 percent of its fleet and is exploring other cost-saving measures amid a global economic slump which has hit travel and cargo demand.

The airline, one of Asia's major carriers, said in a statement that it will decommission 17 passenger aircraft over the financial year from April 2009 to March 2010, and was not ruling out the possibility of deferring plane orders.

Singapore Airlines (SIA) said it had originally planned to decommission four planes before the global downturn hit major markets. "The drop in air transportation has been sharp and swift," SIA chief executive Chew Choon Seng said in the statement.

SIA said it made the decision in view of falling demand which is reflected in advance bookings. It said it plans to reduce capacity by 11 percent from the preceding 12 months.

In a separate statement further confirming this year's bleak outlook, the airline said it filled 74.1 percent of available passenger seats in January, down from 80.5 percent a year earlier.

The cargo load factor, a measure of capacity utilisation, dropped to 54.2 percent from 58.6 percent. "Given the falls of over 20 percent that we have seen recently in air cargo shipments and the tradition of demand for air travel following closely behind trends on the cargo side of business, we have to face the reality that 2009 is going to be a very difficult year," Chew said.

A reduction of 17 airplanes is equivalent to 17 percent of the 102 passenger aircraft which SIA had as of February 1. No decision has yet been made on whether to defer current aircraft orders, including 13 Airbus A380s, the world's biggest passenger plane, SIA spokesman Stephen Forshaw said.

"But don't discount this possibility as we consider the options for our fleet going forward," he told AFP. "That said, new aircraft deliveries do also allow us to retire our older, less fuel-efficient aircraft from our operating fleet."

SIA already has six A380 superjumbos and has orders for 18 A330s, 20 Boeing B787-9 "Dreamliners" and 20 A350-900 XWBs, with deliveries running up to 2016. Forshaw said SIA has yet to decide what to do with the 17 planes that will be taken out of service but the options include selling, leasing or parking them in a desert, which is an accepted industry practice.

Shukor Yusof, an aviation analyst with Standard and Poor's, said: "It's going to get worse... It is likely that layoffs will come next." SIA chief executive Chew said management has met with labour unions about plans to cushion the impact of the downturn.

These include asking staff for voluntary unpaid leave, early retirement, shorter work months and accelerated clearance of leave applications. If there are cuts in salary, management will take them first, Chew said.

SIA's latest announcement came two days after it said it will indefinitely suspend its thrice-weekly service from Singapore to Vancouver due to poor passenger demand. Unlike airlines of bigger countries, SIA does not have a domestic operation to soften the impact of the international traffic slump, so management must act decisively, Chew said.

"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," he said. SIA said in December it was in talks with cargo pilots to take leave with no pay in view of weaker freight demand.

It had 14,245 employees as of March 31 last year, including 7,172 cabin crew and 2,286 passenger pilots. The airline, 54 percent owned by Singapore sovereign wealth fund Temasek Holdings, reported a 42.8 percent fall in net profit in the third quarter to December from the year before. SIA shares closed down 16 cents at 10.44 Singapore dollars.

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