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Cathay Pacific

Singapore Airlines becomes second Asian carrier to announce job cuts after cull of 600 roles at Cathay Pacific last month

Airlines struggling to compete for transit passengers with Middle East and Chinese mainland airport hubs and unable to rely on growth in their own limited home markets

PUBLISHED : Wednesday, 07 June, 2017, 2:51pm
UPDATED : Thursday, 08 June, 2017, 12:31am

Following a shake-up at Cathay Pacific Airways that led to 600 job losses, Asian airlines look set to endure more turbulence with Singapore Airlines indicating many jobs may become “irrelevant” as it embarks on a “radical review” of its business.

The airlines, which pride themselves on offering quality, have lost money to intense competition from budget carriers in the region and international long-haul markets led by Middle East carriers.

The problems at Hong Kong’s flagship carrier resulted in a review that led to a cull of 600 employees last month – Cathay Pacific’s biggest jobs cut in 20 years.

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Singapore Airline’s chief executive Goh Choon Phong, who stepped up to the role of chairman of a global airline body on Tuesday, told reporters that some jobs would become “irrelevant” while others would be redeployed. Goh had earlier said he would be “leaving no stones unturned” in his transformation strategy.

Ellis Taylor, an editor at aviation news site FlightGlobal, said Goh’s indications of job cuts were short on detail, but just like the Hong Kong carrier, immediate cost benefits would be found in streamlining administration and management jobs.

Despite the potentially bumpy ride ahead, it “would be unlikely to affect customers directly, and thus allow [Singapore Airlines] to maintain their premium image,” Ellis said.

The Asian airline finance expert said more meaningful cuts could be found in restructuring the airline’s number of destinations and flights, paving the way for cutbacks on pilots and attendants.

Singapore Airlines recorded a net profit of S$360.4 million (HK$2 billion), down by more than 50 per cent on the previous year, but more tellingly it surprised investors with a loss of S$138.3 million (HK$780 million) in the fourth quarter of last year. Meanwhile Cathay Pacific recorded a loss of HK$575 million last year.

Challenged by small populations and limited room for growth in their home markets, both airlines have gone after the transit passenger market, but the growth of Middle East and mainland Chinese airport hubs, built on stronger domestic airlines, has led to intense competition.

Both airlines will definitely emerge stronger
Corrine Png, transport analyst

Corrine Png, chief executive of Singapore-based transport analyst firm Crucial Perspective, said: “As Asia is an increasingly important driver of both carriers’ revenue and growth, Singapore Airlines and Cathay need to have the right business model and cost structure to grow in this region.”

She said both airlines would return to the competitive fold fitter, but concluded that Singapore’s carrier would be the first to bounce back from its restructure.

“Both airlines will definitely emerge stronger as both have good quality and cohesive management with deep airline industry experience as well as supportive board of directors,” she said.

“My vote will go to Singapore Airlines at this point,” she said, as the airline had a stronger financial position, a younger and more fuel efficient fleet of aircraft than Cathay Pacific, and significantly cheaper access to jet fuel for the coming years.

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Reflecting on the overhaul, IATA chief economist Brian Pearce, said “big challenges” remained among competition from budget airlines and on long haul routes. However, reduced competition from the Middle East carriers as they trim expansion was benefiting the region, he said.

Pearce rejected the notion that trouble at some of Asia’s biggest carriers was an indication of wider risks among airlines in the region.