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SIA Seeks Regional Tie-ups to Drive Growth

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by Ernie B. Calucag

Singapore Airlines (SIA) said Thursday that it is looking at exploring regional partnerships, particularly in India and China, to drive its growth going forward.

The airline posted its first quarterly loss in more than two years on Wednesday, hammered by rising fuel costs and slower demand and increasing competition on long-haul routes.

SIA’s profit slumped 69 per cent year-on-year to S$336.0 million. It also recorded a net loss of S$38.2 million in the fourth quarter, only the third quarterly loss in its history.

“The results highlight SIA’s lack of pricing power and erosion of brand value,” brokerage UOB KayHian said in a report. “The decline in yields appears to indicate that the brand differentiation that SIA has enjoyed has finally eroded.”

The SINGAPOREworld’s No.2 carrier by market value, which has promoted itself as a prestigious global airline over the years, said it is high time to focus on the network of Asian cities served by its regional arm SilkAir.

“SilkAir is very much part of SIA, and we have to leverage SIA’s long haul (network) to connect into SilkAir’s regional routes,” said SIA’s Chief Executive Goh Choon Phong.

SilkAir’s network of cities, which include Xiamen, Bangalore and Koh Samui, would strengthen connections for customers and encourage them to choose the SIA group for their entire trip instead of hopping onto budget carriers, Goh added.

SilkAir contributed S$105.0 million to the SIA group’s operating profit of S$286.0 million in FY2012, that was eroded by a loss of S$119.0 million from its cargo operations.

SIA shares fell 2.8 per cent on Thursday to reach its four-month low of S$10.29 each.