SINGAPORE: Singapore Airlines (SIA) said on Friday (May 17) that SilkAir’s order for 31 Boeing 737 MAX planes remains “intact”, despite two deadly air crashes involving the aircraft.
SilkAir, SIA’s regional arm, operated six 737 MAX jets before they were grounded in March following the crashes in Ethiopia and Indonesia.
However, SIA chief executive Goh Choon Phong said SilkAir would only resume 737 MAX flights after the aircraft is certified safe not just by Singapore, but by aviation authorities of countries that SilkAir flies to.
Speaking to investors and the media following the release of its annual financial results, Mr Goh also said SIA will pay “close attention” to the developments of the 737 MAX software update.
Boeing said on Thursday that it completed a software update on the 737 MAX.
The proposed fix, which addresses a problem with a flight handling system thought to be a factor in both the Lion Air and Ethiopian Airlines crashes, must now win approval from US and international regulators before the planes can return to service.
SilkAir had previously planned to transfer 14 737 MAX 8s to low-cost unit Scoot, but the grounding of the aircraft has since put those plans on hold.
Along with the Rolls Royce Trent 1000 TEN engine issues troubling Scoot, SIA said that the 737 MAX grounding has resulted in a capacity shortfall at SilkAir and Scoot.
SCOOT TO LEASE 10 TO 12 A320s TO MEET CAPACITY SHORTFALL
To mitigate this, SIA is looking at expanding Scoot's fleet by leasing between 10 and 12 Airbus A320s, said SIA's senior vice-president of finance Stephen Barnes. The planes will be leased over the next two financial years.
The group is also looking to extend the leases of several of its aircraft to accommodate the shortfall.
FlightGlobal's Asia managing editor Greg Waldron told CNA that leasing aircraft in the short-term helps the SIA group stay nimble.
"By leasing aircraft, it just gives them the flexibility. Once the (737) MAX situation starts to clarify, then they can send these A320s that they are going to lease back to their owners."
Across the group, capacity is expected to grow a net 6 per cent in its 2019/2020 financial year, SIA said.
The group expects the parent airline and Scoot to grow capacity by 7 per cent each, while SilkAir is projected to see a 3 per cent fall in capacity.
SILKAIR INTEGRATION INTO SIA "ON TRACK", BUT HEADWINDS LINGER
On the integration of SilkAir into SIA, Mr Goh said that the carrier's 2020 target is still "on track". The integration is part of SIA's three-year transformation programme, which started in 2018.
SIA added that both SilkAir and its websites, as well as mobile apps have already been integrated. The Star Alliance carrier said that it will also "ensure that products and services continue to lead the industry across short, medium and long-haul routes".
Mr Waldron said that apart from working on streamlining its business operations, SIA could have to contend with possible fuel price hikes and other geopolitical factors.
"Should fuel prices continue to rise, of if there's other issues - particularly with the (US-China) trade war could definitely hurt SIA's (future earnings), but similarly it will hurt other airlines as well. These are global issues," he said.
"The 737 MAX issue will become increasingly important because this is a big part of the SIA strategy and how this plays out. The longer this situation lasts, the more inconvenient it is for SIA that have bought the MAX, as well as other customers of the MAX."