Singapore Air Slashes Freighter Capacity By 20% As Demand Slumps

Manila Bulletin
February 25, 2012
by: Jasmine Wang and Kyunghee Park (BLOOMBERG)

Singapore Airlines Ltd., the world's second-biggest carrier by market value, cut freighter capacity by 20 percent because of slumping demand and higher fuel prices.

The cuts took effect recently and will continue into the next operating season, which starts in late March, the carrier said in a statement yesterday. The reductions mainly affect long-haul routes, it said without elaboration.

The airline, which has a fleet of 13 Boeing Co. 747-400 freighters, is paring services as the European debt cisis saps demand for electronics, auto parts and other goods made in China. The carrier filled 58.5 percent of cargo space last month, the lowest amount since April 2009, according to data compiled by Boomberg.

"It's good to see excess capacity being removed from the sector," said Robert Bruce, head of Singapore research at CLSA Ltd., Still, it "can be turned on again very quickly" as the carrier isn't parking or retiring planes, he said

The airline, which generates about 20 percent of sales from freight, had a $40 million ($32 million) operating loss in its cargo unit in the quarter ended December. The unit filled 64.7 percent of capacity in the quarter, compared with the 69.2 percent needed to cover its costs.

The break-even target was 8 percentage points higher than a year earlier because of lower rates and higher fuel costs, the airline said in a Feb. 2 statement. The price of jet fuel has jumped 9.1 percent in the past year in Singapore trading.

  "The depressed demand that we are seeing across all markets gives us little reason to be optimistic about the near-term outlook," SIA Cargo President Tan Kai Ping said in yesterday's announcement. The carrier doesn't expect any improvement in the first half, he said.

  Singapore Air fell 0.6 percent to S$10.94 at close in Singapore yesterday before the announcement. It has slumped 22 percent in the past year. Cathay Pacific Airways Ltd., has fallen 15 percent Hong Kong.

  Cathay, the largest international air-cargo carrier, has been "cutting capacity aggressively" on North America and European routes, it said this month. The carrier expects the cargo slump to extend into the second half, Chief Execusive Officer John Slosar said Feb. 13.