‘Operating costs are pretty high in India’

Singapore Airlines surprised its investors by reporting a net loss in the March 2017 quarter, while full-year profit halved from its numbers in FY16. In an interview with BusinessLine , David Lim, General Manager – India, Singapore Airlines, speaks about Singapore’s national carrier’s commitment to the Indian market, despite the tough times that the parent company is facing, and the changes he’d like to see in the domestic aviation scene. Excerpts:

It’s been a difficult quarter for Singapore Airlines. Does this change strategy for markets like India?

With fares falling rapidly, yields are falling for airlines and all airlines are suffering. But we are prepared for competition and for yields to continue to be under pressure. We are working on managing costs better and in recent years, we have been helped by fuel prices coming down. But it’s a difficult time for the aviation business in general. But our East-bound market is continuing to grow. Also, if you look at our financial results, we have also mentioned that we’re going into the next phase. With our portfolio size, we are able to right-size our aircraft. We’re seeing some of this (in other markets). We (Singapore Airlines) used to fly to Hangzhou in China, and we were flying to Jeddah for Haj pilgrims; now we’ve passed on both to Scoot (the low-budget division of Singapore Airlines). Between the four airlines — Singapore Airlines, SilkAir, Scoot and Tigerair — we’re able to right-size the product.

Are you considering making further investments in India?

No further investments for now. We’ve increased, over the last 4-5 months, the number of services we offer, we’re flying more to Ahmedabad since that market has grown.

During peak periods, we are also increasing flights in sectors where there is demand. In September, during Durga Puja, we increase flights to Kolkata, and of course during Diwali.

For the group, it’s 150 services a week covering 15 destinations in India, that’s a lot. I think it’s the second biggest for us after China. We also have Vistara here, and they will expand their network.

Vistara is likely to start international flights next year. What synergies do you foresee?

Most of these synergies will be from Delhi and Mumbai, which we can use as a connecting hub. But first and foremost, Vistara wants to bring a new flying experience to Indian travellers. We will codeshare with Vistara but the rest is up to Vistara’s management. They will map out their strategy. But I think as an airline, Vistara recognises its heritage as being part of the Singapore Airlines and the Tata group.

So what can India look forward to?

We’re launching our Airbus A350 – the newest aircraft in our fleet – in Mumbai on July 1 and replacing the Boeing B777-200R. We currently have 17 flights to Mumbai a week. By the end of this year, our configurations will also change.

We have 19 A380s on the fleet and we’re taking delivery of another five. We’ll also be retro-fitting the older ones.

So there are new products to look forward to. Once the merger of Scoot and Tigerair is complete by late July, we will be able to right-size the product portfolio for the eight destinations that this flies to in India.

Some of the world’s largest airlines are now saying that the future is in unbundling services and charging customers separately for every service. For instance, allowing economy passengers to pay for lounge access at an airport. Do you agree?

I think the trend is that customers want to only pay for things they enjoy. So far we don’t unbundle. It makes sense as strategy for the industry but we have to tread very carefully. We are a full-service premium airline and the lines are becoming grey between full-service and low-cost, but there are basic services we will always provide. There might be some parts that we can unbundle to provide more revenue. We’ve been refining our priority passenger service club, we’re charging for preferred seats on days of high demand.

But the basic product must be there; we won’t charge for meals, or the in-flight entertainment. The lounge is sacred for us and the problem is that if we allow people to buy access, we will worry about its exclusivity.

It’s been a year since you took over India operations for Singapore Airlines. What change would you like to see in the domestic aviation scene?

I think the new civil aviation policy that was drafted and published last year was favourable; infrastructure, airports are improving. The new regional connectivity scheme is good for the aviation industry. But the operating costs are pretty high in India, especially with taxes. It’s among the highest in our network. In India, every year you see a lot of escalation in costs, in office space, contract rates go up in parking, ground handling, lounge costs etc. The government as a whole is trying to cap inflation in airline operating costs, so in a sense, we’re counting our blessings.

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