IN FOCUS: Singapore's airline industry appears to be in full flight, but dark clouds lie ahead

SINGAPORE: The greatest challenge in its existence. That was how Singapore Airlines' chief executive Goh Choon Phong described the COVID-19 pandemic in a staff memo in early 2020.

That year, the national carrier, along with other airlines worldwide, was forced into grounding flights, enforcing hefty pay cuts and as a last resort, furloughing employees as the sector was ravaged by a once-in-a-generation event.  

But more than four years on, it would appear that this grave challenge has been met with aplomb.

With demand for air travel roaring back with a vengeance, Singapore’s airline industry - comprising SIA and low-cost carriers Scoot and Jetstar Asia - now sings a different tune.

From experiencing its first full-year loss in history during the pandemic, SIA in May reported a record profit of S$2.68 billion (US$1.99 billion) for the fiscal year ended March 2024. The reward? A bonus of almost eight months' salary for staff.

For Scoot, signs of growth were evident when it received the first two of nine Embraer aircraft in April, with CEO Leslie Thng noting that this “reflects our confidence in the demand for air travel”. 

Jetstar Asia, meanwhile, expects passenger capacity to exceed pre-COVID levels by the end of 2024. A spokesperson told CNA the airline will continue to focus on expanding its network of routes, increasing fleet numbers and recruiting more manpower. 

“We’re excited about what lies ahead,” the spokesperson said. 

But it's not all clear skies.

SIA Group’s financial statement in May gave some clues, pointing to increased competition from other airlines possibly leading to reduced revenue.

“The airline industry continues to face challenges including rising geopolitical tensions, an uncertain macroeconomic climate, supply chain constraints and high inflation in many parts of the world,” the group - which comprises SIA and Scoot - further cautioned. 

Some of these came to bear last month when Scoot cancelled several flights citing a "variety of operational reasons", which included “supply chain issues”. 

Experts added that the loss of skilled manpower during the pandemic could have contributed as well.

SIA also ran into issues of its own when flights to three Chinese cities were suspended in April, which analysts attributed to regulatory issues stemming from Beijing prioritising the recovery of its local airlines.

And so while signs of growth paint an optimistic picture of the industry, they are also a consequence of limited supply - of flights and seats - leading to airlines charging higher prices amid increased demand, said Mr Alan Lim, director of Alton Aviation Consultancy.

“We expect that there will be a reversion to the long-term mean in terms of financial performance,” he added, as other experts warned of a potential erosion of profit.

VYING FOR A PIECE OF PIE

Apart from SIA, Jetstar Asia has also cited strong competition as part of ongoing headwinds.

The contest is especially intense in the Asia-Pacific region, said analysts.

Mr Mayur Patel, head of Asia at aviation data consultancy OAG, pointed to a nearly 60 per cent increase in the number of flight routes operating in Southeast Asia, and a fourfold jump in the number of routes by low-cost airlines since 2011. 

This increased competition should in theory lead to lower fares. But that would also result in declining revenue for airlines, at a time when operating costs are rising in part by trying to add more flights, said Mr Patel.

What all of this means is that airlines could still be pressured to hike ticket prices above pre-pandemic levels. 

In a CNA commentary, aviation analyst Brendan Sobie also said consumers should not expect air fares to return to 2019 levels.

Airlines have little choice but to roll up their sleeves, said Mr Lim from Alton Aviation.

“The key for local airlines now is how to continue sustaining this growth by differentiating themselves from their competitors – be it in terms of network, product, service, or cost competitiveness,” he said. 

“Airlines will need to take this period of strong profitability to optimise their operations and costs and set themselves up right for the next phase of post-pandemic growth.” 

TALENT WAR

Early this year, Hong Kong’s Cathay Pacific Airways drew the ire of customers when it cancelled flights over “chronic staff shortages”. And in April, India’s Vistara Airlines also cut flights due to a lack of pilots and crew.

Singapore's airlines have not been spared from these manpower issues, which were amplified by the pandemic in more ways than one, said experts. 

“The perceived risk of potentially facing unemployment again if a similar situation occurs in the future, as well as the amplified importance of work-life balance due to COVID-19, add additional dimensions to this issue,” said Associate Professor Hsieh Cheng-Hsien from the Singapore University of Social Sciences (SUSS).   

“Duties in the aviation industry, particularly airlines services, are very difficult to be done via work-from-home … it might be a reason some people left the industry during COVID and aren't returning.”

Mr Lim also pointed to other industries jostling for talent.

“The pandemic spurred growth in sectors such as e-commerce, logistics and technology, which have been able to attract workers with the promise of better working conditions, higher wages and more predictable schedules,” he said. 

Former cabin crew from local airlines concurred, telling CNA they'd left the industry due to the uncertainties of COVID-19, and chose not to return having found more stable full-time jobs elsewhere. 

Over the course of the pandemic, many found that they treasured more consistent working hours. 

“After a flight, I got a full-day rest with two nights at home before I went back to fly again, but the timings were not consistent, and it was hard to plan family activities around that,” said one ex-cabin crew, who spoke on the condition of anonymity.

The 30-year-old now works in the education sector.  

Another cabin crew who was formerly from SIA said that among colleagues she knew, about 60 per cent left the industry for good during or after the pandemic.

But she has also heard from those still with the airline that SIA has had no trouble attracting new hires. Experts said, however, that not all carriers have the same pull as SIA, with its reputation and offer of competitive salaries and benefits.

Then there is the matter of training for crew and pilots, which is no straightforward task.

Former cabin crew told CNA they had to undergo four months of training before going on flight duty. “On-the-job” training, as found in other service industries, does not exist in their line of work.

“(Training) is not just about customer service, but also safety, which encompasses a lot of things, such as knowing where the exits are, knowing the protocols in order to react quickly in an emergency,” said the 30-year-old former cabin crew. 

He pointed to the efforts of cabin crew in the turbulence-stricken SQ321 as an example of the complex and high-pressure nature of the role. 

For others such as pilots and technicians, training can take years to complete, which creates a “substantial lag” in the supply of manpower relative to its demand, said Mr Lim, the analyst.

“The combined effect of these factors has created a significant manpower challenge for the aviation sector, making it difficult to replenish the workforce to pre-pandemic levels and meet the increasing demand for air travel and related services." 

Jetstar Asia said it has recruited more than 90 new employees, comprising mostly pilot and cabin crew, over the past six months.

“We’re holding local recruitment drives, and partnering with local and overseas institutions to attract new talent,” the spokesperson added. 

"CASCADING" SUPPLY CHAIN WOES 

On Tuesday, International Air Transport Association (IATA) director-general Willie Walsh said global supply chain issues affecting the delivery of new aircraft could well persist into 2026. 

The issue is two-pronged, according to analysts. First is the increased demand for spare parts, with many planes left idle during the pandemic and needing maintenance. 

To reduce costs at the time, airlines retired and parked older aircraft. There is now a pressing need to reactivate some of these, but a lack of parts stands in the way, said Mr Alfred Chua, Asia air transport editor at trade publication FlightGlobal.

“Without certain parts or systems, an aircraft might not be able to return to flying… This has also been compounded by a manpower shortfall in the aerospace sector post-COVID, which means there are fewer hands available,” he said. 

Second is the issue of supply bottlenecks, with many airlines vying for new planes.

Aviation expert Shantanu Gangakhedkar, a senior consultant at growth advisory firm Frost and Sullivan, said aircraft deliveries are not made willy-nilly, with orders placed as far as 10 to 15 years in advance.

With the pandemic disrupting production, there now exists huge backlogs of orders which need to be fulfilled before new ones can be made. 

Analysts described the supply chain for aircraft maintenance and production as complicated and sensitive to even the slightest disruptions. 

“The reactivation of parked aircraft and the fulfillment of new aircraft orders are gradual processes, and any delays in one part of the supply chain can have cascading effects throughout the industry,” said Mr Lim. 

“While manufacturers and suppliers are ramping up production to address the backlog, the complex nature of the aviation supply chain, which involves numerous specialised components from various global suppliers, means that resolving these issues will take time.” 

Safety issues with US aerospace firm Boeing have also added a spanner in the works, with production of its popular 737 MAX aircraft now capped and thus further limiting an already-tight supply.

COST AND BENEFIT

Another potential hurdle for airlines would be an increased emphasis on using sustainable aviation fuel (SAF). 

Singapore has taken the lead on the push towards the eco-friendly alternative, mandating that all departing flights use SAF from 2026. 

Last month, SIA and Scoot signed an agreement to purchase oil refinery Neste's Singapore-made sustainable fuel at Changi Airport.

Singapore is also the first country to impose a sustainable fuel levy - meaning that passengers can expect to pay more for their air tickets.

SAF is about two to four times costlier than conventional fuel, and getting a steady supply is the main challenge, said analysts.

Despite Singapore having the largest SAF plant in the world in Neste, it's still not enough to fulfil the demand that's expected to ramp up in the coming years, said Mr Shantanu from Frost and Sullivan. 

“The industry needs to see how supply can be increased further, such as through in-house production, purchasing from other regions."

Amid the raft of mounting challenges, opportunities do lie ahead for the airline industry, such as in the increased adoption and innovation in tech and artificial intelligence (AI).

Reports have pointed to AI possibly playing a key role in improving flight operations and safety, customer service, baggage handling and even maintenance and repairs. 

In November last year, Changi Airport Group began trialling AI-based screening of passenger baggage, to help speed up the process and for better security. 

These innovations are a bright spark in the industry and can help improve passenger experience, manpower issues as well as overall operations and safety, said Mr Shantanu.

Analysts concluded that as Southeast Asia develops and becomes more attractive to tourists, Singapore stands to gain as a hub providing connections and transit options.

And with a strong aviation hub, local airlines in turn stand to benefit.

"Many travellers are choosing SIA for long-haul routes, such as from Europe to Singapore," said Mr Shantanu. "And then they have an option to choose Scoot and Jetstar Asia as a low-cost carrier to continue their journey to other parts of Asia."