ABTN speaks to Joey Seow, Singapore Airlines' outgoing general manager for the UK and Ireland, about why air travel should not be treated as a commodity, what he thinks about APD, and about future plans for the A380.
Seow has been promoted to vice president of partnerships, and is to be replaced by Phee Teik Yeoh.
How is business in the UK?
We counted that we have been 25 years in Manchester and 40 years in London, so we are no Spring chicken. Having been in the UK for a while, we have done well with the help of the trade and our customers.
Whenever you talk about coming out of the recession, you reach the conclusion that the worst is over, and that’s true. Compared to the depths of 2008/9, particularly after the collapse of Lehman Brothers, we were plunged – not just in the UK but globally – into financial crisis. Banks were tottering. Since then I think there has been a fair bit of turnaround. And that is evident in the business side, with corporate travel.
Business is reverting towards normality. I think on the leisure side it is a little bit more tentative. The worst is over still. We see stronger bookings, but we find that people are not as eager to commit as they were before. January has traditionally been the main booking month. Of late we’ve noticed that the booking window is becoming shorter than before.
We see that that is probably a sign that people are not willing to commit long-term, for the moment, which means they probably have some concerns, possibly because of higher VAT, higher inflation and fears over job losses. That imposes a sort of wet blanket on people committing to their holiday plans.
Is there is still some nervousness around business travel?
No, more for leisure. I think business travel has come back a fair bit, compared to when the banks were tottering.
Is Singapore Airlines back at 2008 levels?
I think we are close to, but we are not there yet.
That’s on the demand side. On the supply side, of late, there are concerns around the high fuel prices. The problems in the Middle East and North Africa haven’t helped.
Whilst the worst is over, we are not out of the woods – I think that is generally the concern.
Singapore Airlines has recently cut its all-business class flights to Los Angeles from seven per week to five per week. Is this partly down to fuel prices? It is a very long fuel-intensive flight.
With such high fuel prices we need to review and monitor which routes can be maintained. We continually review our operations. In fact we are trying to put a lot more capacity into higher demand from the BRIC countries – Brazil, Russia, India and China – where demand is a lot stronger.
Global growth is quite sporadic. We find that in Europe as well as in the US growth is a little bit more patchy, whereas in Asia growth rates are considerably higher.
When you say patchy, do you mean in terms of different countries growing at different rates?
And also in terms of timings – some months are better than others?
For example, in the case of Europe we see that Germany is powering along and Portugal is asking for a bail out. You have two extremes, but they are all in the Euro zone. So it is patchy in that different countries have different growth rates.
Likewise in the UK, one month we have growth, and the next there is a dip.
In Europe it is not going in a straight line for all countries, but in the case of Asia growth has been considerably stronger and more well sustained. As a result we are putting more capacity into where there is greater demand.
With the BRIC countries, India and China is logical for us because it is in Asia. We have added capacity into Russia, from fives times weekly to daily, and from the start of the summer schedule this year we have introduced a new service into Brazil. We now cover the main continents of the world: Australasia, Asia, Africa, Europe, North America and South America.
We wish to continue to ensure that we have appropriate growth and extend our network coverage. Not many carriers serve all the main continents around the world. Many don’t serve Australia, for example. We’re trying to extend our reach to the various continents, whilst focusing on markets where there is stronger demand.
How has the new Brazil route been performing?
It goes Singapore – Barcelona – Sao Paolo. It’s encouraging. It’s virgin territory for us, to start off with, but with the strong economy in Brazil we expect to do quite well. At the moment no other south-east Asian carrier flies to Brazil, so we think that we can better connect the two.
We fly three times a week into Sao Paolo, and watch this space. If demand goes well, do not be surprised if capacity goes up.
And India – which cities are looking for growth?
I think the main metros are served by us – Bombay, Madras, Delhi and Calcutta. We also have our subsidiary called Silkair which also serves secondary markets.
In the case of Singapore Airlines the smallest aeroplane that we fly is the B777. We actually have Silkair fly A320s. So on the smaller short hops we work with Silkair. They are our regional arm and they serve some of the smaller secondary destinations, which are better served with a smaller plane. So we continue to grow as well as in China.
In China, Singapore Airlines flies to Beijing, Shanghai and Canton. Silkair flies to secondary cities Chinese destinations which are not the main metros. That enables us to have more frequencies.
There is stronger growth and higher demand in the Asia Pacific area, so we want to put capacity growth in those areas where there is greater demand.
However, in the case of the UK we have also ear-marked it for growth, because the worst is over. From Manchester, via Munich, to Singapore we upped our frequency last year from five times weekly to daily. At the moment at Heathrow we are serving it three times a day, of which two are operated using the A380. And we have one, which is a B777-300. Do not be surprised if we have three A380s out of London in the future. We expect to see that by the end of the year.
Would you also like to grow at Manchester? A number of Middle East airlines have recently expanded there.
We continue to monitor the market situation to see if it can take further capacity, before putting it in. I think that is the logical situation, rather than operating in a vaccuum not knowing what your competitors are doing. As an airline we need to better match demand and supply.
Careful management is ever more important, especially with high oil prices...
Correct. It’s not just putting in capacity because we have planes and we need to put them somewhere. We are trying to match demand and supply. That is a good sustainable way of operating.
Would you say it is fair to say the aviation industry has operated irresponsibly in the past?
I cannot speak for other airlines as to why they put their planes on which routes, but what I can say is when we put on a route we will match supply and demand. We review as to whether the route can continue to grow, factoring in the competitive elements. If the market is weak, during the period of SARS for example or the global financial crisis, we reduce our frequencies, and when demand has come back we’ve added in capacity. That has been a succesful strategy.
When do you think you might look to expand out of Manchester?
We don’t have a fixed deadline. Perhaps because of the massive order of aircraft that the Gulf carriers have, they may need to look where to put their planes. Because of that situation we are under pressure to look for a place to put in capacity, so what we typically do is – not just for Manchester but for all our services – we are on the look-out to add in capacity where demand is stronger and where demand is weak we have scaled back.
In terms of the Heathrow flight, the night-time flight is always busy. Might you consider adding a second evening flight, given it has high demand?
Having greater access to Heathrow is one of our objectives. Certainly the difficulty is getting slots. If we could have another flight that arrives early in the morning we would. We have heard that from many of our customers as well. Of course, unlike the previous Labour government which was for the third runway, which would have introduced some capacity, the current coalition government has indicated that there will be no third runway. We hope that the government in reviewing its strategy for the South East would factor some of these comments in. There is greater need for increased demand for London. I think if more of such feedback gets into the ears of our leaders and decision makers we would probably help our industry better.
Does Singapore Airlines plan to introduce A380 aircraft into more destinations in Europe?
At the moment two A380s a day serve London, and we serve Zurich and Paris with the aircraft. The logical step would be to make it three a day so all our flights from London are with the A380. Also, do not be surprised if it goes to Germany.
Yes. Particularly since Germany is the power house of Europe.
Is there a timescale?
We are actually waiting on Airbus for the delivery of our A380s. Do not be surprised if it happens within the next two years or so.
What are the plans for the fleet overall?
We already have 11 A380s in service. We expect to get our 12th in the next few months. The moment it is delivered we will put it into service. Do not be surprised of the A380 goes onto the London service. Watch this space. We will be looking forward to putting that onto Heathrow. Feedback from our customers is that they like our A380. Not all A380s are the same. Our A380 product is quite revolutionary. For example, in business class we have four seats in a row, so every seat is an aisle seat, meaning you don't have to climb over somebody.
How are corporate negotiations at present?
There are two parts to it. And I'm glad we're having this discussion, because when we talk to corporate travel managers, often they try to commodotise our product. So a corporate is looking at a flight from London to Singapore, and comparing different airlines in a spreadsheet. One airline is £X and another airlines is £Y. As a result products are commodotised, which is not very fair because they may not be aware of the product. Four-abreast business class is not the same as seven-abreast, because seven-abreast you have more seats, which means that you can charge less because you are squeezing more people in. The experience is not the same as flying four-abreast. But when you put it into a spreadsheet, then it commodotises it. That's where I think we play a role, to educate and to help corporate travel managers better explain and justify to their clients why there are disparities.
The second part is that in terms of the negotiations. Compared to three years when people were downgrading and had to walk the talk, companies, even for long haul travel, were travelling in economy not business as they had before. Because their businesses have now turned a corner, many of them are now returning to business class. It's a broad sweep, and I hate to generalise, but some are still price sensitive. They go for the best fare of the day. Others are prepared to pay for the product. I think some corporates have begun to accept that, which two years ago in terms of the financial crisis when they were supposed to be saving every penny is a change. The landscape is changing again. People are now travelling more in the premium cabins, and are prepared to pay more for the better product.
What are your thoughts on the coming year?
I am an eternal optimist. I suppose coming out of the recession, the only way is up. Of course it may not be a straight line, out of the UK. There is talk that at some point interest rates will go up and in so doing sterling will go up in value. That will help our industry. Already in Asia growth rates are higher and we hope the federal reserve, as well as the Bank of England, will manage the economy well enough so we remain on the path to growth. Last year there was considerable talk of a double-dip recession. We don't hear that any more. There is anecdotal evidence that global recovery is on track, so that would help us on the demand side. The supply side is a little bit more of a question mark, because of the high oil prices.
In terms of the industry, because the global recovery is on track, particularly in the case of corporate travel, demand is there. Many companies have restructured. The first thing they do is cut costs to reduce expense. The next step will be to grow revenues, and in order to do that they have to get new business, and they have to travel. We are beginning to see that. We hope this will gather momentum, and as it does this year will be better than the last. Last year we had all kinds of things thrown at us, from ash to snow, and we hope this year will be more settled.
What are your thoughts on aviation's entry into the EU Emissions Trading Scheme (ETS), which comes into force next year, likely in addition to Air Passenger Duty?
We think that people should not be paying twice for the same tax. If it is a green tax, then if EU ETS comes about we expect APD to be removed. At the same time we think there should be a global scheme – you have an EU trading, and then you could have an American system, then an Australian and African system. There is some talk of an Asian scheme, but not to where the European Commission has got it. I think in our industry where we operate on very thin margins, compliance costs need to be kept to a minimum. Ideally we want to have a global standard. We have proposed that the International Civil Aviation Organisation champion a global framework, so that all countries and all airlines can go on the same platform.