Singapore Airlines Group Review Part 1 - SIA has grown its Australia traffic by 50% in five years; launch of Scoot has not impacted parent airline’s performance or growth

19 April, 2017

The Singapore Airlines (SIA) Group has grown its passenger traffic to and from Australia by 50% over the last five years. SIA the parent airline has grown by 21% while new long haul LCC subsidiary Scoot has accounted for most of the remaining growth.

The SIA Group carried 3.803 million passengers to and from Australia in 2016, according to BITRE data. This includes 3.063 million passengers for the parent airline, 651,000 passengers for Scoot and 89,000 passengers for full service regional subsidiary SilkAir.

Scoot and SilkAir both began serving Australia in 2012. Scoot now serves four destinations in Australia (Gold Coast, Melbourne, Perth and Sydney) while SilkAir serves two (Cairns and Darwin.)

SIA operates alongside Scoot in Melbourne, Perth and Sydney. SIA also serves Brisbane - which is only 100km north of Gold Coast - Adelaide and Canberra.

The launch and expansion of Scoot in Australia has not cannibalised SIA's Australia business. Even though Scoot's 787 can frequently be found queueing for takeoff at the end of the runway in Sydney right behind an SIA A380, SIA has continued to grow in Australia over the last five years, adding capacity on the routes shared with Scoot and its other destinations. This indicates the group's strategy of using Scoot to cater to another segment of the market and accelerate growth without impacting the full-service brand has succeeded.

SIA's Australia traffic has grown by 21% since 2011, the last full year it operated as the only SIA Group brand serving Australia (Singapore-based short haul LCC Tigerair served Perth in 2011 but at the time Tigerair was not considered part of the SIA Group as it was only partially owned by SIA. Tigerair is now fully owned by SIA but dropped Perth prior to SIA taking control and majority ownership).

SIA also has been able to improve its load factor in Australia over the last five years, despite adding capacity and launching Scoot. SIA's average seat load factor on Australia routes was 82.5% in 2016. This represents a 3.2ppts improvement compared to the 79% load factor achieved in 2012.

Singapore Airlines annual passenger traffic and seat load factor on Australia routes: 2006 to 2016

Source: CAPA - Centre for Aviation & BITRE

SIA passenger traffic to and from Australia has increased every year since 2009, when there was an 8% decline as demand softened due to the global financial crisis. SIA also reduced its Australia capacity in 2009.

The parent airline has since increased Australia capacity every year except 2015, when there was a small decline - but traffic was up due to a 6.1ppts improvement in load factor. In 2016, SIA's seat capacity to Australia was up 5% to a record 3.715 million seats.

SIA's seat capacity to Australia is further increasing in 2017, which should lead to further passenger traffic growth. As Blue Swan Daily previously reported, SIA will have a record level of capacity in the Australian market in Aug-2017. The latest capacity increases include three more frequencies to Melbourne from Jul-2017 for a total 31 and four more frequencies to Brisbane from Aug-2017 for a total of 28.

See related report: Singapore Airlines continues Australia expansion, reaching record capacity levels in Aug-2017

In 2016, SIA added three weekly frequencies to Brisbane and launched four weekly flights to Canberra. The Canberra flights continue onto Wellington in New Zealand.

The new Canberra flights, which were launched in Sep-2016, accounted for less than 24,000 passengers and less than 1% of SIA's total Australia traffic in 2016. SIA carried nearly 15,400 passengers between Canberra and Singapore in 2016 and nearly 8,400 passengers between Canberra and Wellington, according to BITRE data.

The new Canberra flights will have a bigger impact on SIA's Australia traffic in 2017 due to the full year impact. However, Canberra is still a relatively small niche destination for SIA. In comparison SIA currently has 35 weekly flights to Sydney, which rises to 42 weekly flights when including Scoot . The group will have 36 weekly flights to Melbourne from Jul-2017 and 35 weekly flights to Perth, when also including the Scoot flights in these markets.

The SIA Group will have nearly 160 weekly flights to and from Australia in Aug-2017 - more than any other foreign airline group. The group should surpass 4 million passengers in the Australian market in 2017, a notable achievement given that the population of Singapore is under 6 million - although the nature of Australia's international markets is such that the next largest foreign airline is Emirates, from a population of only 9 million.