Things have been difficult for all businesses. Yet, the travel industry appears especially beaten and bruised by the pandemic.
For countries fortunate enough to span such expanse that they contain multiple time zones within themselves, domestic travelling might have saved their airlines from the worst.
Not in Singapore, though. You know what I mean, right? But rumour has it they’re still going to try and promote domestic flights anyway.
Nonetheless, this is why experts warn of more retrenchments from SIA.
Retrenchment Announced Earlier This Week
SIA had announced a drastic retrenchment of 9% of their workforce earlier this week.
2,400 employees from across the group’s 20 subsidiaries, including Scoot and SilkAir, failed to make the cut.
Compared to the hundreds of layoffs during the 2003 SARS crisis, the scale of the retrenchment has increased considerably.
But that might just be the beginning.
Analysts Expect More Layoffs
Aviation analyst Shukor Yusof, who is also the founder of Endau Analytics, thinks we haven’t seen the end of it.
“I expect more job losses, unfortunately, as I don’t see SIA able to sustain employees when its market has shrunk considerably, and will likely shrink even further in the coming months and years,” he said.
SIA had originally planned to cut about 4,300 positions, but reduced the figure by about half after factoring in a recruitment freeze, natural attrition and voluntary departure schemes.
According to Professor Jochen Wirtz, the vice dean of graduate studies at the National University of Singapore Business School, payroll and fuel expenses account for about 60% of airline expenditures.
There’s, of course, no need to pay for fuel anymore unless people in SIA bath in fuel, but payroll will still come in.
Referring to more layoffs, Mr Shukor added: “It does help financially – every cent counts in this business – but won’t suffice to save the airline from further losses.
“We are yet to see the bottom in the aviation industry. Next year will likely bring unspeakable damage to many airlines.”
After all, remember: the industry might only fully recover by 2024.
SIA Performance Taken A Devastating Hit
CEO Goh Choon Phong revealed a “catastrophic” 99.5% decline in the airline’s passenger carriage in the first quarter of this financial year.
In contrast to pre-pandemic levels, the capacity in operation is currently at 8%. It is expected to be less than 50% at the end of the financial year, so there’s still not much improvement.
The group strategizes with a smaller fleet for a reduced network for the coming years, noting their “vulnerable position” without a domestic market that will be first to recover.
The consensus is shared by other analysts, who recommend a review on unprofitable sectors and business model.
“My guess is that Scoot will grow a lot faster, simply because the tourism market will recover faster than business travel,” opined Prof Wirtz, suggesting SIA to appeal to the higher end of leisure travellers.
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