Following Singapore Airlines (SIA; SGX: C6L) CEO’s promise to make a “bold” move to ensure the company’s “long-term viability”, it was recently reported that SIA is cutting jobs. It shouldn’t come as a surprise.
Budget airlines have been an increasingly popular choice for travellers, especially for short-distance trips. SIA’s recent results showed an increase of almost 60 percent in net profit from its budget carriers, Scoot and Tiger.
Even with such a stellar performance from Scoot and Tiger, SIA still reported a $138-million loss for the fourth quarter, a clear indication that SIA’s management should make some reforms in the company. SIA’s CEO Goh Choon Phong haven’t mentioned a specific number of jobs yet, though.
Of course, SIA is not the only premium carrier facing problems in the disrupted airline landscape. Hong Kong rival Cathay Pacific Airways Limited (HKG: 0293) reportedly cut 600 jobs “as part of the biggest business revamp in two decades as it slipped into a loss for the first time in eight years.”
A step in the right direction?
Now that comparison apps and websites such as Skyscanner and Expedia made the aviation industry ever more competitive in terms of prices, perks and loyalty points, is it a step in the right direction for SIA? It is still too early to tell but it is apparent budget airlines would be the main contributor to SIA’s bottom line in the years to come.
SIA’s share price recovered slightly to barely $10 a share when we previously discussed the premium air travel service just two weeks ago, only to drop back below $10.
Read related: Will SIA CEO’s “Bold Move” Save It From Further Losses?
According to Bloomberg, SIA saw a 3.4-percent rise in share price year-to-date, trailing way behind the Bloomberg Asia Pacific Airlines Index, which returned 21 percent over the same period.
Whether SIA can climb back to the previous $12.65 per share mark 2.5 years ago will depend heavily on CEO Goh’s “bold moves” to steer the company back to long-term and sustainable profitability.
In the meantime, we should expect more deals to nearby countries in the Asia-Pacific region or hopefully, lucky enough to have another Norwegian budget airline’s London deal again.