SIA’s aggressive new game plan might be too little, too late: analyst

Challenges are plenty in a cutthroat market.

The national carrier’s aggressive new growth strategy might be too little and too late, according to a report by Maybank Kim Eng analyst Mohshin Aziz.

“We have reservations on many of its new business plans as we think SIA is late in the market and its challenges are aplenty,” Aziz said.

Although SIA’s new premium economy service stands a good chance of succeeding, he cautioned that the group will have to endure a 12-18 month gestation period before it begins to contribute positively to the group’s bottomline.

In terms of SIA’s plans to expand its route network, Aziz warned that its Thai and Indian multi-hub strategy will run into several headwinds.

“Bangkok is a competitive hub and the North Asian routes that NokScoot plans to fly to - Bangkok to Seoul, Tokyo and Osaka - are overcrowded. Vistara Air should be loss-making in the foreseeable future due to high costs and cumbersome regulations in India. There are media murmurs that the Indian government wants to reform its aviation industry, though nothing is tangible for now,” he noted.

Aziz also noted that SIA’s plans to generate new revenue streams sounds identical to the rhetoric of low-cost carriers Air Asia and Tigerair.

“We do not doubt SIA’s capabilities but we think it is very late to the market and things have become very challenging. Some of the businesses like advertisements and aircraft simulator training have become overcrowded and commoditised. There has been aircraft simulator surplus capacity in Malaysia, Thailand, the Philippines and China since 2013-14. This has hurt hourly rates for third-party simulator training,” he stated.