SIA needs to be mindful of capacity cuts with EU obligation

It has been cutting capacity across the globe due to drop in passenger volumes.

Singapore Airlines (SIA) will have to be mindful about cutting capacity as the European Union (EU) is not waiving airlines’ obligation to fly at least 80% of its slots to keep their rights to use the same slots in the next Northern Winter or Northern Summer season, according to a CGS-CIMB report.

Meanwhile, China has already waived this obligation temporarily.

The group has been addressing its drop in passenger volumes by cutting capacity. The first wave of cuts were related to Chinese routes in early February, with cuts implemented for Scoot, SIA and SilkAir. Scoot, in particular, cancelled all of its flights to China.

The full-service carriers (FSCs) still maintain their core flights to the key cities in China where there are large populations of Singaporeans.

The second wave of network adjustments concentrated on Northeast Asia and Southeast Asia routes, with services maintained in all those cities at lower frequencies. The third wave of cuts was to the US, Europe, Southwest Pacific and Southeast Asia, as Covid-19 spread globally.

Despite capacity cuts, passenger loads and yields are still lower on a YoY basis, and forward bookings still continue to fall and have not yet bottomed out, in SIA’s view.

The available seat kilometers (ASK) for SIA and SilkAir combined fell 12% YoY in March and 15-16% lower against the original planned schedule. Scoot’s capacity has been cut 35-40% against its original plan, as China flights made up 25-26% of its total capacity.