MIAMI — Singapore-based regional airline, Silk Air (MI), will go through what its mother company, Singapore Airlines (SQ) calls, a significant investment program.
The program includes a capital injection of over $100 million, aiming to merge the regional carrier into Singapore Airlines once the program is completed.
Launched in 1989 as Tradewinds with the goal of serving holiday passengers in the southeast Asia region, was renamed SilkAir in 1992.
The carrier evolved from a small regional carrier to a full-service airline under the watch of Singapore Airlines.
Today, SilkAir operates a fleet of three Airbus A319s, nine A320s, 17 Boeing 737-800s, and five 737 MAX 8s.
The airline aims to become an all-Boeing 737 operator as the Airbus fleet begins to phase out.
SilkAir currently flies to 49 destinations in 16 countries within the Asian region.
The initial goal of SilkAir’s investment program involves fitting its 34 planes with lie-flat seats in Business Class, as well as with SQ’s award-winning in-flight entertainment system.
According to SQ, all cabin upgrades should begin in 2020, due to “lead times required by seat suppliers.”
Singapore Airlines expects the merger with SilkAir to be completed once “a sufficient number of aircraft have been fitted with the new cabin products.”
Although this merger will strengthen Singapore Airlines’ network and product offering, it will mark the end of an airline that’s been soaring the Asian skies for more than 20 years.
A Transformation Program
“Singapore Airlines is one year into our three-year Transformation Programme,” said SQ’s CEO, Goh Choon Phong.
Phong pointed out that the SilkAir brand is not as well known in Europe as it is in Asia. Therefore, by merging with its parent airline, leverage will develop exponentially.
“It will be positive for our customers,” the CEO said. “SilkAir has always played a critical role for Singapore Airlines as a regional feeder. Even with the merger, it won’t detract from that role,” he added.
“However, we believe that with the merger and one single brand, it will make it much easier for customers to understand that both narrow body and wide body (planes) belong to the same organization and brand.”
According to Goh Choon Phong, both carriers will freely transfer routes and aircraft, looking to optimize the group’s network until the merger is completed.
SilkAir’s current upgrades will also reduce the gap with Cathay Pacific’s regional subsidiary, Cathay Dragon, which operates a more similar product to that of its mother company.
Once the merger is completed, the likelihood of seeing a Boeing 737 MAX 8 painted with Singapore Airlines colors is very high.
Singapore is Back in the Blue
This morning, Singapore Airlines reported a full-year net profit of $893 million, representing an increase of $533 million from the same period in 2016.
The airline managed to surprise the market’s forecasts, as it finally reached its highest profit level since 2011.
According to the airline, its operating profit of $1,057 million, depicting an increase of $434 million (+69.7%) from the previous year.
However, SilkAir’s operating profits were down by $58 million compared with last year’s same period. According to SQ, this is due to higher expenditure outpacing revenue gains.
Consequently, SilkAir’s earnings declined from $24 million to $3 million. The group blames higher fuel, handling, landing and parking costs, which “rose faster than revenue gains.”
However, SilkAir’s passenger traffic improved 12.8% on the back of an 11.9% expansion in capacity.
But overall, the Singapore Airlines Group managed to turn around from a loss to an operating profit (+$178 million).