Singapore Airlines seeks tie-ups in India and China

Singapore: Singapore Airlines (SIA) today said it is looking for potential partnerships in India and China, a move that could help it stay profitable. The airline is specifically working closely with airlines in China and India, especially those that are in the same alliance, SIA chief executive Goh Choon Phong told reporters.

He did not name the airlines that SIA could partner with, saying discussions were ongoing and an announcement would be made at a right time. SIA is to launch its own fully-owned budget airline Scoot, joining an increasing number of low-cost carriers in Southeast Asia. Globally, SIA is a member of the Star Alliance along with China. That apart, the airline had earlier tried to set up a joint venture in India with Tatas but that attempt had not materialised.

Meanwhile, discussions are on in India to open up the airlines sector to FDI. Although overseas institutional investments are allowed in the sector, no foreign airline is allowed direct investment in Indian carriers. Goh`s disclosures for likely tie-up with Asia`s biggest markets came after SIA reported 69 per cent drop year-on-year in net profit to SGD 336 million (about Rs 1,439 crore)for the financial year 2011-12, though it had a nominal 2 per cent increase in turnover to SGD 14.86 billion.

SIA said its expenditure rose at a faster pace, resulting in big cut in profit, largely due to surging jet fuel prices. "Fuel prices are expected to remain at high levels, which will adversely impact the Group`s operating performance," said SIA in latest financial statement. Jet fuel prices rose 32 per cent on the year to USD 133 a barrel. Industry observers said the high jet fuel price account for more than 40 per cent of an airline`s total costs.

"The problem for SIA is that the long-haul business, which historically has been the major source of earnings, will continue to be challenging," The Straits Times quoted aviation analyst K Ajith of the UOB Kay Hian brokerage house. Industry observers said budget-class airlines and low- cost carriers were cutting into shares of major airlines, forcing them to re-think strategies of tapping mega markets of China and India for the future growth.