SIA airfares up but airline will not pass on full cost of fuel increases to passengers

SINGAPORE – Singapore Airlines (SIA) will not be increasing airfares to the extent that it passes the full increase in fuel costs on to passengers, SIA’s chief commercial officer Lee Lik Hsin said on the sidelines of the group’s results briefing on May 15.

He was responding to a question from The Straits Times on whether airfares would continue to increase.

The airline noted that jet fuel prices have more than doubled since the Iran conflict began, adding significant cost pressures to its business.

In its results filing for the financial year ended March 31, the group noted that SIA and Scoot had already raised airfares across their network, but that “the adjustments do not fully offset the rise in the price of jet fuel, which is the group’s single-largest expenditure item”.

Mr Lee told reporters that the question of airfares still goes back to the concept of demand and supply.

“We want to still be able to attract passengers, and in doing so, we have to be competitive and offer value. We have to factor that in very carefully as we price tickets,” he said.

That is why airfares have not been increased to a point where they fully cover the fuel price hikes, “because otherwise we will have no passengers”, Mr Lee said.

He added that current prices do not reflect the pass-through of the totality of fuel cost increases, as customers will not accept it and it will hinder demand – which does not meet SIA’s business objectives.

Adding capacity

Despite increasing fuel costs and the challenges posed by the Middle East conflict, SIA is increasing its capacity to Europe by 13 per cent, while other airlines are cutting flights.

SIA chief executive Goh Choon Phong said: “Commercially, even right from the start, we were already looking at how we can better capture some of the displaced traffic through some of the ad hoc additional flights that we can put in within the capability of our resources.”

For instance, SIA ran ad hoc flights to London and Frankfurt when other carriers stopped flying the routes from Asia to Europe.

SIA is also launching flights to Madrid and a three-times-weekly service to Munich in October.

It will also add capacity to Britain by expanding its London Gatwick services. Together with its services to London Heathrow, SIA will operate up to six daily flights to the British capital.

Mr Lee added: “Our financial position is strong, and therefore we are actually growing rather than cutting capacity.”

Chief operations officer Tan Kai Ping also noted that although the Middle East carriers have resumed some services, SIA remains bullish about its ability to capture some of the spillover customer flows that used to transit through the Middle East.

There are still the customers who change their plans and want to travel through alternate hubs, he said.

Responding to questions about jet fuel supply, he said that it remains “stable” across SIA’s network despite the volatile situation.

He noted that if fuel supplies run short, airports would begin rationing fuel, but that scenario is not happening at any of the airports that SIA flies to.

Long-term transformation of Air India

Mr Goh said during the company’s presentation that SIA remains committed to supporting Air India’s transformation efforts, alongside its partner Tata Sons.

“We want to make Air India a world-class carrier and airline with an Indian heart,” he said.

He reiterated SIA’s multi-hub strategy as Singapore is a small market with a relatively small population base and no domestic operations for airlines.

Meanwhile, India is the world’s third-largest aviation market and has a target of reaching 230 airports by 2030.

Mr Goh said: “We’ve never had any illusions that it is an easy path. Way back when we started the joint venture with Tata Sons... I already knew at that point in time that it is a long game.”

He added that he told analysts and the media back then that “this is definitely not going to be a walk in the park”.

“We have been operating in India for a long time, we know the market, we know how difficult it is. But we also had a sense, even way back then, that this is a market that holds tremendous potential, and today that potential is even more obvious,” he said.

Mr Goh noted that Air India faces the same issues currently affecting all airlines globally, but also three other factors specific to the carrier.

Air India was affected by Pakistani airspace closures, the crash of AI171 that caused the airline to cut flights while it relooked processes, and the depreciation of the Indian rupee which is vital given that a large part of any airline’s expenditure is in US dollars.

But Air India has been very active in transforming itself, Mr Goh said, and has shown tangible progress.

When asked how long this process might take, Mr Goh said it took a decade for Vistara to establish itself as a leading carrier in India.

He added that some SIA staff were seconded to Air India to support it. But when asked about whether SIA will install one of its staff as Air India’s new CEO, Mr Goh said the Air India board is responsible for appointing the next CEO.

Air India is searching for a CEO after Mr Campbell Wilson resigned in April.

Improvements to SIA

On the SIA side, the group is also harnessing generative artificial intelligence to improve operations, Mr Goh said. It has an AI-powered assistant and knowledge repository called Jarvis, with about 95 per cent staff penetration.

An AI-powered chatbot called Kris also provides customers with round-the-clock self-service support, from answering general inquiries to completing simple transactions.

SIA will also be unveiling next-generation seats in 2026 for long-haul flights across all cabin classes from first class to economy.

It will also launch a new KrisWorld in-flight entertainment experience, along with new in-flight dishes, amenity kits and updated soft furnishings and serviceware.

The roll-out of these new cabin features is expected in 2026 as well.

SIA’s share price rose 2 per cent on May 15 to close at $6.42.