SINGAPORE (BLOOMBERG) - Singapore Airlines (SIA) is committing to a strategy of working with international partners and operating overseas hubs after Covid-19 exposed the financial dangers of not having a domestic aviation market.

The airline is open to opportunities and will evaluate potential synergies, chief executive officer Goh Choon Phong said in an interview with Bloomberg News.

“We realised that (being) without a domestic market has its challenges,” Mr Goh said. “That is why we have the multi-hub strategy. We establish an external hub, whereby we hope we can then participate in the growth from that market.”

Mr Goh, a 58-year-old industry veteran who joined SIA in 1990 and became CEO in 2011, is trying to guide the carrier out of the toughest period in its history. This time last year, it had just announced a record annual loss and was flying only a few thousand people a month compared with as many as 2 million in pre-Covid-19 times. Unsure when matters might improve, the airline had to raise billions of dollars to get through the crisis.

Now that Singapore and most other countries around the world have opened again for quarantine-free travel, SIA was able to increase traffic to more than 1 million passengers in April, the most since the pandemic began.

Thai setback

SIA has tried to operate in domestic markets before, to mixed success. The airline attempted to expand its footprint in Thailand in 2014, but the joint-venture carrier ended up being liquidated when the pandemic hit.

The multi-hub strategy involves setting up an airline venture in another country that can tap the potential growth in that domestic market, as well as benefit from any flow-on international services. 

SIA’s budget carrier unit Scoot set up NokScoot, a venture with Nok Airlines, in 2014 to provide services for short- and medium-haul flights from Thailand. NokScoot's board decided to liquidate the business in June 2020 after failing to fully start operations of the low-cost carrier.

"I am not ashamed to say that we have tried, for example, in Thailand with NokScoot, and of course, with the pandemic it became very difficult," Mr Goh said.

"What is important really is the strategy of identifying the right partner to work with in the multi-hub scenario," he said. "It may not work, but that should not deter us from doing what we think is the right strategy. And we must be willing to take some risk."

Importance of India

In the interview, Mr Goh highlighted India as a key growth area, saying it is expected to become the world's third-biggest aviation market by the middle of this decade, if not before.

SIA teamed up with Indian conglomerate Tata Sons to form full-service carrier Vistara, which started flying in 2014. Vistara now serves nine overseas destinations and 31 in India, though it has yet to make a profit.

"India is obviously a very important one because it is going to be massive," Mr Goh said. "We want to continue to look at scaling up Vistara and ensuring that it grows well."

Apart from the huge domestic market - already the world's third largest - India's allure also lies in international passengers. Close to 4.8 million people travelled between India and Singapore in 2019, before the pandemic, data from India's Directorate General of Civil Aviation show.

With Vistara, SIA aims to cater to Indians flying to Europe and the US, poaching them from Gulf rivals that dominate the Indian overseas air travel market.

Mr Goh refused to be drawn when asked if SIA would be interested in buying a stake in Air India, saying the company does not comment on confidential discussions it may or may not be having with partners.

"What I can tell you is that both Tata Sons and ourselves are equally committed to ensure that Vistara continues to grow," he said.

Tata is majority owner of four airlines - Vistara, Air India, AirAsia India and Air India Express - prompting speculation that it may consolidate or reorganise them into low-cost and full-service models. India does not allow foreign carriers to hold more than 49 per cent of a local airline, so any reorganisation may bring down SIA's stake in Vistara, unless it invests further.

Code-sharing and alliances

Another avenue of growth is establishing and deepening partnerships with other carriers through code-sharing and joint marketing activities, which helps expand networks at less of a cost.

Singapore's competition regulator granted conditional approval on May 10 for an agreement with Malaysia Airlines that includes revenue-sharing on some flights. The regulator is also assessing a similar partnership between SIA and All Nippon Airways.

SIA, a member of Star Alliance, already has partnerships with Air New Zealand, Deutsche Lufthansa and Scandinavian carrier SAS. Through its various tie-ups, the airline has been able to add more than 200 new destinations to its network, according to Mr Goh.

"This thing about not having a domestic market is something you cannot overcome on your own," he said.

Boeing 777X delays

Mr Goh also said that Boeing has reached out to SIA to discuss the US planemaker’s failure to deliver its long-delayed 777X jetliners on time.

“When the delay was foreseen you can imagine that Boeing would have reached out to us for early conversations,” he said. “Obviously, we expect Boeing to help us in the interim to make sure that we continue to be able to deploy the right capacity.” 

Boeing in April delayed deliveries of 777X jets to 2025, five years later than expected, prompting some plane lessors to suggest the product’s future is in doubt. The US planemaker - which offers the model in two variants - will not resume production until 2023, leading to speculation some buyers may cancel orders or switch to Airbus’ A350 jets.

Last year, SIA swopped some of its Boeing wide-body jetliner orders for the larger 777X, paring commitments for the 787-10 Dreamliners. After that change, SIA's total orders stood at 31 for Boeing’s largest aircraft, a vote of confidence in the heir to the manufacturer’s iconic 747 jumbo.

“We are a very important customer to Boeing. I am sure Boeing will tell you that too,” Mr Goh said, adding that any conversations between the two are confidential. “There are conversations on what is the impact of the delay.”

SIA is also due to take delivery of three Boeing 787-10 Dreamliners this year, but that model has grappled with structural glitches since 2020 and deliveries are stalled. Mr Goh did not specify whether there were compensation talks for delays in 787 deliveries as well.