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UPDATE 1-Singapore Airlines plans cost cuts to offset competition
October 6, 2017 / 6:51 AM / 17 days ago

UPDATE 1-Singapore Airlines plans cost cuts to offset competition

* Review launched in May after surprise Q4 loss

* Route network, organisational structure under scrutiny

* Cathay Pacific facing similar competitive pressures (Recasts, adds more details of transformation plan)

By Jamie Freed

SINGAPORE, Oct 6 (Reuters) - Singapore Airlines Ltd intends to cut fuel consumption, review its supplier relationships and invest in digital technology under a three-year transformation plan to boost its competitiveness, according to an internal newsletter.

Singapore Airlines and Hong Kong-based rival Cathay Pacific Airways Ltd are struggling against mounting international competition from Chinese and Middle Eastern rivals, without domestic flights to underpin their earnings.

After a surprise fourth-quarter loss, Singapore Airlines set up a dedicated transformation office to review its strategy in May, although it has not released a cost-cutting target.

In a September staff newsletter obtained by Reuters, CEO Goh Choon Phong said the airline was working on 56 initiatives, which also included more self-service options for customers and slashing in-flight food and beverage waste.

It was also reviewing its organisational structure and reviewing its route network, he said.

Since the review was launched, Singapore Airlines has handed two of regional arm SilkAir’s routes to budget carrier Scoot, merged part of SilkAir’s finance team with its parent and offered unpaid leave to cabin crew.

CAPA Centre for Aviation Chief Analyst Brendan Sobie said Singapore Airlines should consider the more radical move of merging SilkAir with its parent as part of the review.

“It would generate efficiencies and ensure a consistent product at the full service end of the market,” he said.

The carrier has already merged budget arms Scoot and Tigerair Singapore and folded its cargo arm back into Singapore Airlines.

SilkAir CEO Foo Chai Woo said in an interview on Wednesday that the company planned to keep the carriers separate for now but declined to rule out a future merger.

Cathay has been more aggressive in its restructuring efforts as it tries to rebound after reporting its worst first-half loss in more than 20 years. It has cut 600 jobs as part of a review aimed at reducing HK$4 billion ($512 million) in costs over three years. ($1 = 7.8082 Hong Kong dollars) (Reporting by Jamie Freed; Editing by Edwina Gibbs and Stephen Coates)

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