Singapore Airlines Signs Huge $13.8b Deal with Boeing

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Capitalising on future growth

Singapore Airlines increases its order of Boeing aircraft - what does this mean for the carrier's future?

 A Singapore Airlines A380 taking off at Auckland International Airport, photo from airlinehubbuzz.com

A Singapore Airlines A380 taking off at Auckland International Airport, photo from airlinehubbuzz.com

As part of Singaporean Prime Minister Lee Hsien Loong's visit to the United States, the PM (with his American counterpart) witnessed the signing of a deal between the city state's flag carrier, Singapore Airlines and the aircraft manufacturer Boeing.

This $13.8b dollar deal would see the airline purchasing 20 777-9s and 19 787-10 Dreamliners from Boeing which adds to the airline's standing commitment for 30 787-10 Dreamliners. These aircraft are meant to be used for the airline's future network expansion efforts and as potential replacements for some of the aging aircraft currently in the fleet. Some aircraft could also be seconded to the airline's budget carrier, Scoot to aid similar expansion efforts. 

Singapore Airlines is also currently in the process of receiving deliveries of the A350-900 from Boeing's biggest competitor, Airbus. The airline already has 18 of such jets in its fleet operating flights from the airline's hub in Singapore to destinations in Europe like Düsseldorf and Amsterdam. In 2018, the airline will also start receiving the ULR (Ultra-Long Range) variants of the A350-900 and will use these jets to resume direct flights to the United States. These are also slated to begin in 2018.

According to the Straits Times: 'Under the agreement, the 777-9s are due for delivery from the 2021-22 financial year and the 787-10s for delivery from the 2020-21 financial year.' The airline has also included a further 6 exercisable purchase options for each aircraft type. Though the list price of the purchased aircraft stands at close to $14 billion, it is likely that the airline received a heavy discount for the order, potentially only paying about $6.5 billion for its order.

 
 The carriers in the Singapore Airlines group before the merger of Scoot and Tigerair, image from singaporevirtualairlines.org

The carriers in the Singapore Airlines group before the merger of Scoot and Tigerair, image from singaporevirtualairlines.org

These new orders come at a time as the other airlines in the group are also in the midst of their own expansionary efforts. In July of this year, Scoot announced that it would commence flights to 4 new Asian destinations (Harbin, Kuantan, Kuching and Palembang) and its first US destination (Honolulu). SilkAir has just received its first 737 MAX 8 aircraft in early October which is billed (along with its 737-800s) as the replacements for its A319 and A320 workhorses.

These deliveries will see the airline transitioning into an all Boeing fleet and will allow the airline to reach destinations further out from its home base. For instance, the airline has recently announced that it will begin operating a direct service to Hiroshima on Oct 30 2017.

The Singapore Airlines group is currently undergoing a significant reorganization and rationalization effort aimed at improving the operational efficiency of its business. In the past few years, the airline has dropped routes with lacklustre yield and has increased frequencies on routes that exhibit strong consumer demand, resulting in a more streamlined but profitable network. 

Other efforts at boosting the profitability and long-term viability of the group includes the establishment of Vistara in India, the setting up of a pilot training venture with Airbus and the merger of Scoot and Tigerair. The airline has also placed a significant emphasis on its digitalization program which are meant to save on labor costs and improve the in-flight passenger experience. 

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