SilkAir to Merge with Parent Singapore Airlines - What This Means For You

TRAVEL NEWS

Airlines


An industry shakeup

Merging two airlines is not an easy thing to do, especially between the world’s best carrier and the most awarded regional airline. Find out what this might mean for you.

 The SilkAir crew operate narrowbody jets to various leisure destinations across the region, photo from  Singapore Airlines

The SilkAir crew operate narrowbody jets to various leisure destinations across the region, photo from Singapore Airlines

On the back of stellar financial results released just yesterday, Singapore Airlines (SQ) has announced that it will bring sister airline SilkAir (MI) into its fold. This quells long-standing rumours that SilkAir would eventually be merged into the parent airline just like what the carrier did with low-cost carriers Scoot (TR) and Tigerair (TG). That merger is already underway. 

To achieve this, SQ says that it will undertake a multi-year product revamp for its jets operating under SilkAir in order to install better features like fully lie-flat seats in Business Class and (finally) seat-back in-flight entertainment systems across all cabins. It is estimated that these would cost SQ more than $100 million to achieve.

With luck, Singapore Airlines is looking to boost its revenue and achieve a uniform brand identity across its portfolio of airlines. Whereas at one point the Singapore Airlines group had 4 distinct airlines each catering to a different market segment, this new move would consolidate operations under one premium brand and a low-cost one. 

One possible reason for the merger lies with the fact that the SilkAir brand is scarcely known to consumers living outside of South East Asia, and hence cannot benefit from the huge and positive global reputation of its parent airline. Because of this, there was less of an incentive to fly with SilkAir over rivals like Lion/Malindo Air, AirAsia or even Scoot. The new changes, therefore, are an important exercise in brand consolidation which also means that fliers loyal to other Star Alliance carriers can now earn miles when flying SilkAir.

 
 Out with the old and in with the new - will SilkAir's jets adopt a similar seat design to the new SQ 787-10s?,  photo from Singapore Airlines

Out with the old and in with the new - will SilkAir's jets adopt a similar seat design to the new SQ 787-10s?, photo from Singapore Airlines

What this means for you

New cabin products

Singapore Airlines recently announced a new lie-flat Business Class product for its regional 787-10s jets, and it is possible that an adapted version of that seat could come to its SilkAir planes. If so, this is a definite upgrade from the current leather-clad angled-flat seats. If Singapore Airlines chooses to not adapt its 787-10 seats to its narrowbody jets, it could perhaps take inspiration from well received narrowbody Business Class products like jetBlue's Mint service.

For Economy Class travellers, the installation of seatback in-flight entertainment systems to the carrier's narrow-body jets is a definite upgrade especially on longer flights to Hiroshima and Cairns. These now currently operate without any seat-back entertainment options. This is the reason why SilkAir is generally considered as 'inferior' to SQ.

Different jets to 'try'

If you're one to always fly with premium carriers or big low-cost airlines to major destinations, it's likely that you would not have flown on a narrowbody jet before. These are namely planes like the A320 and the 737. However, with the merger, Singapore Airlines will begin to deploy SilkAir's narrowbody jets onto various routes in its network - potentially even to major cities as well. 

Generally higher standards of service and care

It is generally true that Singapore Airlines flights have 'more to offer' to passengers relative to SilkAir ones. For example, SilkAir does not have a hot towel service before departure like SQ does, instead opting to hand out cold towelettes to passengers. Meals on SQ are also considered to be of a higher standard than SilkAir's both in quality and quantity though it must be said that both are already heads and shoulders above the competition.

SQ flight attendants also go through a much more stringent training process that may appeal to those who think that a professional demeanour is best. Currently, SilkAir's crew are likely to adopt a more relaxed and convivial tone with customers.

It has been long known that many baulk at the idea of paying 'SQ prices for SilkAir products'. While there are grounds to support this claim, we think that both carriers are already excellent in their own regard, and that differences in service are minimal. However, this merger makes sense for the Singapore Airlines as it will finally be able to project a unified brand image and a consistent tone to passengers. This is especially pertinent as the SilkAir brand has not gained much traction amongst fliers despite the high quality of its crew and products.

Transfer of routes between airlines in the Singapore Airlines Group

As part of its ongoing operational review, Singapore Airlines has made it clear that it will reallocate various routes in its network to whichever carrier can best serve it. With the ability to use narrowbody jets under the Singapore Airlines brand, it is possible that we may see smaller jets with premium service flying to major destinations.

The result of this would be a consolidated premium and low-cost brand strategy, resulting in both carriers working very closely together. In all, this makes sense for the group since it is making efforts to expand into new markets and does not want fliers to be confused over brand stratification. 

Route swaps have already taken place within the Singapore Airlines Group, for destinations like Langkawi, Pekanbaru and Kalibo, which were transferred to Scoot from SilkAir. Conversely, SilkAir took over Scoot's services to Yangon back in October 2017.

 
 Hanoi is served with daily flights by SilkAir as Singapore Airlines does not have any current service to the Vietnamese capital. 

Hanoi is served with daily flights by SilkAir as Singapore Airlines does not have any current service to the Vietnamese capital. 

The Key Differences

Singapore Airlines

  • Only operates twin aisle, widebody jets like the A350 and the A380
  • Flies long-haul to major leisure and business cities across the world
  • Able to enjoy the perks of frequent flyer status with alliance partners including lounge access
  • Has many daily services to major destinations
  • KrisWorld entertainment system is one of the best in the industry especially on newer jets

SilkAir

  • Only operates single aisle, narrowbody jets like the Boeing 737
  • Flies to short/medium haul leisure destinations within Asia 
  • Only able to enjoy access to SilkAir contracted lounges
  • Services to many destinations do not operate on a 'daily schedule'
  • SilkAir's IFE is a streamed service with less content compared to its parent airline 
 
 Singapore Airlines Group CEO Goh Choon Phong is at the heart of the airline's 3-year brand and operation revitalisation effort, he is pictured here signing a $13b deal with Boeing.  Photo from the WSJ.

Singapore Airlines Group CEO Goh Choon Phong is at the heart of the airline's 3-year brand and operation revitalisation effort, he is pictured here signing a $13b deal with Boeing. Photo from the WSJ.

A merger that heralds a bright future for Singapore Airlines 

SilkAir started out in 1975 under the regional charter airline known as Tradewinds, operating flights to leisure destinations across the region. It got its current name in 1992 after a huge rebranding exercise. Over the next 2 decades, the airline would also grow in size and expand its reach to cater to business travellers. 

Overall, the merger a good development for travellers as even 'leisure destinations' like Hiroshima can now get the 'SQ' treatment. Whereas in the past destinations like Hiroshima would be unable to support widebody jets, the merger would allow it to be served by smaller jets albeit with better food and service. 

Apart from this, the merger would benefit the group as a whole since functions like finance and operations would not have to be duplicated for every airline within the group. Pursuant to this, a consolidation of operational functions between Singapore Airlines and SilkAir was already agreed upon and it is likely that this full merger will further extend this rationalisation to other departments within the company. 

Singapore Airlines is currently in the first year of its 3-year operational review plan which has so far delivered many landmark changes to its business. This is all part of an effort to better compete with the airline's competitors like Emirates, Qantas, Cathay Pacific and the Big 3 Chinese airlines.

While not a lot of information has been given regarding the transition, Singapore Airlines expects to begin the process by 2020 as the carrier needs to negotiate with partners. This includes stakeholders like seat manufacturers and regulatory authorities as Singapore Airlines' seats and products have not been installed on a narrow-body jet before.

This longer lead time makes sense for the carriers as SilkAir just announced a revamp of its Business and Economy Class seats when it took delivery of its new Boeing 737 Max 8 aircraft back in September 2017. Quickening the merger with Singapore Airlines would be a waste since so much money has already been put into developing its new products. It is also now clear as to why SilkAir's recent revamp was more iterative than revolutionary especially with the news of the merger as it is more reasonable to see the less dense spatial configuration of the new 737 MAX 8 jets as being more suited to a future Singapore Airlines-esque product. 

We welcome the merger proposal with open arms as it means that travellers will benefit from a better in-flight experience, and it is likely that the airline will perform better financially. SilkAir has always been in an awkward middle ground as it has a premium cost structure but is still seen as inferior to its parent airline. Hence, this merger makes sense for everyone and we're excited to see it through.  

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