The
COVID-19 pandemic has upended many assumptions about the world’s normal state
of being. New business trends have emerged or intensified while existing norms are
being questioned in a rapidly evolving environment. Many businesses are forced
to reinvent themselves in the throes of a crisis and do not have the luxury of
time. For many, this is an existential crisis.
Among the many affected is Singapore Airlines (SIA). Even the airline’s multiple quality accolades are not sufficient to save SIA from the worst impact of the crisis. Without the Temasek sponsored bailout of SGD fifteen billion announced in March 2020 SIA’s solvency as a going concern was brought into question.
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| A Singapore Airlines Airbus A-380 coming in for landing. (Source: Wikipedia) |
Six months after the March bailout was agreed the situation has not materially improved for SIA. Passenger traffic has dropped by over 90 percent year on year while freight volume has approximately halved during the same period.
Less
than 50% of SIA’s fleet is airborne. As of August 2020, out of SIA’s active fleet of 124 aircraft only 56
were being utilized for revenue generating passenger or cargo flights. After factoring in capacity
utilization on passenger flights the scale of SIA’s problem becomes more apparent.
Moreover,
even after placing scores of planes in long term storage SIA’s operating
costs continue to burn cash. By mid-August SIA had already spent SGD
4.4 billion of
fresh money raised as a result of the March exercise.
The
present operating environment raises obvious questions about SIA’s future
strategic direction.
Is the strategy proposed at the time of the March bailout still relevant or is it time for a rethink? Do Singapore taxpayers, either directly through the government or via government investment vehicles like Temasek, continue to support SIA for the next few years in the hope that the world – and SIA’s operations - returns to ‘normalcy?’
These
questions are best addressed by an Independent Review Commission staffed by aviation
experts – local and international – appointed and formed by the government. While
the commission’s objective will be to provide recommendations on SIA’s future,
its terms of reference must be broad enough to permit members to ask tough
questions, including those which may make many Singaporeans uncomfortable.
Singapore’s future is intertwined with the world. As a city-state, the Little Red Dot cannot isolate itself from the world. The country’s port and airport are vital to ensure Singapore’s status as an important node in an interconnected world.
Nevertheless,
Singaporeans deserve greater openness and accountability on the use of public
funds to keep SIA flying. The public must be assured there is a coherent and coordinated
strategy in place to revive SIA and Singapore’s aviation sector.
As
Singapore’s first Prime Minister, the late Lee Kuan Yew once said to the
Singapore Air Transport Workers’ Union,
“[The airline was not a prestige project,
if they could not turn in a profit then]
we should have no compunction in closing a service down."
SIA’s fate is not yet at the stage where discussions about closing it down are warranted. However, the size of public sector support to SIA requires greater transparency in the form of a government sanctioned independent review of SIA’s operations.
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