Singapore Airlines Flies Higher

Consistently upgrading to new planes keeps maintenance and fuel costs down. Add superb service and you have the champagne of Asia airlines

by Frederik Balfour

Singapore Airlines has been synonymous with superior service for decades and is widely seen as consistently raising the bar for the industry as a whole. "They are the airline equivalent of the Lexus motorcar in Asia," says Peter Hilton, aviation analyst at Credit Suisse (CS). "They tend to be a feature leader, which keeps them at the leading edge of product development." The carrier's strong reputation for service is—in a way—a virtuous circle, as it is able to attract and maintain a highly motivated staff.

Singapore Airlines also operates one of the youngest fleets in Asia, with an average aircraft age of eight years. It is consistently one of the first global airlines to buy the latest aircraft models—the first Airbus double-decker A380 to take flight will bear the Singapore Airlines logo. In late June at the Paris Air Show, the airline placed a $3.7 billion order with Airbus for 20 of its next-generation A350-900 XWB planes. Around the same time, the airline also ordered $800 million worth of engines from Rolls Royce. Singapore Airlines was also a charter customer of the Boeing (BA) 777 aircraft, and will be one of the first to take delivery of Boeing's midsized, long-haul 787 Dreamliner aircraft when it comes onstream in 2008.

Profits Still Soaring

Continually upgrading to newer planes helps keep maintenance and fuel costs down, a formula that has enabled Singapore Airlines to remain the region's most profitable carrier in absolute terms. For the fiscal year ended March, 2007, it earned $1.4 billion on sales of $9.55 billion. That's a 71% jump in earnings over the previous year. The stock price has risen 50% in the past 12 months, outperforming the 40% increase for regional rival Cathay Pacific Airways.

Going forward, Singapore Airlines has set its sights on the huge mainland Chinese market. It is reportedly in advanced talks with loss-making, Shanghai-based China Eastern Airlines to take a 25% stake together with its parent, the Singapore government investment arm Temasek Holdings.

Balfour is Asia Correspondent for BusinessWeek based in Hong Kong.