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SINGAPORE: SilkAir, Singapore Airlines' regional wing, will be merged with its parent brand after undergoing a major cabin upgrade, Singapore Airlines announced on Friday (May 18).

In a news release, Singapore Airlines said more than S$100 million will be invested in the multi-year cabin revamp programme which will see new lie-flat seats in Business Class and the installation of seat-back in-flight entertainment systems in both Business Class and Economy Class.



This will ensure closer product and service consistency across the SIA Group’s full-service network, the company said.



Aircraft cabin upgrades are expected to start in 2020 "due to lead times required by seat suppliers, including to complete certification processes", according to Singapore Airlines.

The merger will take place only after a sufficient number of aircraft have been fitted with the new cabin products, and specific details will be announced progressively as the programme develops and timelines are finalised, it added.

There will also be transfers of routes and aircraft between the different airlines in the portfolio, which Singapore Airlines said was "consistent with ongoing efforts to optimise the SIA Group’s network".





Singapore Airlines CEO Goh Choon Phong called the announcement a "significant development to provide more growth opportunities and prepare the Group for an even stronger future".

The changes will be "positive" for customers, Mr Goh, adding that it was a major investment to ensure that Singapore Airlines' products and services continue to lead the industry across short, medium and long-haul routes.



NO JOB CUTS

Speaking at the carrier’s results briefing, Mr Goh also said the merger between Singapore Airlines and SilkAir is not a "consolidation exercise".

He said the SilkAir brand is not as well known in areas like Europe compared to here in Asia and as such, the merger will allow SIA to better position the brand in those regions.



“SilkAir has always played a critical role for SIA as a regional feeder. Even with the merger, it won’t detract from that role. However, we believe that with the merger and one single brand, it will make it much easier for customers to understand that both narrow body and wide body (planes) belong to the same organisation and brand."

"That is not to say there is no place for SilkAir," Mr Goh told media and analysts at the briefing. "In fact there is still a lot of demand for SilkAir type of service specifically on the bigger destinations, bigger cities in Southeast Asia."



He also said that no employee will be made "redundant".

“Our view is that with the integration and the growth opportunity, there should be more opportunities for our staff to go into different roles," he said.

"However, where there are overlaps, we will look at how to redeploy staff and also how to provide re-training. This is not something new for us, we have gone through mergers between Tiger and Scoot."

Mr Goh also clarified that when the merger is successfully completed, SilkAir will no longer exist as an airline or brand.



SilkAir operates a fleet of 11 Airbus A320-family aircraft, 22 Boeing 737-800 and 737 MAX 8 aircraft. It is currently transitioning to an all-737 fleet, and serves 49 destinations in 16 countries, according to Singapore Airlines.



JUMP IN PROFIT

The move comes as Singapore Airlines undertakes a three-year transformation programme designed to cut costs and boost revenue amid competition from Chinese and Middle Eastern rivals and low-cost carriers.

Singapore Airlines on Thursday topped market expectations by reporting a 150 per cent rise in full-year net profit to the highest level since 2011, as passenger and cargo revenue rose and the transformation programme produced early results.

But SilkAir was a weak spot, reporting a full-year operating profit of S$43 million for the 12 months ended March 31, down 57 per cent from a year earlier.

The cabin upgrade will close a gap with rival Cathay Pacific Airways, whose regional arm, Cathay Dragon, operates jets with cabins more similar to its parent than the wider gulf between Singapore Airlines and SilkAir products.

"Upgrading the narrowbody product and folding SilkAir into Singapore Airlines is sensible and was inevitable," CAPA Centre for Aviation Chief Analyst Brendan Sobie said. "The product gap between SilkAir and Singapore Airlines has become too wide."



As part of its transformation programme, Singapore Airlines had already handed some of SilkAir's routes to budget carrier Scoot and merged part of SilkAir's finance team with its parent.

Additional reporting by Brandon Tanoto.