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Thu, Aug 23, 2001 - Page 19 News List

Singapore Airlines confident on upgrade

DPA , SINGAPORE

The global economic slowdown is not daunting Singapore Airlines' (SIA) ambitious fleet upgrade strategy, innovations to woo passengers or its zeal to expand its footholds abroad.

Passenger and cargo loads for Asia's most profitable carrier have slid and analysts expect net profits to shrink for the fiscal year ending March 2002, but top executives have ruled out any knee jerk reactions.

"We always plan on the basis that the economy cycles up and down," said vice-president Bey Soo Khiang. "We work on the basis of a consistent sustainable growth."

Since taking delivery of two Boeing 777-200 long-range aircraft in July, SIA has converted three more options for the planes into firm orders worth an estimated US$480 million.

Stressing SIA will continue with its fleet renewal plans despite the vagaries of the world economy, Bay said negotiations are under way for routes to new US destinations.

The aircraft are part of a US$12.7 billion order by SIA in 1995 and its leasing affiliate for 77 Boeing 777s, the largest single order in civilian aircraft history.

In a bid to woo more business passengers, SIA is spending US$100 million on "SpaceBeds" for long-haul flights to Europe, Australia, Asia and North America, with the first to be introduced in November. The reclining seats rely on a cushioning substance developed for NASA which conforms to fit the contours of a passenger's body.

"This is part of our plan to work on new products all the time," said senior vice-president Yap Kim Wah.

A more advanced inflight entertainment system is to be progressively fitted to all B747s and B777s. SIA emerged as the first airline to introduce an e-mail and Web-surfing service earlier this year.

The zeal for expanding its presence globally has not waned during its prolonged battle for control of Air New Zealand, which owns struggling Ansett, the No. 2 domestic Australian carrier.

Qantas has threatened to look for a partner outside the region if the New Zealand government allows SIA to up its 25 percent stake to 49 percent, requiring the lifting of a foreign ownership cap.

"SIA has been lobbying hard," said Tan Ee Ching, aviation analyst with Independent Economic Analysis. "Success would mean the expanded presence SIA wants and a boost to earnings."

Qantas maintains an SIA-Air New Zealand-Ansett combination would leave it unable to compete and has offered an alternative proposal under which it would buy SIA's stake in Air New Zealand and sell Ansett to SIA.

In one tirade, Qantas said the SIA proposal would create a "behemoth." British Airways has a 25 percent stake in Qantas.

Air New Zealand chief executive Gary Toomey insists SIA has offered the only reasonable solution and can meet all the conditions of the government.

The carrier "is fast approaching the point of no return" Toomey told a business gathering in Auckland.

In tandem with the Tata Group, SIA, which is 56 percent government-owned, is also bidding for a stake in loss-making Air India.SIA owns 49 percent of Virgin Atlantic, but a potential venture with Air China collapsed and an attempt at a deal with South African Airways also failed.

"It would be quite bad for earnings" if the New Zealand government is not convinced, said Tan, citing the drop in SIA's overall load factor amid high fuel prices, shrinking electronics exports and weakening demand for air travel.

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