Singapore Airlines to Expand Capacity Amid Intensifying Competition

Singapore Airlines (SIA) has committed to expanding its capacity despite growing competitive pressures and recent financial challenges.

At an earnings briefing, Chief Commercial Officer Lee Lik Hsin affirmed that the airline will not “hold back” on growth plans, even as competitors bolster their own capacity. In the second quarter, SIA increased capacity by 9.7% compared to the previous year, indicating its continued focus on growth.

This announcement comes after the airline reported a 59% drop in second-quarter net income, with heightened competition reducing airfares and impacting profitability. SIA shares saw a significant dip in early trading on Monday, falling by as much as 6.2%, although they later recovered some ground to end 3.57% lower. The company also maintained an interim dividend of 10 Singapore cents per share, despite the profit decline.

SIA’s net profit for the April-September period fell to 742 million Singapore dollars ($559 million), a 48.5% decline from the previous year, while operating profit dropped 48.8% to SG$796 million. Although revenue rose slightly by 3.7% to SG$9.5 billion, yields—a measure of profitability—continued to decline, with the airline facing increased competition as rivals restored their pre-COVID-19 capacities. According to SIA CEO Goh Choon Phong, this increased capacity has added pressure to yields.

Passenger traffic also grew by 7.9% year-over-year, though it was outpaced by an 11% increase in capacity, leading to a 2.4 percentage point drop in load factor to 86.4%. Despite these challenges, the airline remains committed to growth, with Lee emphasizing that SIA will not scale back its expansion due to market competition.

SIA has taken several strategic steps to address industry challenges. The airline has invested SG$1.1 billion in upgrading cabins for 41 of its long-range and ultra-long-range Airbus A350 aircraft, with the retrofitting program expected to complete by 2030. These updates include enhanced first- and business-class cabins, reinforcing SIA’s reputation for premium service.

Additionally, SIA is adapting to ongoing supply chain disruptions, which could result in having five fewer aircraft than planned by the fiscal year-end. The airline has mitigated these delays by extending the use of existing planes, building up spare parts, and increasing local maintenance facilities.

While competition remains intense, SIA’s load factors are high, and demand is expected to stay robust. However, the airline acknowledges that the “operating landscape will continue to be competitive,” especially as other carriers restore capacity. CEO Goh expressed confidence that ongoing product investments and innovations in AI, along with strategic partnerships, will help SIA navigate these pressures.

Bloomberg and CNBC contributed to this report.