SilkAir



A wholly owned subsidiary of Singapore Airlines (SIA), SilkAir serves as SIA’s regional wing.The airline currently operates short and medium haul routes across 16 countries to about 54 destinations in Asia.2

Background
SilkAir’s origins lie in the formation of Tradewinds, a subsidiary of SIA established in 1975 as a hotelier before turning into a travel agency that provided charter flights.3 Tradewinds started airline operations on 21 February 1989 with a McDonnell Douglas MD-87 leased from GRA Group in Ireland, which took off from Changi Airport to begin a scheduled flight to Pattaya.4 The airline expanded its operations thereafter, running 39 scheduled weekly flights to destinations such as Haadyai, Phuket, Bandar Seri Begawan and Kuantan by August 1990.5

In April 1992, Tradewinds was renamed SilkAir in an effort to turn it into a premier regional carrier. The rebranding exercise, which saw the adoption of a new logo created by American airline corporate identity specialist Landor Associates, came with a US$100 million buying spree to increase the fleet to 12 by 1997. The airline also launched a new executive class, introduced new routes to Vientiane and Cebu, and added new destinations in China and Indonesia.6

The first decade (19922003)
The airline’s first year under the SilkAir brand name saw a 68 percent increase in passenger traffic from 291,304 to 489,476 passengers.7 However, the carrier ran into profitability issues from 1994 after registering a loss of S$27 million. To reduce depreciation and operating costs, it decided to phase out its Airbus A310 aircraft and replace them with Boeing 737 and Fokker 70. The airline also dropped unprofitable routes and launched new ones.8 Despite being unprofitable, SilkAir was still able to increase its seating capacity at an annual rate of about 30 percent from 1990 to 1997.9

In 1997, SilkAir returned to financial viability and reported a net profit of S$100,000.10 To expand its fleet, it announced a deal in that year to purchase eight Airbus aircraft to replace its fleet of Boeing 737.11 The Asian economic crisis in 1998, however, affected its expansion plans, forcing it to focus on renewing rather than expanding its fleet. As a result, the carrier decided to pace the delivery of the new Airbus aircraft to five by 1998, and the rest by 2001. The airline also registered lower yields from fares, and its Indonesian operations, which made up around 30 percent of its network and ticket sales, were adversely affected by the economic crisis.12

With global air travel falling due to numerous factors including the outbreak of the severe acute respiratory syndrome (SARS) in 2002 and a global economic slowdown, SilkAir and its parent company SIA continued to operate under adverse economic conditions over the next few years. This again forced SilkAir to enforce cost-cutting measures, such as suspending less profitable services and releasing some of its expatriate pilots.13 In January 2002, SilkAir pilots agreed to wage cuts of up to 16.5 percent.14

In June 2002, the regional airline announced a five-year plan with the goal of becoming a market leader. The plan entailed expanding its fleet to 15, increasing its investment in tourism and market development from S$8 million to S$16 million, and boosting its charter business to generate extra revenue. It also planned for more flights to key tourist destinations in China and India.15 By October 2002, SilkAir announced the purchase of four Airbus 320 and two Airbus 319, which took its fleet count to 15.16 It also introduced new routes to Hyderabad in India, as well as Chengdu in China.17

Competition from budget airlines and continued growth
In the face of increasing competition from budget airlines like AirAsia and ValuAir, SIA publicly contemplated converting SilkAir into a budget carrier in 2003, but eventually decided against it.18 Instead, it decided to start a budget carrier named Tiger Airways.19

In response to the competition, SilkAir launched a S$3 million branding campaign in February 2003 to raise customers’ awareness of the carrier’s services and fair deals.20 It also revamped its online booking service, and took measures to reduce operating costs with a target of S$10 million in annual savings.21

In 2004, the carrier refreshed its cabin and cabin crew’s uniform to project a more casual image. Designed by SilkAir crew member Vianha Rohim, the uniform was selected through a design contest. It was the third outfit change since the carrier started airline operations in 1989. The first, unveiled in 1989, was designed by local designer Celia Loe, while the second was by Parisian fashion house Balenciaga in 1993.22 In 2015, SilkAir refreshed its cabin crew’s uniform with an outfit designed by Singaporean fashion designer Alexandria Chen. It is a one-piece uniform with an asymmetric neckline and seagull-patterned georgette bow pin. The uniform comes in two colours: Aqua blue for junior cabin crew and plum red for senior flight attendants.23

Following the introduction of these measures, SilkAir’s profit doubled to S$30.6 million in financial year 2004 from the previous year. It also surpassed the one million passenger milestone in 2005.24 The strong showings continued, with record quarterly and monthly passenger traffic levels in 2005.25 In 2006, the airline carried 1.56 million passengers, a 25 percent increase from the previous year. For that financial year, it attained a turnover of S$415 million and profit of S$30m.26 The improved performance came under the stewardship of Mike Barclay, who was the company’s chief executive officer from 2004 to 2007.27

SilkAir received a number of awards in 2004, including Best Regional Airline (Asia and China) from magazines TTG Asia and TTG China.28

In December 2006, SilkAir signed a S$2 billion deal to acquire 11 Airbus planes, with an option for nine more. It was the company’s first aircraft order in 10 years.29

The airline operates a fleet of 29 aircraft in 2016, which comprises 14 Boeing B737-800, 11 Airbus A320-200 and four Airbus A319-100. It is undergoing a transition programme to an all-Boeing fleet. At an average age of three years and seven months, SilkAir has one of the youngest fleets in the region.30

As of April 2016, SilkAir flies to 54 destinations in countries like Australia, China, Malaysia, Indonesia, India, Maldives and Nepal.31



Author

Alvin Chua



References
1. SilkAir. (2016). Our heritage. Retrieved 2016, April 21 from SilkAir website: http://www.silkair.com/jsp/cms/en_UK/mi_global_footer/our-heritage.jsp
2. SilkAir. (2017). Destinations. Retrieved 2017, July 10 from SilkAir website: http://www.silkair.com/en_UK/sg/destinations/
3. De Silva, G. (1992, March 13). Tradewinds to be renamed SilkAir, plans to buy more planes. The Straits Times, p. 48; Tradewinds takes off next month. (1989, January 23). The Straits Times, p. 18; Loh, E. (1988, May 25). Tradewinds negotiating to buy medium-haul plane. The Straits Times, p. 25. Retrieved from NewspaperSG.
4. Tradewinds takes off on inaugural flight. (1989, February 22). The Straits Times, p. 12; Lee, H. S. (1989, January 17). Tradewinds spreads its wings on back of tax perk. The Business Times, p. 3. Retrieved from NewspaperSG.
5. Elias, R. (1990, August 28). More SEA destinations for Tradewinds. The Business Times, p. 27. Retrieved from NewspaperSG.
6. De Silva, G. (1992, March 13). Tradewinds to be renamed SilkAir, plans to buy more planesThe Straits Times, p. 48. Retrieved from NewspaperSG.
7. Soh, F. (1993, May 10). SilkAir soars with new name. The Straits Times, p. 21. Retrieved from NewspaperSG.
8. Almazan, A. (1995, September 11). SilkAir to phase out A310s, revamp routes to end lossesThe Business Times, p. 46. Retrieved from NewspaperSG.
9. Raj, C. (1997, March 31). SilkAir in market for US$400m worth of planesThe Business Times, p. 1. Retrieved from NewspaperSG.
10. Raj, C. (1997, June 26). SIA should list some of its subsidiaries soon. The Business Times, p. 19. Retrieved from NewspaperSG.
11. Raj, C. (1997, March 31). SilkAir in market for US$400m worth of planesThe Business Times, p. 1; Chia, J. (1997, May 17). Aircraft sales keep SIA hanging onto $1b net profit. The Straits Times, p. 48; SilkAir inks Airbus deal. (1997, November 1). The Straits Times, p. 76. Retrieved from NewspaperSG.
12. SilkAir, hit by regional crisis, defers expansion. (1998, September 25). The Business Times, p. 40. Retrieved from NewspaperSG.
13. Fang, N. (2003, April 30). SIA lines up action Jan to battle ‘worst crisis’. The Straits Times, p. 4. Retrieved from NewspaperSG.
14. Kaur, K. (2004, January 29). SilkAir pilots strike salary deal. The Straits Times, p. 7. Retrieved from NewspaperSG.
15. Fang, N. (2002, June 17). SilkAir aims to be market leaderThe Straits Times, p. 18. Retrieved from NewspaperSG.
16. SilkAir to buy six Airbus jets for $587m. (2002, October 5). The Straits Times, p. 30. Retrieved from NewspaperSG.
17. SilkAir to launch flights to Hyderabad. (2002, October 18). The Business Times, p. 38. Retrieved from NewspaperSG.
18. Sreenivasan, V. (2003, October 30). SIA clears the air: SilkAir won’t be budget carrier. The Business Times, p. 1. Retrieved from NewspaperSG.
19. Wong, K. (2003, December 10). SIA to start budget carrier. The Straits Times, p. 1. Retrieved from NewspaperSG.
20. Fang, N. (2003, February 19). SilkAir forks out $3m for branding campaign. The Straits Times, p. 19. Retrieved from NewspaperSG.
21. Chan, C. P. (2004, July 6). SilkAir remains full-service. Today, p. 11; Yap, S.-Y. (2005, April 13). Record 1m passengers flew SilkAir. The Straits Times, p. 4. Retrieved from NewspaperSG.
22. Sim, G. (2004, July 21). New outfit for SilkAir staff from next month. The Straits Times, p. 9. Retrieved from NewspaperSG.
23. Lim, S. (2015, April 10). New look for SilkAir cabin crew. Today. Retrieved from Factiva via NLB’s eResources website: http://eresources.nlb.gov.sg/
24. Yap, S.-Y. (2005, April 13). Record 1m passengers flew SilkAir. The Straits Times, p. 4; Loh, C. (2005, May 12). 4-year high for SIA. Today, p. 28. Retrieved from NewspaperSG.
25. Sreenivasan, V. (2005, January 13). Silkair flew 110,000 passengers in DecThe Business Times, p. 5. Retrieved from NewspaperSG.
26. Kaur, K. (2006, December 21). SilkAir gets ready to tap growth with $2b Airbus deal. The Straits Times, p. 4; Kaur, K. (2007, March 16). SilkAir passenger numbers up 25%The Straits Times, p. 47. Retrieved from NewspaperSG.
27. Kaur, K. (2006, December 21). SilkAir gets ready to tap growth with $2b Airbus deal. The Straits Times, p. 4. Retrieved from NewspaperSG.
28. SilkAir. (2016). Industry awards. Retrieved 2016, April 21 from SilkAir website: http://www.silkair.com/jsp/cms/en_UK/mi_global_footer/industry-awards.jsp
29. Kaur, K. (2006, December 21). SilkAir gets ready to tap growth with $2b Airbus deal. The Straits Times, p. 4. Retrieved from NewspaperSG.
30. SilkAir. (2016). Our fleet. Retrieved 2016, April 21 from SilkAir website: http://www.silkair.com/en_UK/mi-silkair-experience/experience-fleet/; SilkAir. (2014, February 4). Boeing, SilkAir begins transition to all 737 Fleet [Press release]. Retrieved 2016, April 21 from SilkAir website: http://www.silkair.com/jsp/cms/en_UK/mi_press_release_news/nf1003-04022014.jsp
31. SilkAir. (2017). Destinations. Retrieved 2017, July 10 from SilkAir website: http://www.silkair.com/en_UK/sg/destinations/



The information in this article is valid as at 2017 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.

 

Subject
Airlines--Singapore
Organisations>>Companies
SilkAir (Airline)
Transportation
Law and government>>Safety administration>>Air transportation
Business, finance and industry>>Industry>>Services>>Transportation and logistics
Business enterprises
Commerce and Industry>>Transportation