A new report from Alton Aviation Consultancy on the Singapore aviation sector has warned that supply chain issues – including a shortage of jets – are likely to persist into the medium term, even as the country’s airlines remain “poised for growth”.
The report, released 6 August, estimates supply chains to only fully stabilise “until at least” 2025, pointing out that the issue, though “significant” will not be permanent.
“Despite the efforts of manufacturers and suppliers to ramp up production to address the backlog, the complexity of the aviation supply chain, involving numerous specialised components from global suppliers, will likely prolong the resolution of these issues. The reactivation of parked aircraft and the fulfilment of new aircraft orders are gradual processes, and any delays in one part of the supply chain can have cascading effects,” states the consultancy.
The report follows a year of record financial and operational performance and comes as Singapore-based operators close in on full recovery.
Alton also suggests that the days of record profits – as seen by national carrier Singapore Airlines group – are a one-off phenomenon, and that there is likely to be a “reversion to the long-term mean”.
The airline group delivered a record operating profit of around S$2.7 billion ($2.0 billion) for the year ended 31 March, up 1% against the previous financial year. At its annual results briefing, airline executives warned of cost and yield pressures from increased competition in the market.
The Alton report concurs, noting: “It is important to recognise that the post-pandemic travel boom is exhibiting signs of normalising. As airlines resume operations and expand their capacity back towards, and beyond, pre-pandemic levels, competition in the Singapore market has intensified.”
Other key challenges include high operating costs, led by an increase in fuel prices, labour costs and maintenance expenses.
The consultancy says that while these challenges are “significant”, they are not permanent, with airlines “adapting” to be more efficient.
Adds the report: “Local airlines must now determine how to sustain…growth by differentiating themselves from their competitors. This may be achieved through various strategies, including network expansion, product innovation, service enhancement, or cost competitiveness.”
The current period of profitability is also an opportunity for Singapore-based operators to “to invest in preparation for the next stage of post-pandemic growth”.
