| SINGAPORE, July 4
SINGAPORE, July 4 With limousine pick-ups and
on-board chefs, Asia's premium airlines are investing hundreds
of millions of dollars on luxury services in a bet on a rebound
in business from the wealthy, even as low-cost carriers fly high
with the booming middle class.
Although business and first-class traffic has fallen
significantly in the last few years as companies cut costs,
carriers such as Singapore Airlines Ltd (SIA), Cathay
Pacific Airways Ltd and Qantas Airways Ltd
are estimated to still earn about 35 to 40 percent of passenger
revenue from the high-margin segment.
Yields per premium passenger are around four to five times
higher than those for economy class, underscoring why airlines
are keen to pour money on amenities that range from luxurious
cabins to fine dining.
Asia-Pacific airlines are the most profitable in the global
aviation sector, industry data shows.
"If you don't upgrade your products, you are always going to
be under pressure to drop the price more significantly," Tan Pee
Teck, SIA's head of product and services, told Reuters in an
"So, when people see the investment, see something new,
fresh, there'll always be people who are going to try it, just
like the way the A380 was launched."
While low-cost carriers such as Malaysia's AirAsia Bhd
and Indonesia's Lion Air have been grabbing headlines
with record plane orders to feed rapid demand for travel, the
battle for Asia's richer travellers has also been heating up.
Singapore's flagship carrier has hired BMW Group's design
unit, DesignworksUSA, to roll out new first-class seats
featuring more privacy and personal stowage space.
The first-class cabins, along with more comfortable seats on
business class developed by another design firm, will be put on
Boeing's 777-300ERs and enter SIA's fleet later this year. SIA
will showcase the new products at a media event on July 9.
The launch comes as SIA, considered the gold standard for
customer service, and famous for its iconic "Singapore Girl" in
sarong kebaya uniform, faces pressure from free-spending Gulf
State-backed Emirates Airline, Etihad Airways and
Qatar Airways are investing heavily to attract travellers with
fleet upgrades, extensive networks and new perks.
On its A380 flights, Emirates offers shower facilities for
first-class passengers and an on-board lounge with open bar in
first and business class cabins. It also provides a
complimentary chauffeur service to first- and business-class
passengers in more than 55 cities.
This has not gone unnoticed. "On my long-haul flights these
days, I will go for Emirates over Singapore Airlines whenever I
can," said Barry Lea, who has flown business class on SIA and
"I find their in-flight entertainment top notch. It's all
very well taking Singapore Airlines and being sort-of attended
to by Miss Worlds but, on a 17-hour flight, the novelty wears
Emirates is relentlessly expanding its network from Dubai
and this has given it a strategic advantage.
"Schedule is always going to be key," said Nick Rees, who
manages Emirates' Singapore and Brunei operations. "Where we see
our network being particularly strong is, we have one stop in
Dubai to 35 points in Europe."
Ease of connections is a key factor for snagging premium
business, and Singapore's location as a gateway into the
fast-growing economies of Southeast Asia means the city-state's
Changi Airport is still an important hub.
"Most carriers are putting their best product into Changi
because of the competition here," said Rees.
Qantas, which has a five-year alliance with Emirates,
unveiled a new Singapore lounge in April, with seating for 460,
20 showers and many 80-inch television screens.
As Asia's growth adds to the ranks of the region's
super-wealthy, millionaires from countries such as Singapore,
China, Hong Kong and Indonesia are splurging on premium air
Asia-Pacific, second only to North America, drove global
High Net Worth Individual (HNWI) population growth in 2012,
increasing its HNWI population by 9.4 percent to 3.7 million,
Capggemini and RBC Wealth Management said in a report.
"You get Indonesians travelling to the U.S. to look at
boutique hotels to purchase at a good price. And they are
travelling in suites, they are travelling in first class and
business class," said Tan.
"Certainly, the relative growth of the premium segment
doesn't match the low-end growth. But there will still be growth
and, for as far out as we can see, this is a segment we think
will be sustainable."
Timothy Ross, Credit Suisse's head of transport research for
Asia-Pacific, upgraded his rating on SIA to "outperform" from
"neutral" last month, citing sustained growth in demand, the
impact of lower jet fuel prices and the emergence of data
supporting a recovery in business travel.
"Its challenge is to ensure that it is using its premium
product on routes that will support a yield premium and not to
gold plate product in markets where customers won't pay for
this," Ross said.
Last year, SIA announced it would be stopping its
all-business class, 19-hour flight connecting Singapore and
Newark later in 2013, the longest scheduled non-stop route in
the world, in an industry hit by high fuel costs and weak
CAVIAR AND LOBSTER
Other Asian airlines are also eyeing the premium market.
The likes of Malaysia Airlines and Thai Airways
have introduced A380s and are making a pitch for the
wealthier traveller, although they are hampered by less
Malaysia Airlines began serving caviar and lobster to
first-class passengers on some routes last year, and has
introduced first-class travel on its services from Kuala Lumpur
to Hong Kong and Paris.
State-run Garuda Indonesia, in its largest
investment ever, is taking delivery of 24 new aircraft this year
as it expands further into the long-haul and premium market.
"We are definitely seeing an increasing trend of passengers
upgrading and opting for our executive class when travelling
with us," said Garuda's Chief Executive Emirsyah Satar.
Garuda plans to launch its first direct Jakarta to London
service this year with its new Boeing 777-300ER equipped with
eight first-class suites. The suites, featuring outsize seats
that can be converted into full-flat beds, will offer live
broadcast from six global channels and wi-fi connection.
Pre-flight concierge services will include a limousine
pick-up and a personal butler. Passengers will be pampered by a
chef on board and can enjoy in-flight entertainment on a
23.5-inch touch screen LCD. The aircraft will also have 38
executive-class seats that can also be converted into a full
"As travellers grow increasingly affluent, the demand for
exceptional travel experiences is stronger than ever," Satar
(Editing by John O'Callaghan and Alex Richardson)