May 9, 2014 / 4:26 AM / 3 years ago

UPDATE 1-Singapore Airlines to launch premium economy service in 2015

(Adds details on the service launch, background)

SINGAPORE, May 9 (Reuters) - Singapore Airlines Ltd said on Friday that it plans to launch a premium economy service in the second half of 2015, after years of resisting the move due to concerns it would reduce the appeal of its business class seats.

The airline, facing growing competition from Middle Eastern carriers and falling demand from companies for business class travel, said it would initially roll the service out on its medium- and long-haul routes.

“The market has matured in premium economy and we think it is right for us now to embark on this,” Mak Swee Wah, head of the airline’s commercial activities, told reporters and analysts at a briefing.

He said the target market would be a mixture of business and leisure travellers seeking more legroom than is available in regular economy.

The premium economy concept has been around for more than 10 years, and is already offered by more than 40 airlines including Hong Kong’s Cathay Pacific Airways, which launched its service in 2012.

Singapore Airlines had until now opted to stay focused on business and first class, which make up around 40 percent of its revenue. But a drop in demand for high-end travel preceded the new service: Last year it ended its non-stop business-class only flight between Singapore and New York as it was no longer financially viable.

On Thursday the carrier reported its fourth-quarter operating loss widened to S$60.3 million ($48.39 million) from S$44.2 million a year earlier, saying yields were likely to remain under pressure as it had to offer a series of promotions to maintain passenger numbers.

The airline also said on Friday that it will invest $325 million to upgrade 19 of its Boeing 777-300ER planes with new seats and entertainment systems.

$1 = 1.2460 Singapore Dollars Reporting by Anshuman Daga and Siva Govindasamy; Writing by Rachel Armstrong; Editing by Paul Tait and Kenneth Maxwell

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