Singapore Airlines (SIA) is taking another stab at trying to find a sustainable way of serving the Wellington market with the decision to serve the New Zealand capital from Melbourne instead of Canberra.
- Singapore Airlines is changing the stopover point on Wellington-Singapore from Canberra to Melbourne;
- Wellington-Melbourne is a much larger market than Canberra-Melbourne but Singapore Airlines will have to compete against partner Air New Zealand for local Wellington-Melbourne traffic;
- The new routing does not change the underlining issues that have impacted the performance of Wellington-Singapore as the total transit time will be similar and the same outdated product will be offered.
SIA has served Wellington from Singapore with a stop in Canberra since Sep-2016, using two-class 266-seat 777-200s. Wellington was launched with four weekly flights but reduced in 2017 to three weekly flights during certain off-peak periods.
SIA announced on 24-Jan-2018 that the transit point for Wellington will switch from Canberra to Melbourne on 3-May-2018. The new Wellington-Melbourne-Singapore route will continue to be operated with 777-200s, consisting of 38 angled flat business class seats in 2x2x2 configuration and 228 economy seats and 3x3x3 configuration.
As Wellington-Melbourne is launched, SIA’s Canberra schedule will be upgraded to daily flights with four class 777-300ERs but a stop in Sydney will be added southbound.
Wellington-Canberra has suffered from relatively low load factors, particularly during off peak periods. Canberra-Singapore load factors have been higher because there have been significantly more Canberra-Singapore passengers than Wellington-Singapore or Wellington-Canberra passengers.
SIA tried to improve its performance in Wellington by reducing to three weekly flights during off peak periods and rescheduling its Wellington flights. The current schedule, introduced in Sep-2017, reduced the time the aircraft sits in Wellington by two hours. This lowered the cost of the operation and resulted in improved connections beyond Singapore. However, the changes clearly did have enough of an impact on the route’s performance given the decision only four months later to drop it.
The decision to drop Wellington-Canberra is sensible, although obviously disappointing for both airports. Wellington-Canberra is a very small market and SIA clearly struggled to generate sufficient local traffic – even with low fares.
The new Wellington-Melbourne service will not enhance Wellington’s network as the route is already served daily by Air New Zealand and Qantas. The new routing enables SIA to tap into much higher local demand compared to Wellington-Canberra. However, the Wellington-Melbourne market could potentially become oversupplied as SIA will rely heavily on local traffic to fill the aircraft. It is debatable whether Wellington-Melbourne can support widebody aircraft; if it was clear the market could, Emirates would have launched the route years ago.
SIA’s launch of Wellington-Melbourne also creates a potentially sticky situation with Air NZ. Wellington-Singapore is part of the Air NZ-Singapore joint venture but Air NZ didn’t place its code on Wellington-Canberra (their codeshare only covers Wellington-Singapore traffic). This did not create much of an issue because Air NZ does not operate Wellington-Canberra but it does operate Wellington-Melbourne and will end up competing with SIA for local traffic. SIA will likely offer low fares on Wellington-Melbourne – as it has done with Wellington-Canberra – which will inevitably impact Air NZ (and its JV with Virgin Australia).
SIA has tried to attract Singapore-Wellington traffic by offering fares which are lower than Singapore-Auckland or Singapore-Christchurch. Yields have been low, impacting revenues under the SIA-Air NZ joint venture.
The change in the stopover point from Wellington to Melbourne also does not address the underlining issues impacting SIA’s performance in the Wellington-Singapore market.
SIA has struggled to attract Wellington-Singapore traffic because its product on this route is not significantly faster than other one-stop options. All the other one-stop options (via Auckland, Brisbane, Christchurch, Melbourne and Sydney) are served daily and offer a better product, including lie flat business class seats on the longer sector.
The new routing is slightly quicker (25 minutes) than Wellington-Canberra-Singapore but is still not significantly quicker than the other one-stop options. The product is not being changed as outdated 777-200s will still be used.
Eventually SIA will need to figure out whether Wellington is worth maintaining as it could easily rely on its partners Air NZ and Virgin Australia to operate offline connections, resulting in similar overall transit times from Wellington to Singapore.