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Singapore Airlines CEO Sees Cargo Market Cooling as Supply Adjusts

Singapore Airlines CEO Goh Choon Phong discusses the impact of oil prices and global trade tensions on the airline’s business. (Screengrab from Bloomberg Video)

By Eliza Haverstock

As the brewing trade battle between the U.S. and China threatens to slow demand for air freight, the market also is likely to cool as demand gets in line with supply, according to the chief executive officer of Singapore Airlines Ltd.

“From a business perspective, we would like to see countries around the world to work together to grow the economy, rather than contributing to the slowdown,” Goh Choon Phong said in an interview with Bloomberg Television’s Ramy Inocencio. Last year “was a great year for cargo,” Goh said, as an unanticipated jump in demand outpaced capacity.

Yet “even without these aspects of world-trade impact, you will be expecting people to put in capacity,” he said at Bloomberg’s headquarters in New York. As capacity and demand are more balanced, “you will also see some pressure on yield.”

His comments shed light on another potential threat to cargo rates as carriers brace for a possible U.S.-China trade war that could undermine a market that saw demand rise since the fourth quarter of 2016. Asia-Pacific airlines control 37 percent of the global air-freight market, and Singapore Airlines, Southeast Asia’s biggest carrier, has seven Boeing Co. 747-400 cargo planes in its fleet.

Oil Prices

Meanwhile, Goh said, Singapore Airlines is well-positioned to contend with rising fuel costs.

“We have a fairly consistent hedging strategy basically to manage, not to speculate, but to manage the volatility of oil prices,” he said in the interview, broadcast Friday in Singapore. “We’re fairly well hedged at the moment.”

The airline also is in discussions with Singapore authorities over new fees to help fund the construction of a terminal and runway at Changi Airport in the city-state.

“We want to work very closely with Changi to make sure that not just the immediate concerns, but the longer term concerns of the airport, and the ecosystem and the hub in Singapore continue to be something that we can nurture and grow,” Goh said. Authorities in July will impose an airport-development levy of S$10.80 ($7.95) on passengers, while charges on airlines to land, park and use jet bridges will climb one percent.

And while U.S. airlines cut back on amenities for passengers, Goh said Singapore Airlines is committed to keeping the high level of customer service for which Asian carriers are known.

“We would never retreat from our brand promises,” he said.

With assistance from Kyunghee Park and Marissa Dunn. To contact the reporter on this story: Eliza Haverstock in New York at ehaverstock@bloomberg.net. To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net. Tony Robinson, Susan Warren

© 2018 Bloomberg L.P

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