Summary of Key Points
While many Southeast Asian airlines have suspended flights to China due to high oil prices, Singapore Airlines (SIA) has taken the opposite approach by expanding its direct flight services between Singapore and Hangzhou. The recovery rate of SIA's routes between the two cities (114.7%) far exceeds that of other popular Southeast Asian routes (59.3%), despite the pandemic. This is largely due to the mutual visa exemption agreement between China and Singapore, which has led to a surge in bilateral travel. Chinese tourists have returned to Singapore as its largest source of passengers, and both Singaporean travelers and those transiting through Singapore have significantly increased their numbers heading to China. Additionally, there has been a shift in the type of travelers, with a growing demand for high-end, independent travel experiences.
At the same time, competition on the SIA routes is fierce, with 17 airlines operating them. Therefore, attracting and retaining transit passengers has become crucial for airlines to remain profitable.
Why Did SIA Decide to Expand Flights to China?
Unlike other Southeast Asian airlines that have stopped flying to China due to rising oil costs, SIA has increased its services to Hangzhou and even replaced smaller aircraft with larger ones, increasing the weekly flight frequency from 91 before the pandemic to 112. The reason is simple: there is a strong demand for travel between Singapore and China:
- In the fiscal year 2025, SIA transported over 4 million passengers between the two cities, a year-on-year increase of 8.1%.
- Four airlines currently operate flights between Hangzhou and Singapore, with passenger numbers reaching 85,000 this year, up 11.9%.
- The demand in the East China region (e.g., Shanghai) is still not saturated, and Hangzhou, as SIA's ninth domestic destination, can serve a larger audience.
Why Is the Recovery Rate of SIA’s Routes So Much Higher Than That of Other Southeast Asian Routes?
The 114.7% recovery rate of SIA’s routes stands out compared to the 59.3% for routes between China and Thailand. The key factor is the mutual visa exemption agreement that took effect in 2024:
- The number of Chinese tourists traveling to Singapore has increased significantly, from 1.36 million in 2023 to 3.08 million in 2024, a 126% rise, making China once again SIA’s largest market.
- The number of Singaporean travelers and those transiting through Singapore to China also increased by 110% in 2024.
With the removal of visa requirements, travel between the two countries has become more convenient, leading to a surge in flight traffic.
Changes in Chinese Tourists Traveling to Singapore
Post-pandemic, Chinese tourists traveling to Singapore have shown several significant changes:
- There has been a shift from group tours to independent or private travel arrangements.
- There is a growing preference for high-end services; the target audience is mainly adults aged 30-39 who prefer 4-5 star hotels in central business districts, with amenities such as executive lounges and ESG-certified (environmentally friendly) facilities. They are willing to spend more on business or first-class accommodations.
- These tourists are less price-sensitive and focus on quality experiences, such as customized tours and independent travel arrangements.
These changes align well with SIA’s strengths, particularly its high-end services, which cater to this market segment.
Why Are Transit Passengers Such a Competitive Advantage for Airlines?
With 17 airlines competing on the SIA routes, attracting transit passengers has become essential for profitability:
- Transit passengers include those from Australia traveling through Singapore to China, Indonesians going to Beijing via Singapore before continuing to Hangzhou, or Chinese travelers heading to Southeast Asia or Australia.
- SIA’s network covers 42 destinations in Southeast Asia and the South Pacific. Approximately 20%-30% of its flights to China involve transit passengers.
- Transit passengers are crucial as they help fill empty seats and increase flight occupancy rates, thereby boosting profits.
How Can Airlines Survive in This Fierce Competition?
To thrive in this competitive environment, airlines need to focus on two key areas:
- Targeting the Right Audience: By offering high-quality services (e.g., business-class amenities) to attract wealthy travelers.
- Leveraging Network Strength: Utilizing their extensive flight networks to attract more international transit passengers and help Chinese tourists continue their journeys to other destinations.
- Diversifying Services: SIA operates both high-end (e.g., its own flights) and budget-friendly (e.g., its budget airline, Scoot) services to meet different customer needs.
In summary, airlines that can effectively cater to high-end travelers and transit passengers will have a competitive advantage in this rapidly evolving travel market. For customers, this means more choices, but higher costs may be required for the best service experiences.