Silk Air, a wholly owned subsidiary of Singapore Airlines, has announced that it has signed a letter of intent to purchase 68 Boeing aircraft valued at about $5 billion at current prices. The agreement includes an order for 31 Boeing 737-8 Max aircraft, 23 Boeing 737-800s, and purchase rights for another 14 aircraft.
The airline, which is listed on the Singapore Exchange, is currently expanding its network, increasing its capacity on existing routes, and renewing its fleet. This new order will enable the carrier to meet its goals.
Deliveries for the aircraft will begin in 2014 and will continue up to 2021. The company representative said, “Deliveries are due to begin in 2014 and continue to 2021, by which time the airline's fleet will have more than doubled in size."
The aircraft currently has an all-Airbus fleet, comprised of six Airbus A319-100, fifteen Airbus A320-200 and three more A320s due for delivery at the of 2013. With this new order, the carrier shifts from operating an all-Airbus fleet.
In an official statement, SilkAir said, "The order is the largest in SilkAir's history and remains subject to the negotiations of a final purchase agreement."
Marvin Tan, SilkAir chief executive, said,
The selection of the B737 follows detailed evaluations and extensive negotiations with both Airbus and Boeing. The order will enable us to maintain a young and modern fleet, with an aircraft that has a proven track record of strong customer appeal, excellent reliability and low operating costs.
Mr Tan added, "We continue to see very strong growth within the region and these new aircraft will position SilkAir well. They will enable us to spread our wings to even more destinations and increase capacity on existing routes, contributing to the overall SIA Group network."
SilkAir stated that this is the largest aircraft in the airline’s history, and it reflects the company’s "confidence in the Asia-Pacific air travel market." The company added that the local market is "helping the carrier maintain annual double-digit percentage growth rates through the end of this decade and beyond."
SilkAir operates passenger services from Singapore to 40 cities in Australia, China, Southeast Asia and South Asia. The airline flew 3 million passengers in 2011.
SilkAir started operating in 1989 with two leased McDonnell Douglas MD-87 aircraft. Over the subsequent years, the carrier invested in six Boeing 737-300s, which were gradually replaced by Airbus aircraft.
Shukor Yusof, an aviation analyst at Standard & Poor's Equity Research, commented that this purchase will make SilkAir well positioned to face increasing competition from competing airlines in the region, such as Indonesia’s Lion Air and Garuda.
Strengthening SilkAir will enable the carrier to become a bigger regional player and allow parent firm SIA -- which is also facing fiercer rivalry -- to focus on long-haul routes. There is a huge intra-Asia travel market that has not yet been tapped and so this would indicate to us that SIA is using SilkAir to compete against the likes of the low-cost carriers in the region. I expect to see SilkAir penetrate more destinations in emerging markets in Indonesia, Myanmar and also in China and India.