Boeing Wins an Asian Bonanza

Champagne and new 747s on Singapore Airlines

During gloomy days earlier this decade, planemakers kept their spirits up with thoughts of the boom to come when airlines finally had enough cash to replace their aging, noisy and fuel-inefficient fleets. At last, this dream seems to be becoming reality. Last month Pan Am signed a $500 million contract with Lockheed for twelve wide-bodied TriStar L-1011s, and last week small, state-owned Singapore Airlines (SIA) stole Pan Am's headlines. It placed with Boeing the richest order in commercial aviation history: $900 million for 13 jumbo 747s and six medium-range 727s. Gleefully grabbing the record claimed weeks earlier by Lockheed executives, Boeing insisted: "This is the 'order of the century.' "

The record will not stand unchallenged for long; Boeing could break it later this year if it receives orders from American or United Airlines for its new generations of 767 and 777 jets, which are now on the drawing boards. What seemed surprising was that a deal of last week's size came from a state-controlled carrier whose home country is smaller than New York City, with a population (2.3 million) smaller than Colorado's. Yet Singapore Airlines is based astride key crossroads of Asian air travel, and last year it carried 2.5 million passengers on highly profitable routes serving 30 cities in 25 countries; flights to San Francisco and Honolulu begin next year. Earnings for the fiscal year just ended are estimated to be $25 million on revenues that have risen more than eightfold since 1969, to some $490 million.

SIA gets a lift from its high level of repeat travelers. British travel agents voted SIA "airline of the year" in 1977, and a survey of 500 agents in the Asian-Pacific region placed it first in the area. The line does not belong to the International Air Transport Association cartel, so it can give all sorts of free extras to passengers. In both first class and economy, they get free champagne and drinks even before takeoff; gifts like pens or complete leather toilet sets are distributed on every flight to first-class passengers. SIA is spending $30 million to build what it calls the world's largest flight kitchen. Meals are served by stewardesses dressed in Paris-designed sarong kebayas, the Singapore national dress. The company sends the stewardesses to finishing school, gives them professional training in grooming and pays their dental bills for regular teeth cleanings--but absolutely forbids them to accept dates with passengers. Cabin crews are larger than on most carriers, and best of all, SIA offers tired passengers a chance to sleep in either almost fully reclining "snoozer seats" or (first class only) pull-out bunks.

The line now operates a largely Boeing-made 27-plane fleet, and it is buying primarily to standardize equipment and get new fuel-efficient Pratt & Whitney engines. "The devil you know is better than the one you don't," says SIA Chairman Joseph Pillay, who is 44 but looks much younger.

A quarter of the $900 million will come from the sale of older and thirstier 707s, 737s and 747s, and SIA will wind up with a fleet of no more than 32 jets. A further quarter will be provided by internal cash flow generated by its policy of using speedy six-year plane depreciation (vs. about 15 years for most U.S. airlines). The rest, or about $450 million, will be financed externally. Says Pillay: "We shall approach the Export-Import Bank for about $360 million and get the rest from commercial U.S., European and Asian banks." If any part of the deal goes wrong, Pillay figures that he could get a loan from a "Middle Eastern country."

No doubt the U.S.'s Eximbank will make loans to SIA, and that may cause a touch of embarrassment for both Boeing and United Technologies, the parent of Pratt & Whitney. Only last month executives of both companies blasted Eastern Air Lines' $778 million purchase of 19 European-made A300 Airbuses, charging that the deals had been "unfairly subsidized" by the German, French and Spanish governments. Boeing never had strong grounds for complaint anyway--it accounts for more than half of all commercial plane sales in the non-Communist world. To keep up with traffic growth and meet noise and pollution standards, the airlines are generally expected to buy up to 1,500 planes worth $80 billion between now and 1990, and that is enough business for all the builders.

This file is automatically generated by a robot program, so viewer discretion is required.