SINGAPORE Airlines plans to reduce its capacity by 11 per cent in the 12 months starting from April as travel demand falls, and it has begun talks with staff unions on steps to cope with the downturn.

The announcement yesterday came after SIA reported a 43 per cent drop in quarterly profit last week, hurt by hedging losses and slowing demand for travel and cargo.

The company will decommission 17 aircraft from the operating fleet during the 12 months.

The original plan - before the recession hit major markets - was to phase out four aircraft, SIA said in a statement.

Chief executive Chew Choon Seng said that this year will be a "very difficult" one.

He said in the statement: "Singapore Airlines does not have a domestic operation to soften the blow from the slump in international air traffic, and we have to act decisively to address the situation.

"We have determined the capacity to be operated that will enable the airline to remain viable in a shrinking market, but the removal of surplus capacity will result in redundant resources and will draw sacrifices from every one of us in the company."

But he stressed that retrenchment will be the last resort.

"We have already taken action, such as expanding and stepping up training and re-training programmes, and we will contemplate retrenchment only as a last resort," Mr Chew said.

He added that SIA will work with its staff and the unions to come up with a consensus on necessary action plans. The airline will continue its efforts in improving efficiency and reducing wastage.

Apart from containing costs without compromising safety, security and quality of service, the company is engaging the unions on various measures that will affect its employees.

These include accelerated clearance of leave entitlements, voluntary leave without pay, voluntary early retirement and shorter work months.

If the company implements salary cuts, the management will be the first to take them, SIA said.

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