In a Feb. 16 release, the airline says the decision comes after a drop in forward booking and a 20% dip in cargo demand.

The capacity initiative will begin in April and continue through to March 2010 and will result in an 11% drop in available seat miles compared to the preceding 12 months. The 17 aircraft, which have not been identified, will be decommissioned this year.

“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,” SIA said.

The carrier noted that it has already planned to drop four aircraft from its passenger fleet, with one scheduled for conversion to a freighter and three more to be returned to lessors at the end of their leases.

“We have already taken action such as expanding and stepping up training and re-training programs, and we will contemplate retrenchment only as a last resort, but we do not have the luxury of time and we need to agree and act on some measures quickly so that we can push back the point of retrenchment as far as possible and improve our chances of avoiding it altogether,” the airline said.

Added CEO Chew Choon Seng, “The drop in air transportation has been sharp and swift. Given the falls of more than 20% that we have seen recently in air cargo shipments, and the tradition of demand for air travel following closely behind trends on the cargo side of the business, we have to face the reality that 2009 is going to be a very difficult year.”

SIA said it has already met with three of its unions to discuss the carrier’s contraction. “Apart from containing costs without compromising on safety, security and quality of service, the company is engaging the unions on measures that will affect staff. Such measures include accelerated clearance of leave entitlements, voluntary leave without pay, voluntary early retirement and shorter work months,” SIA noted.