As part of its transformation programme, Singapore Airlines had already handed some of SilkAir's routes to the group's budget carrier Scoot and merged part of SilkAir's finance team with its parent.
SilkAir's best business class product is the wide recliner of its new Boeing 737 MAX 8 fleet.
In a news release, Singapore Airlines said more than S$100 million will be invested in the multi-year cabin revamp programme which will see new lie-flat seats in Business Class and the installation of seat-back in-flight entertainment systems in both Business Class and Economy Class.
Aircraft cabin upgrades are expected to start in 2020 "due to lead times required by seat suppliers, including to complete certification processes", according to Singapore Airlines.
The airline also says the merger will not take place until enough planes are available with the new product.
"Singapore Airlines is one year into our three-year Transformation Programme and today's announcement is a significant development to provide more growth opportunities and prepare the Group for an even stronger future", SIA chief executive Goh Choon Phong said in the announcement. It is now transitioning to an all-737 fleet, and serves 49 destinations in 16 countries.
SilkAir was launched in 1989 as Tradewinds the Airline, initially focusing on holiday destinations in Southeast Asia.
A strong fourth quarter marked a turnaround from a year ago, when an operating loss by its flagship full-service airline led the company to launch a three-year transformation programme created to cut costs and boost revenue amid competition from Chinese and Middle Eastern rivals and low-priced carriers. The parent airline swung into the black with an operating profit of S$137 million, versus a loss of S$41 million a year ago, buttressed by higher revenue.
However, it remained characteristically cautious in its outlook.
Average ticket prices, or yields, rose 1 percent in the fourth quarter, breaking a downward trend as the airline and its peers curbed discounting to counter rising fuel prices.
"The overall demand outlook for cargo remains moderately positive, but is subject to geopolitical uncertainties which may have implications on global trade".