SIA sees low-cost segment fuelling growth for both premium and budget services

Short-haul budget carrier Tiger Airways (Tigerair) will soon shed its signature black-and-orange stripes as its joins long-haul budget carrier Scoot under a single brand and operating licence. The merger, slated for completion in 2H2017, marks the end of a turbulent journey for Tigerair and its shareholders.

In May, Singapore Airlines announced the establishment of a new holding company called Budget Aviation Holdings (BAH) to own and manage both Tigerair and Scoot. It is headed by former Tigerair CEO Lee Lik Hsin, who predicts efficiencies, cost savings and a more compelling proposition for travellers. “I think it is fair to say that we are a lot more optimistic about what we can gain from the single brand, from the synergy of single marketing, as well as communicating what we believe to be the stronger brand benefits to a larger pool of customers,” says Lee.

Pursuing growth in the budget segment of the aviation market seems a logical choice given the sluggish global economy. SIA’s full-service segment has been hit by weaker corporate travel demand. This impact has been most acute in the banking and oil and gas sectors, says SIA CEO Goh Choon Phong. Passenger yields have also declined amid excess capacity worldwide. And, SIA is facing stiff competition on multiple fronts. The proliferation of low-cost carriers (LCCs) in the region has chipped away at its short-haul business. Meanwhile, it is struggling to maintain its share of the long-haul, premium business segment as Chinese airlines expand aggressively and Gulf carriers up the ante in luxury travel at a fraction of SIA’s fares.

---

Related Stories

• SIA to adjust conversion prices of 1.625% convertible bonds due 2025 after interim dividend
• SIA’s 1HFY2024/2025 earnings down 48.5% y-o-y to $742 mil, maintains interim dividend of 10 cents per share
• MAS versus SIA — the truth is painful, but you cannot have a successful solution without an honest assessment

---