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Sunday, May 29, 2011

SIA takes bold gamble with new budget carrier

Singapore Airlines is planning to establish a new no-frills, low-fare airline operating widebody aircraft on medium and long-haul routes.

“The new airline is being established following extensive review and analysis. It will enable the SIA Group to serve a largely untapped new market and cater to the growing demand among consumers for low-fare travel,” Singapore Airlines said.

Operations are expected to begin within one year. The airline will be wholly owned by Singapore Airlines, but will be operated independently and managed separately from SIA.

“We are very excited about what our new low-fare subsidiary will offer to consumers. We are seeing a new market segment being created and this will provide another growth opportunity for the SIA Group,” said SIA CEO Goh Choon Phong.

SIA, one of the world's most profitable premium airlines, surprised the industry on Wednesday by announcing plans to tap into the region's growing appetite for budget air tickets on medium- to long-haul destinations.

The sector is currently dominated by neighbouring Malaysia's AirAsia X, which was was launched four years ago and flies to 14 cities including London, Tehran, Paris, Seoul and Tokyo as well as destinations in China, India and Australia.

SIA said it aims to launch its wholly-owned but independently managed low-cost operation within one year using wide body aircraft.

The announcement came amid intensifying competition in first and business class travel, with rivals such as Hong Kong's Cathay Pacific and Gulf carriers like Emirates and Etihad muscling into SIA's premium turf.

The company is yet to be named but they feel that it will help to stimulate demand for long haul flights in the budget travel market which is something which has happened in the short haul market in Asia recently. They feel it will provide a significant opportunity for growth for their company. They are not abandoning the rest of the company either, as this new branch will not compete against their current businesses. Further details including the name, management team and routes will be be announced later.
They will use Singapore Airline fleet to start with and then make further decisions with regards to long term fleet in the future. Their competition in AirAsia has reported on their Twitter site that he is not worried about the new business, in fact he says they should be worried as he feels they should not be trying to enter a market they know little about. It is unlikely that the company will be a failure though as SIA has done extensive research and are a well established company.

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