SIA to set up wholly-owned low-cost carrier
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SIA to set up wholly-owned low-cost carrier
The Straits Times
May 25, 2011
In an announcement that took the industry by surprise, Singapore Airlines said on Wednesday that it will set up a new wholly-owned low-cost carrier.
The airline will operate widebody aircraft on medium and long-haul routes, SIA said.
Operations are expected to begin in a year.
The new airline, being established following extensive review and analysis, will allow the SIA Group to serve a largely untapped new market and cater to the growing demand among consumers for low-fare travel, SIA said.
It will be wholly owned by SIA, but operated independently and managed separately from the parent carrier.
May 25, 2011
In an announcement that took the industry by surprise, Singapore Airlines said on Wednesday that it will set up a new wholly-owned low-cost carrier.
The airline will operate widebody aircraft on medium and long-haul routes, SIA said.
Operations are expected to begin in a year.
The new airline, being established following extensive review and analysis, will allow the SIA Group to serve a largely untapped new market and cater to the growing demand among consumers for low-fare travel, SIA said.
It will be wholly owned by SIA, but operated independently and managed separately from the parent carrier.
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TODAYonline | Hot News | SIA CEO charts new flight plan
Less than six months into the Singapore Airlines (SIA) hot seat, chief executive Goh Choon Phong, 47, is leading the national carrier into a new frontier that was shunned by his predecessor.
Within the next 12 months, SIA's new low-cost subsidiary flying medium- and long-haul routes will be up and running, it announced yesterday. As analysts noted, the reversal was a nod to the inroads made by low-cost carriers in what has traditionally been the turf of full-fledged airlines.
Kuala Lumpur-based carrier AirAsia X - which pioneered the low-cost, long-haul model in South-east Asia in November 2007 - boasts a network that now includes European cities such as London and Paris, the Oceania region as well as the burgeoning China and India markets.
Qantas associate Jetstar, on the other hand, started flying Airbus A-330s long-haul to Melbourne and Auckland in December last year and in March this year respectively. It also has plans to offer flights to Japan and points in Europe in the near term.
Standard & Poor's aviation analyst Shukor Yusof pointed out that a "structural change" in the industry has required SIA to react.
Said the analyst: "They realised that the market won't return to pre-crisis levels and they can't depend purely on premium services ... and being under new management, a CEO who is relatively young and sees things from a different perspective, the company is looking at more adventurous ways of generating revenue."
Mr Siva Govindasamy, Asia managing editor of aviation publication Flightglobal, added: "Budget carriers have given people opportunities to travel and, now that people are getting richer, they want to fly further away. The strong demand for such services means it's an increasingly important market that SIA is looking to tap into."
SIA owns regional carrier SilkAir, as well as controls about a third of regional budget carrier Tiger Airways.
In an interview with Flightglobal published in January last year, former SIA CEO Chew Choon Seng had expressed his doubts over the low-cost, long-haul model. He had added: "It is one thing to ask passengers to pay S$2 or S$5 for a drink on a short-haul flight that is only 45 minutes long but it is another thing on a 13.5-hour flight to London."
SIA said in its announcement yesterday that its new "no-frills" airline will be wholly-owned but operated independently and managed separately.
Analysts estimate the unnamed airline will offer fares at least 30 per cent lower than economy class tickets on SIA. They expect it to operate wide-body or double-aisle aircraft to destinations at least six hours away such as Australia, Japan and China.
SIA's Mr Goh said yesterday the move follows "extensive" review and analysis, and will enable the SIA Group to serve a "largely untapped new market".
"We are seeing a new market segment being created and this will provide another growth opportunity for the SIA Group," said Mr Goh. "As we have observed on short-haul routes within Asia, low-fare airlines help stimulate demand for travel, and we expect this will also prove true for longer flights."
Flamboyant AirAsia head honcho Tony Fernandes responded to the news on Twitter: "singapore airlines to set up a long haul low cost carrier. Hahahaha. Deja vu. Airasia staff should be proud that we have been copied again. Will be same result like tiger."
Mr Fernandes told Today over the phone that the impending competition was "nothing new" for his company.
He added: "We're not afraid of anyone. In fact, SIA is afraid of us, that's why they are starting this subsidiary. Imitation is the best form of flattery."
A Jetstar spokesperson said the carrier is confident of its "market leader position", having developed "a successful formula and a very successful growth strategy" since 2006.
Within the next 12 months, SIA's new low-cost subsidiary flying medium- and long-haul routes will be up and running, it announced yesterday. As analysts noted, the reversal was a nod to the inroads made by low-cost carriers in what has traditionally been the turf of full-fledged airlines.
Kuala Lumpur-based carrier AirAsia X - which pioneered the low-cost, long-haul model in South-east Asia in November 2007 - boasts a network that now includes European cities such as London and Paris, the Oceania region as well as the burgeoning China and India markets.
Qantas associate Jetstar, on the other hand, started flying Airbus A-330s long-haul to Melbourne and Auckland in December last year and in March this year respectively. It also has plans to offer flights to Japan and points in Europe in the near term.
Standard & Poor's aviation analyst Shukor Yusof pointed out that a "structural change" in the industry has required SIA to react.
Said the analyst: "They realised that the market won't return to pre-crisis levels and they can't depend purely on premium services ... and being under new management, a CEO who is relatively young and sees things from a different perspective, the company is looking at more adventurous ways of generating revenue."
Mr Siva Govindasamy, Asia managing editor of aviation publication Flightglobal, added: "Budget carriers have given people opportunities to travel and, now that people are getting richer, they want to fly further away. The strong demand for such services means it's an increasingly important market that SIA is looking to tap into."
SIA owns regional carrier SilkAir, as well as controls about a third of regional budget carrier Tiger Airways.
In an interview with Flightglobal published in January last year, former SIA CEO Chew Choon Seng had expressed his doubts over the low-cost, long-haul model. He had added: "It is one thing to ask passengers to pay S$2 or S$5 for a drink on a short-haul flight that is only 45 minutes long but it is another thing on a 13.5-hour flight to London."
SIA said in its announcement yesterday that its new "no-frills" airline will be wholly-owned but operated independently and managed separately.
Analysts estimate the unnamed airline will offer fares at least 30 per cent lower than economy class tickets on SIA. They expect it to operate wide-body or double-aisle aircraft to destinations at least six hours away such as Australia, Japan and China.
SIA's Mr Goh said yesterday the move follows "extensive" review and analysis, and will enable the SIA Group to serve a "largely untapped new market".
"We are seeing a new market segment being created and this will provide another growth opportunity for the SIA Group," said Mr Goh. "As we have observed on short-haul routes within Asia, low-fare airlines help stimulate demand for travel, and we expect this will also prove true for longer flights."
Flamboyant AirAsia head honcho Tony Fernandes responded to the news on Twitter: "singapore airlines to set up a long haul low cost carrier. Hahahaha. Deja vu. Airasia staff should be proud that we have been copied again. Will be same result like tiger."
Mr Fernandes told Today over the phone that the impending competition was "nothing new" for his company.
He added: "We're not afraid of anyone. In fact, SIA is afraid of us, that's why they are starting this subsidiary. Imitation is the best form of flattery."
A Jetstar spokesperson said the carrier is confident of its "market leader position", having developed "a successful formula and a very successful growth strategy" since 2006.
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I personally don't see how this business model is going to work. I am not TF's biggest fan but the reason for AK and AKX is for accounting practices and the ability to squeeze more money from the general public when it goes public.
However they are run as a single business entity in terms of marketing and network. How is SIA going to do this? Fly budget from PEK to SIN and then what fly premium to BNE?
I believe its going to be a mess. The only advantage that SIA is going to get out of this is lower staff costs....... as always pilots will be the first!
However they are run as a single business entity in terms of marketing and network. How is SIA going to do this? Fly budget from PEK to SIN and then what fly premium to BNE?
I believe its going to be a mess. The only advantage that SIA is going to get out of this is lower staff costs....... as always pilots will be the first!
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oops...
Originally Posted by a345xxx
I personally don't see how this business model is going to work.
Originally Posted by a345xxx
SIA is going to get out of this is lower staff costs....... as always pilots will be the first!
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I'm guessing the planes used will be the 330's and the older 772's then. Pilots wouldn't be an issue since no new orders placed yet and no new planes expected except for a few 380's and i believe some 330's. FO's from india is mostly going to be correct.
Captains will be generated from within for the time being i suspect. As and when required, the expat market may be tapped,for experienced expats.
Seems like an excellent buisness model to me.
Captains will be generated from within for the time being i suspect. As and when required, the expat market may be tapped,for experienced expats.
Seems like an excellent buisness model to me.
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This is an excellent opportunity for SIA to take on the LCC boys aka AirAsiaX and Jetstar. Having lost much business to the lost cost carriers in the 4-5-hour radius, its time to have a slice of the lucrative long-haul LCC pie.
After much deliberation by mgt, theres $ to be made in this untapped biz model. With SIA's careful planning and spare airframes to lend to this upstart, it is exciting days to come. Cost cutting measures are SIA's forte and will be a bonus to help keep this upstart afloat.
On the crewing side of things, its anyone's guess how the flight deck is crewed. An option would be taking on experienced drivers from mainline and then hiring from the world, for a start...
SIA is already in the process of retiring older 777s and 747s, and these may help to develop and test the routes planned. Also leaves to the imagination where the B787s and A350s will be implemented.
Adventure awaits!
After much deliberation by mgt, theres $ to be made in this untapped biz model. With SIA's careful planning and spare airframes to lend to this upstart, it is exciting days to come. Cost cutting measures are SIA's forte and will be a bonus to help keep this upstart afloat.
On the crewing side of things, its anyone's guess how the flight deck is crewed. An option would be taking on experienced drivers from mainline and then hiring from the world, for a start...
SIA is already in the process of retiring older 777s and 747s, and these may help to develop and test the routes planned. Also leaves to the imagination where the B787s and A350s will be implemented.
Adventure awaits!
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An option would be taking on experienced drivers from mainline and then hiring from the world, for a start...
... yeap, and with silk salary, cargo lifestyle and tiger cabin crew
... yeap, and with silk salary, cargo lifestyle and tiger cabin crew
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3 years ago, I got accepted by SIA and was even given a class date for 330 left seat (I'm also 777 rated). As we all know everything came to a halt and I guess I'm in a pool now. does anyone know what the status is these days and/or do
you know of a good TEL/email address to contact them? Thanks guys.
you know of a good TEL/email address to contact them? Thanks guys.