SIA to unleash budget Tiger Airways
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SIA will hold a 49 percent stake in Tiger Airways.
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SINGAPORE (Reuters) -- Singapore Airlines Ltd, Asia's largest airline by market value, has announced it will launch a budget carrier called Tiger Airways in the face of growing regional competition.
The success of Asian budget carriers such as Australia's Virgin Blue and Malaysia's Air Asia has exposed strong pent-up consumer demand for cheap fares at a time when Asia's aviation industry is recovering from the fallout of SARS.
"SIA recognizes the potential for low cost travel in this part of the world and wishes to participate in this new segment of the market," said Chew Choon Seng, chief executive of Singapore Airlines, in a statement.
Regional rival Qantas Airways Ltd recently said it would launch a low-cost airline next May to fend off competition from other budget operators.
"They were talking about this for a while and this was pretty much expected. It's a defensive move," said Philip Wickham, regional analyst at ING Barings.
Singapore Airlines said the new airline, due to take off in the second half of 2004, would be launched in partnership with Singapore's state investment agency Temasek Holdings, along with Indigo Partners LLC and Irelandia Investments Ltd.
Singapore Airlines will hold 49 percent, the Singapore government's powerful investment agency Temasek will hold 11 percent, Indigo Parters 24 percent and Irelandia, the investment vehicle of Tony Ryan, founder of Irish no-frills airline Ryanair , will have 16 percent.
"Singapore Airlines and Temasek will own a majority of the new airline, but Tiger will be separately certificated and operated independently by a team specially recruited for the low cost airline," the carrier said in a statement.
The low cost airline will operate a large fleet of single type, narrow body aircraft.
"No firm decision has yet been made on aircraft type. However the excess supply of aircraft available worldwide is expected to result in very low prices from the manufacturers and lessors," the airline said.
The classic formula for a budget airline is to get high productivity from planes and employees on short- and medium-haul flights using a standardized fleet of aircraft that are turned round rapidly at uncongested secondary airports.
Booking is done on-line, seating is all-economy and service minimal and usually there's no free food and drink.
But some analysts say that formula cannot work as well in Asia, pointing to a dearth of suitable secondary airports and to long flight times that marginalize the advantages of quick turnarounds and make service more attractive.
Charlie Clifton, former director of operations at Ryanair, will establish the base in Singapore and set up operations throughout Southeast Asia over coming months, the statement said.
"It's probably a good idea for them to bring them in," said Wickham, referring to Ryanair's partnership. "They have been running a low cost airline so it makes it a better build."
Copyright 2003
Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
