Singapore Airlines has set the scene for consolidation among Asia-Pacific carriers by announcing it will launch a wide body longer range low fare second brand airline.
The move will bring enormous pressure to bear on Qantas plans for expanding its Jetstar franchise in the region and its projected low cost but ‘premium’ single aisle Asia based brand.
The statement by Singapore Airlines issued after the close of trading on the Singapore Stock Exchange says:
Singapore Airlines has today announced its intention 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.
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 Mr Goh Choon Phong.
“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.”
Mr Goh added: “At the same time we remain fully committed to the further growth of SIA, which will continue to offer the highest-quality products and services to our customers.”
More details will be announced by the new airline’s management team in due course, including its branding, products and services, and route network.
Early speculation in Singapore has nominated the dozens of Boeing 777-200ER jets in the Singapore Airlines fleet as a likely choice of airliner for the budget longer haul brand, as these aircraft are fully depreciated and available at nominal cost.
However Singapore Airlines is also the world’s second largest operator of the Airbus A380, and has a transitional fleet of A330-300s in service pending the arrival of orders for 20 Airbus A350s and 20 Boeing 787-9s.
The fleet and brand choice is one thing. The consequences for airline consolidation in this hemisphere are another matter altogether because of the potential for Singapore Airlines to add capacity to its new venture rapidly and stress the viability of operations by existing longer haul low cost carriers in AirAsiaX and Jetstar’s fledgling Singapore based A332 operations.
The move would also have the potential to outflank the announced intention of Qantas to have an Asia based entity operate a fleet of 50 Boeing 787-8s and -9s for both the Qantas and Jetstar brands.
Singapore Airlines owns a full service single aisle subsidiary Silk Air which flies A320s on short to medium haul routes in SE Asia, and has a one third equity in Tiger Airways, down from the 49 percent holding it had when that venture was launched in 2004 in response to Qantas setting up Jetstar Asia in Singapore.
The move into longer haul low cost operations by Singapore Airlines also gives Virgin Australia investors something to think about in the context of the recent ‘healing’ of relations between the Virgin brand and the Singaporean group, and Virgin Australia’s announced intention of establishing an Asia alliance by the end of December.