May 16, 2016

Tigerair takes on rest of Asia with alliance

A long game by Singapore to engineer a low cost airline boost to its hub and tourism industry has spawned an LCC alliance that will benefit Virgin Australia's Tigerair franchise

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

The value of the Value Alliance to Singapore is well mapped
The value of the Value Alliance of low cost carriers to Singapore is well mapped

Tigerair Australia (and seven other low cost carriers) have just announced the Value Alliance to give them the market clout and network reach to take on the major trans border Asia Pacific LCC franchises of AirAsia and Jetstar.

Make that without spending billions of anything on new jets and trying to cut each other’s throats, but at risk of their own, in the process.

It consists of Virgin Australia’s Tigerair operation, Singapore Airline’s Tigerair head franchise and its wide body low cost 787 operation, Scoot, Cebu Pacific (Philippines), Nok Air, and NokScoot (Thailand), Vanilla Air (Japan) and Jeju Air (South Korea).

In some cases there are overlapping ownerships, and there are obvious gaps in the maps including China, Taiwan, Vietnam, Indonesia, Malaysia and India compared to AirAsia and Jetstar.

But the Value Alliance members hold a combined significant presence in 17 hub airports and carry 47 million passengers a year in what is a fast growing market for low fare air travel and it might obviously grow in numbers of airlines and combined network reach.

The arrangements to collectively sell each other’s products (including bookable ancillaries like refreshments, checked baggage, roomier seats, priority boarding and other extras) are in the process of being rolled out.

Put together the branded networks of each Value Alliance Member mean multi-stop itineraries involving any of them can be booked on a single visit to any of their booking sites. Delivering on these claims will be obviously critical to success, given the number of risks the different airports and borders will pose to reliability.

The combined route map shown at the top of the post is also strongly Singapore-centric, reflecting the long term plan by Singapore to leverage low cost travel to grow its tourism industry and reinvigorate traffic flows through its Changi hub at a time when it was being increasingly bypassed by non-stop flights into the PRC and losing some of its shine as both a business centre and cross roads for SE Asia.

Those objectives made it easy for Singapore to accommodate the ambitions Qantas had for its Singapore based Jetstar Asia franchise more than 11 years ago. That same long game has now fostered the formation of the Value Alliance, and added more value to Virgin Australia’s ownership of the local Tigerair franchise.

It’s a game that will be played for a long time to come.

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5 thoughts on “Tigerair takes on rest of Asia with alliance

  1. ghostwhowalksnz

    Would there be regulatory concerns because of Tigerair Australia involvement?

    “Shukor Yusof, founder of Malaysia-based aviation consultancy Endau Analytics, said the alliance will benefit carriers more than passengers.
    “The idea would be to align airfares so that there will not be too much disparity between the different discount carriers… I suspect that no longer will you be able to get airfares that cost less than a jug of beer,” he said.

    There would seem some significant competition watchdogs that should be barking over this stitchup

  2. Ben Sandilands

    Interesting possibilities. The ACCC doesn’t have any obvious jurisdiction over air tickets sold for flights between two points outside of Australia. There has never been a case brought against (without prejudice) Air NZ for a domestic flight bought here, nor Ryanair or similar in Europe, but there may be a legal technicality that allows actions against their agents, as has happened on rare occasions for tickets bought in Australia for journeys starting here in foreign carriers, including code shared or interline connections.
    I suspect the reason is that it might be like hitting a walnut with a steam hammer but in slow motion over a period of years for legal fees similar to the annual GDP of Tasmania.

    Another factor is competition impairment. I don’t think there would be a public interest case of merit where there is competition for the Value Alliance from other carriers. In practice, airlines can charge anything they like for any sort of fare here, but they are on international services, incredibly incapable of making anybody pay for anything that is uncompetitive.

  3. ghostwhowalksnz

    ACCC seems to vet airlines that operate to Australia and within and their tie ups, so is Scoot and Tigerair not under that category ?

  4. Ben Sandilands

    I think that’s the point that needs exploring. The ACCC has not so far ever dealt with issues that apply to a flight between two points outside Australia, and no offshore competition authority has ever dealt with a flight that occurs totally externally to their home country borders. (Well, maybe they have, but I can’t find one.)

    However the ACCC, and other similar bodies, have dealt with cartel like behavior, notably in the freight fixing cases, which, no doubt to the disappointment of many, have seen fines imposed on various carriers including Qantas and Air NZ sometimes revoked on appeal.
    I’m not arguing with your point, but making the case that no-one actually gives a f*ck if the consumer has competitive alternatives.

    Regulatory intervention in fares and conditions normally requires a misuse of market power to deceive or coerce consumers or deny them alternatives.

    I disagree in part with the Sabah article in that the Value Alliance seems to represent an offer of convenience more than anything else. It won’t achieve anything if it isn’t price competitive with Jetstar, AirAsia, Indigo, Hong Kong Airlines and so forth, so there is no obvious disadvantage to consumers. At this stage.

  5. Rais

    Singapore is a good entry to West Malaysia without necessarily bothering with a connecting flight to Kuala Lumpur. I sometimes go to Singapore and get on a cheap, comfortable coach (even cheaper from Johor Bahru) to KL.

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