- POSTED: 16 Dec 2013 12:31
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Taiwan's China Airlines and Singapore's Tiger Airways plan to set up a Taiwan-based budget carrier, while Scoot plans to establish a new Bangkok-based low-cost carrier with Thailand's Nok Airlines.
SINGAPORE: Competition in Asia's low-cost carrier space continues to intensify with the likes of Singapore Airlines' (SIA) budget offshoots, Tigerair and Scoot, announcing plans to launch low-cost carriers with new partners.
Analysts said this sudden aggressive move by SIA's low-cost subsidiaries is to play catch-up with other low-cost stalwarts in a bid to expand its reach across both North and Southeast Asia.
Tigerair and Taiwan-based China Airlines plan to set up Taiwan's first-ever budget carrier.
Tigerair will hold a 10 per cent stake in new carrier Tigerair Taiwan, and the new start-up will have a registered capital of S$85 million.
In a statement, Tigerair said the new carrier will also extend its presence into the new and largely untapped markets of Taiwan, Japan, and Korea.
Ellis Taylor, a reporter at Flightglobal, said: "But Tiger is only taking 10 per cent stake in this carrier so it's hard to see what they're going to bring to the table, except for their branding and so on.
“The big question is how much influence Tiger would be able to yield over the whole thing. I think it will be very hard for China Airlines to give up control and let it run as a low-cost carrier. We've seen problems with that with ANA and AirAsia Japan, which of course is now finished. I wonder if we will run into the same issues there."
SIA's long-haul budget carrier Scoot is also joining hands with Nok Air in Bangkok to establish new low-cost player NokScoot.
Based at Don Mueang international airport, Scoot will hold a 49 per cent stake and Nok Air will take up a 51 per cent stake.
The investment costs an initial S$80 million and is still subject to regulatory approvals.
Experts said this move is akin to SIA, a forerunner in the aviation industry, taking its cue from other smaller players.
Mr Taylor said: “They're playing catch-up to an extent, particularly to the AirAsia group who have been very successful in their pan Asian strategy and their long haul affiliate AirAsia X. So I wouldn't be surprised to see Nok Scoot go up against AirAsia X when they announce their destinations. They've sort of flagged that North Asia and Australasia will be the key markets.”
In addition to new carriers, Tigerair and Scoot will be collaborating on joint operations and sales, as well as marketing on parallel routes.
And if that is not enough, Tigerair is also venturing into India, with an agreement with Indian budget carrier SpiceJet to allow passengers to connect to each other's flights.
Mr Taylor said: “The SpiceJet agreement really is about allowing more connections into India. So passengers will be able to fly Tigerair to Hyerabad particularly, and then fly on from there through the SpiceJet network into 14 other destinations.
“That is significant of course as the Indian market is very big, and Tigerair has expanded there a lot and this just extends their reach. The downside is that it's a very competitive market there. There have been a lot of airlines putting capacity in, and it makes it hard to go through."
It is clear that SIA has embraced the competition in the low-cost carrier space with the latest agreements between Scoot and Nok Air, as well as Tigerair and China Airlines.
Analysts said this is SIA's attempt to defend its position in Asia.
But with more low-cost players coming into the same market, experts said ticket prices will inevitably be lower, which is good news for travellers.
Subranshu Das, director of aerospace practice at Frost & Sullivan, said: “We've seen many low-cost carriers registered but not able to sustain. We anticipate in the next couple of decades, consolidation is going to happen.
“The umbrella model works, that means Singapore airlines under SIA, you will find Tiger Airways, Scoot and SilkAir. Look at Malaysia Airways, MASwings, Firefly. Each is trying to spread the overhead cost, utilise the resources and infrastructure which is the key in minimising the cost."
Still, some observers expect SIA to weather the changing landscape quite well, with its steady cash flow and multiple funding sources.