Tiger Airways-Scoot tie-up: Time to redefine sibling airline roles

Courtesy en.wikipedia.org

SINGAPORE AIRLINES (SIA) may be caught in a bind with one too many carriers in its stable. SIA wholly-owns regional carrier SilkAir and the newly inaugurated budget carrier Scoot, and has a stake of close to 33 per cent in budget carrier Tiger Airways.

While analysts applaud a possible tie-up between Tiger Airways and Scoot as a positive move in rationalizing their operations, what more than meets the eye is the cause rather than the result. Of course, the obvious question is why Scoot, set up to operate medium-to-long-haul routes, should fly the shorter Singapore-Bangkok route in direct competition with Tiger. Will it be going to more places where Tiger is already going?

SIA CEO Goh Choon Phong said the SIA group is looking at greater collaboration between the two budget carriers. This was affirmed by Tiger chief Koay Peng Yen when he said Tiger would offer more passenger choices by working in partnerships with other airlines – not ruling out Scoot. It would be some comfort for the ailing Tiger which has not been particularly successful in tying up with other airlines. However, any tie-up between Tiger and Scoot is more an expected than surprise outcome. After all, blood is thicker than water.

When news first surfaced of SIA’s plans to set up Scoot, which operated its inaugural flight to Sydney in July, there were mixed reactions among analysts. It was obvious that SIA did not want to be left out of the growing regional budget business, which was already posing a challenge to legacy airlines for the low-end traffic when premium travel continued (and still does) to drag. That might be a discreet strategy to retain overall market share within the family

Moreover, Qantas has been aggressive in promoting Jetstar across Asia with considerable success, in contrast to the loss-making international operations of the parent company. There has to be a sizeable market out there that SIA as a premium carrier may not be able to completely tap, as suggested by the frenzy of full-service airlines such as Japan Airlines and All Nippon Airlines entering into budget joint ventures. The region’s low-cost airlines themselves, such as AirAsia and Lion Air, have also expressed ambitious plans in fleet and network expansion.

The Scoot decision came at a time when Tiger was caught in a troubled spot, having been suspended by the Australian authorities over safety concerns. The timing could not be incidental. While SIA began taking a stronger interest in reverting Tiger’s misfortune, it could not rely on the latter’s damaged reputation as the budget race gathered momentum. Scoot appeared to be a quick substitute even though it was set up as a budget long-haul operator, unlike Tiger which focuses on flights no longer than five hours in the true tradition of the no-frills model – at least, perhaps, until Tiger recovers. Speculations were rife then as to whether SIA would fully acquire Tiger or in time sell off Tiger, which by then would have been displaced by Scoot.

Today the question is whether Tiger and Scoot might as well operate as one, even if they retain their different identities. While early concerns had been that Scoot would eat into its parent’s market share, operating the same routes, consider how Scoot, supposedly branded for the medium-to-long-haul, is now taking on a route that should have been left entirely to Tiger. It is good news if it means going where there is capacity shortage, but not if it is a scramble for survival.

One begins to wonder if SIA has in its anxiety to protect its turf spawned one too many offshoots, though the forward strategy is likely to divide the market between premium as the domain of SIA (mainly long haul) and SilkAir (regional and secondary destinations), and budget – whether short or long-haul – that of Tiger and Scoot, but with a fair amount of overlaps. Here is no less a lesson learnt from SIA’s past when grooming SilkAir as an alternative choice on the same routes proved to be less than desirable. 

Some analysts make much of the benefits of connectivity between Tiger and Scoot, believing the tie-up would more likely favour Scoot with feed from Tiger for its long haul routes. This might have been overplayed, considering the nature of budget travel that is made up predominantly of point-to-point traffic and how interline transfers is hardly a feature of the budget model. There may be more synergy between these two carriers and SIA, in cases where SIA does not operate.

The SIA management has often reiterated that its subsidiaries operate independently, even when SIA CEO Goh hinted at the possible tie-up between Tiger and Scoot. Indeed, SIA cannot afford to be detracted from the competition itself faces. While nothing binds stronger than the maternal instinct, nonetheless there is an urgent need to redefine clearly the roles of each sibling airline vis-à-vis the parent within the SIA group.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

One Response to Tiger Airways-Scoot tie-up: Time to redefine sibling airline roles

  1. T T says:

    TIGER & SCOOT AIRLINES LOST MY LUGGAGE AND HAVE DONE NOTHING TO HELP ME. THEY DESTROYED MY TRIP TO AUSTRALIA DUMPING ME IN ANOTHER COUNTRY WITH ONLY THE CLOTHES ON MY BACK. WHEN I CONTACTED THE STAFF IN SYDNEY THAT HANDLES LOST LUGGAGE FOR TIGER AND SCOOT ( AEROCARE) THEY SHOWED ME A STACK OF CLAIMS WITH 80 BAGS THAT HAD BEEN LOST IN THE LAST 2 WEEKS! SHAME ON YOU TIGER AND SCOOT AIRLINES YOU ARE A TERRIBLE COMPANY! (You) take over 10 days to answer an email!!!!

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