What would make the new Scoot different?

Singapore Airlines (SIA)’s budget subsidiaires Scoot and Tigerair are now fully merged under one name, i.e. Scoot. Tigerair operated its last flight on July 24.

Why Scoot and not Tigerair? Quite obviously, considering the dotted history of the latter’s operations that ran the gamut of bad publicity from complaints about poor service and flight disruptions to safety infringement that resulted in suspension of its Australian services in 2011.

Adopting the Scoot brand could help distance the new identity from a beleaguered past. Tigerair remained a broken dream for its parent who had named it with the nostalgia of an erstwhile era before SIA broke away from Malaysia-Singapore Airlines to come into its own. Then the airlines was flying the Tiger logo.

Courtesy Scoot

The Scoot/Tigerair merger is marked with a new tagline: Escape the Ordinary. Though not one quite stunning or provocative for a tagline, it is perhaps an ambitious but staid attempt to set itself apart from the pack. Scoot’s original tagline was the somewhat outlandish “Get Outta Here!”

Yet what would make the new Scoot different?

Scoot CEO Lee Lik Hsin said of its new tagline: “It is inspirational to our inner wanderlust, and inspires us to travel and explore the world.”

Given that any and all of the airlines, whether full-service or no-frills, are but a means of transportation, how then will Scoot inspire people to travel with them instead of others? That’s the challenge.


The end draws near for Tigerair

ScootTigerThe announced assimilation of Tigerair into Scoot by the end of next year does not come as a surprise. In fact, it has long been anticipated.

The two airlines will operate under the single identity of Singapore Airlines (SIA)’s youngest subsidiary airline Scoot which was originally intended as a medium-to-long haul budget carrier in contrast to Tigerair’s short-haul status. To be expected, Scoot is performing much better than Tigerair, which has been plagued by an ill-gotten past. Faced with stiff regional competition, the lines soon blur between the networks of the two brands as they lapse into each other’s domain. The intra-competition does not make economic sense, which led to a policy of co-operating rather than competing.

A new company Budget Aviation Holdings (BAH) was formed in May to manage the two carriers. So said SIA CEO Goh Choon Phong: “The integration has already led to commercial and operational synergies between Scoot and Tigerair that are providing growth opportunities for both airlines. Following a review, we have determined that the logical next step is to pursue a common operating licence and common brand identity to enable a more seamless travel experience for customers.”
BAH chief executive Lee Lik Hsin added: “A single brand is less confusing for consumers and more effective to build brand loyalty and affinity.”

Multiple branding within a family is not a new economic phenomenon. But it has not worked for the Scoot-Tigerair differentiation when the market becomes restricted by its defined limits that may hurt both carriers in their pursuit of growth, particularly for Scoot in its own right to tap into source markets to grow beyond those confines. Besides, the poor reputation of Tigerair does not help. More than that, what really is happening in the big picture is that the aviation landscape has shifted drastically. The so-called niche budget market has extended beyond its boundaries. Tigerair seems a lame and superfluous appendage when Scoot could do the job better, and the neater structure will better position the Group in an integrative strategy rather one that is segmented overall.

Scoot and Tigerair go where it makes sense

ScootTigerSingapore Airlines (SIA)’s decision to bring its budget subsidiaries Tigerair and Scoot under the control of a common holding company – Budget Aviation Holdings – is no surprise. Expected and long predicted. It just didn’t make sense for the two carriers to be competing for the same market in apparent collaboration although the initial division is for one to operate the short haul and the other the medium haul. The lines soon blurred.

The new entity will be headed by Tigerair CEO Lee Lik Hsin.

SIA chief executive Goh Choon Phong said: “The holding company structure will drive a deep integration of our low-cost subsidiaries, which are important parts of our portfolio strategy in which we have investments in both the full-service and budget aspects of the airline business.”

Indeed, as the aviation landscape keeps shifting, one may even wonder why this has not happened much earlier with Tigerair’s poor performance and Scoot competing in the same market. While major airlines are consolidating their strengths, SIA may be finding it one too many on its plate to try and catch-all but risks dilution of its core strategy. Well, as it has always been said, better late than never, and better now than later.

This may be the prelude to the merger of the two carriers with one identity although SIA has said there may be difficulties with traffic rights, airline/aircraft registration and licensing. But it can happen. “We would not rule it out,” said Mr Goh. “But for the moment, we do see a benefit in them having their own separate identities.”

Tigerair turns around

Courtesy AFP

Courtesy AFP

AT last Tigerair is reporting a positive quarter (3QFY15) with aprofit after tax of S$2.2 million (US$1.76 million), compared to a hefty loss of S$118.5 million in the previous year. This was achieved on the back of a reduction in costs by 1.5% and capacity by 5.7% that resulted in a higher load factor by 6.2 percentage points and an improved yield by 4.9%. More notably, actual fuel costs fell 21.2% from S$82 million to S$65 million, a blessing of the current slump in the global oil market.

But Tiger, as its CEO Lee Lik Hsin said in a statement issued by the airline, is `not out of the woods yet`. Moving forward, the budget carrier looks to its affiliation with parent Singapore Airlines (SIA) for strength. SIA has increased its stake in Tigerair to 55%, and has not ruled out increasing it further. This suggests a more direct involvement by SIA in Tigerair`s affairs.

Indeed, it is going to be a family affair, with Tigerair saying it will work more closely with step-sibling Scoot. Presumably that must also mean joining hands to take on the competition posed by the likes of AirAsia and Jetstar.

Is there a future for Tigerair?

Courtesy AFP

Courtesy AFP

IT has to happen, and it is happening. The anticipated increased control of the long ailing and unprofitable Tigerair by parent airlines in both Singapore and Australia was announced almost simultaneously, an unlikely coincidence.

Tigerair (Singapore)

Singapore Airlines (SIA) will increase its stake in Tigerair from 40 to a majority of 55 per cent. The low-cost carrier reported its biggest loss to date for the quarter July to September, posting a loss of S$182.4 million (US$145.9 million) compared to a profit of S$23.8 million last year. By January 2015, SIA’s stake is expected to increase to as much as 71 per cent following a rights issue to raise up to S$234 million.

Despite the growth of air travel in the region and budget carriers accounting for more than 50 per cent of the traffic at Singapore Changi Airport, Tigerair seems embattled by the competition. Tigerair CEO Lee Lik Hsin was “heartened” by SIA’s support, reiterating the familiar standard strategy for a turnaround: “We have resolved our excess capacity issues and we also stemmed further losses from overseas venture.” Overcapacity was already cited in the preceding quarter’s report. In May the carrier said in a statement: “Tigerair Singapore had started the process of consolidating its services in preparation for a decisive turnaround in its prospects.” The carrier had since ended its costly partnerships in the Philippines (Tigerair Philippines) and Indonesia (Tigerair Mandala).

Granted, it may be early days. Yet how different would SIA’s increased dominance make in the future of the ailing Tigerair? Hitherto, the SIA hand has long been suspected to be writing the Tigerair story. Underlying the appointment of Mr Koay Peng Yen – Mr Lee’s predecessor – as CEO of the carrier was the expectation that Tigerair would benefit from an injection of new ideas from outside the SIA family, but that apparently had not seemed to work. Even with a makeover involving a name change and logo, the carrier continued to bleed. Replacing Mr Koay with someone from within the SIA Group only affirmed the parent airline’s intention to reassert a greater influence to hopefully steer it back to profitability. (See Can leadership change save Tigerair? May 16, 2014)

SIA in its own right continues to be one of the world’s most successful airlines in aviation history, and among the best for premium service. But the same could not be said of its investments outside the airline in joint ventures and subsidiary operations. The name itself should work some magic on Tigerair, yet it does not as the budget carrier faces stiff competition from the likes of AirAsia and Jetstar, including even sibling Scoot. It has long suspected that the day would come when SIA divests its stake in Tigerair, as it did with the Australian offshoot with first a majority share sale of 60 per cent to Virgin Australia and then finally relinquishing it totally for A$1. Further efforts to save the Singapore-based Tigerair may yet lead to the same outcome of counting the days for the carrier. It does not make sense for SIA to operate or maintain two budget carriers within its fold if they are competing for the same market within the region, although Scoot is supposed to ply medium to long-haul routes. Besides, there is also regional carrier SilkAir, albeit a full-service airline. (See Is Singapore Airlines better off without its subsidiaries? Aug 6, 2014)

Tigerair Australia

Is Virgin Australia in the same dire straits as SIA to have gone this far that it only makes sense to continue going?

Observers may be surprised by Virgin buying the unprofitable Tigerair Australia for A$1 (US$0.88). But its complete takeover of the budget carrier was hardly a surprise. Virgin’s earlier 60-per-cent acquisition augured the complete divestment by SIA in a matter of time. Troubled carriers have been known to be sold for a dollar, such as Malaysia’s AirAsia which was transferred from a government conglomerate to new owner Tony Fernandes for one Malaysian ringgit (US$0.26). But note that such acquisition usually comes laden with heavy debts. Mr Fernandes’ success in turning around the heavily indebted AirAsia into Asia’s largest budget carrier might offer the much needed optimism for the ill-reputed Tigerair to look ahead to better days under Virgin’s undivided attention

Virgin chief executive John Borghetti said: “We will benefit from the economies and achieve profitability ahead of schedule by the end of 2016.”

Unlike its Singapore counterpart, Tigerair Australia is less buffeted by competition though not necessarily less intense competition. Virgin’s interest in Tigerair is fueled by the competition posed by Qantas’s subsidiary Jetstar; Tigerair would provide an expanded network and the necessary links domestically. To that end, Virgin may have already achieved the satisfaction of knowing its rival is now more wary of its presence. In view of the subdued domestic demand (which Qantas has also cited as affecting its domestic operations), Virgin would slow down the growth of Tigerair than originally planned. Mr Borghetti said Tigerair’s fleet is likely to be reduced. The general consensus in the industry is that with full control of the budget carrier, Virgin is probably in a better position to speed up its plan to improve Tigerair’s performance. Q1 losses from Tigerair Australia amounted to A$11.6 million.

So, is there a future for Tigerair? The ground may be more favorable in Australia as demand in the domestic market improves. In Singapore, SIA may already be thinking of how else it may metamorphose the loss-making carrier.

This article was first published in Aspire Aviation.

Tigerair keeps sinking

Courtesy Tigerair

Courtesy Tigerair

THE tide has not changed for Tigerair as the budget carrier which is 40% owned by Singapore Airlines continues to be plagued by poor performance.

Tigerair posted an operating loss of S$16.4 million (US$13.1 million) for the quarter ended June 30, 2014, which is the first quarter of its new financial year. This was more than twice the loss of S$6.2 million for the same quarter last year.

The company cited two primary reasons for the contraction. First, the exclusion of Tigerair Australia from the results after it was acquired 60% by Virgin Australia in July last year. This raised the question as to whether Tigerair had made a bad investment decision at a time when it was desperately trying to cut losses.

Second, the huge loss incurred by Mandala Indonesia Airlines, which was everything but a savvy decision at a time when Tigerair was pressured by the regional competition in a race to set up joint ventures and expand its network particularly in light of the impending full implementation of the Asean (Association of Southeast Asian Nations) open skies policy in 2015. The cost for that hasty misadventure amounted to S$35.3 million for the quarter. This widened the loss to S$65.2 million. The Indonesian carrier has since July 1 ceased operations with a provision for shutdown costs of S$14.6 million. On a note of forced optimism, Tigerair could look to an improved bottom line, as stated by CEO Lee Lik Hsin in a press release: “With the cessation, the Group will no longer be exposed to loss-making Mandala.”

Either way, Tigerair appears to be trapped, perhaps a victim of circumstances, but in cold business, that may only serve to amplify the weaknesses not of the market but of the player in question, only simply because it is all about the competition.

So did Mr Lee also say: “Despite the competitive operating conditions faced by Tigerair Singapore, our first quarter results showed a slight improvement over the last quarter.” Some consolation there; you choose the quarter for comparison as you deem fit. While corresponding quarters best take care of seasonal aberrations, consecutive quarters can point to a changing trend. The truth often lies somewhere in between, how much of it depending on how skewed the interpretation is presented. No one can argue the toss with Mr Lee. Figures don’t lie; what is more important is the reading of the story they tell.

For the same quarter ending June 30, Tigerair Singapore posted an operating loss of S$19.8 million, compared to an operating profit of S$5.9 million last year. However, by the same argument, it was an improvement over the operating loss of S$29.4 million in the preceding quarter. The point of contention is whether this is a sufficient indication of a turning trend, losing less. The good news was that revenue grew by 3.2% – but that was as far as it went – on the back of an increase in capacity by 14.8% resulting in a higher load factor by 0.8 percentage points which unfortunately was offset by lower yields by as much as 11.5%. The bad news is that costs went up by 19.9%.

Tigerair continues to gripe about overcapacity that has affected its bottom line. In the statement it issued, Tigerair said: “Tigerair Singapore continues to operate in a challenging environment due to persistent oversupply of capacity in the region.” That, we have to admit, is the crux of the competition. While soothsayers continue to raise the optimism of rising Asia, the truth is that the competition has intensified as the region becomes more liberal. This is exacerbated by the thin line between budget and legacy. Asean too may have oversold the dream of its open skies, and the proliferation of upstarts, whether independent or wholly/jointly owned entities, has brought about intra-airline instead of inter-airline competition that in the case of Tigerair sees it competing with sibling Scoot.

Tackling overcapacity can mean aggression or a retreat. Tigerair is already executing plans to ground eight surplus aircraft. With the cessation of Mandala operations, the Group will have four more surplus aircraft returned to the hangar.

In May when Tigerair replaced Mr Koay Peng Yen with Mr Lee at the helm, it said: “Tigerair Singapore had started the process of consolidating its services in preparation for a decisive turnaround in its prospects.” In his parting shot, Mr Koay said: “We have re-calibrated our strategy and taken the necessary steps to reposition Tigerair.” (See Can leadership change save Tigerair? May 16, 2014) Maybe it is still early days. Apart from the change of leadership, we are still none the wiser about that re-calibration unless it was all about shedding Mandala to mark the intended turning point. What else, one is apt to ask.

This article was first published in Aspire Aviation.

Can leadership change save Tigerair?

Courtesy Tigerair

Courtesy Tigerair

THE sudden departure of Koay Peng Yen as Tigerair’s CEO smacks of a management issue at the top.

To some observers, it may have come as a surprise, considering that not too long ago, Mr Koay appeared to be all too ready to steer the beleaguered budget carrier in a new direction when he said: “We have re-calibrated our strategy and taken the necessary steps to re-position Tigerair.” What exactly those steps might be is not clear, apart from the sale of Tigerair’s stake in Tigerair Philippines to Cebu Pacific Airways and the intended sale of its stake in Tigerair Mandala (Indonesia), both moves made to cut losses in the joint ventures.

To others, Mr Koay’s departure was to be expected as Tigerair continues to roll in losses, fails at expanding its regional connections with third party carriers, and hardly succeeds any better in performance even with its rebranding, in competition with rivals such as AirAsia and Jetstar Asia. Its Q4 net loss widened from S$15.4 million (US$12.3 million) a year ago to S$95.5 million, a hefty more-than-six-fold increase, of which S$21.5 million was attributed to losses in associate and joint ventures. The future is bleak. Or, as stated by the carrier: “Tigerair continues to operate in a challenging business environment. It is expected that yield and load factors will remain under pressure.”

Mr Koay is being replaced by an internal candidate from within parent Singapore Airlines (SIA), which owns about 40 per cent of Tigerair. Interestingly, Mr Koay whose stint with Tigerair lasted barely two years was an external candidate from the shipping industry. It is a perennial favourite debate across large corporations as to whether fresh blood from without might do a better job at improving a company`s fortune, especially when the company concerned is ailing and failing. With hindsight knowledge, one might reflect on whether Mr Koay`s appointment then could not have come at a better or worse time when Tigerair`s reputation was at its nadir, and the airline was reeling from the suspension of its Australian operations because of safety breaches. Quite paradoxically, it also marked the beginning of increased involvement by parent SIA in the affairs of Tigerair. The appointment of Lee Lik Hsin as Mr Koay’s successor pointed to even greater influence by SIA. Perhaps then there may be better synergy between parent and offspring, and perhaps even more significantly, the sibling carriers within the SIA stable may better complement rather than compete with each other.

A statement issued by Tiger said: “By the time of Koay’s departure, Tigerair Singapore had started the process of consolidating its services in preparation for a decisive turnaround in its prospects.” One cannot be sure if that was meant to compliment Mr Koay, who, during his term, also saw the sale of a 60-per-cent stake in Tigerair Australia to Virgin Australia which might at that time look like a sweet deal – for Tiger, it would improve the bottom line, and for Virgin it was an investment in its bitter competition with Qantas and Jetstar, Or did that Tiger’s statement inadvertently spell out the fortuitous timing for Mr Lee, to lead from a hinted certainty the way that Mr Koay might been challenged to steer from uncertainty?

Tigerair has blamed over-capacity in the industry, increased competition and “turbulence in markets that hampered fledgling carriers from establishing a decisive hold” for its woes. Yet this is the very stuff that the business is all about. Incorporated in 2003 and commencing services a year later, the company was hardly a “fledgling” though the reference might be directed at the carrier’s recent joint ventures whose failure might have to do with more than just being so granting that start-up costs are a normal course of business. Clearly the powers that be have recognized the need for reorganization and new directions, and we keep asking, “What next, Tigerair?”

So too, the question: Can leadership change save Tigerair? It is tempting to say it may need more than just that, but the change of hand provides the opportunity to change course, whether driven by the new man or the power behind him. Yet in fairness to Mr Lee, whose last appointment was president of SIA Cargo, time will tell.

This article was first published in Aspire Aviation.