Will Qatar Airways be Malaysia Airlines’ white knight?

Some three to four months after Malaysian prime minister Mahatir Mohamad said ailing Malaysia Airlines (MAS) may shut down or be sold, he revealed he had received four proposals to take over the national flag carrier.

The first known interest came from former AirAsia non-executive chairman Pahamin Ab Rajab and five partners, whose consortium is looking at scooping up a 49 per cent stake in MAS. Whether AirAsia is part of the consortium is not clear, but the budget carrier’s chief Tony Fernandes had said he was not interested as it would be a mistake for a low-cost operator to want to go full-service. (See Can AirAsia save Malaysia Airlines, 8 July 2019)

Qatar Airways now emerged as the second prospective white knight come to the rescue of MAS following a meeting between Dr Mahatir and Qatar Emir Sheikh Tamin Hamad al-Thani. Both Qatar and MAS belong to the OneWorld alliance. At least that’s common ground for a start, unless geopolitical problems Qatar faces with its neighbours that lead to its isolation in the region stand in the way.

But, of course, no doubt Qatar has the funds to shore up the loss-making MAS. There are good competitive reasons for doing so. The tie-up will certainly boost Qatar’s standing in Southeast Asia and the extended Asian region. Dr Mahatir has recognised that MAS suffers from fierce competition, and Qatar’s aggressive strategy in the international arena may well also push the Malaysian carrier in the same direction.

The acquisition will complement Qatar’s investment in Europe, where it is already a major shareholder of the International Airlines Group (IAG) which owns British Airways, Iberia, Vueling and Aer Lingus. With a share of 20.01 per cent, it s IAG’s largest single stakeholder.

It is interesting that of the four proposals received by MAS, Qatar is the only foreign company. It is not known if the other proposals are from industry players apart from the suggestion that Mr Pahamin had an aviation link in a non-executive capacity. That probably explains how many industry experts think MAS’ best bet is AirAsia, once a carrier heavily indebted and now Asia’s leading budget operator.

Qatar’s credentials as the world’s best airline voted by Skytrax respondents are impressive, but national pride to keep the flag carrier in local hands may present a hurdle. Yet one only has to look at Swiss International Air Lines now owned by the Lufthansa Group and the merger between Air France and KLM to appreciate how in business, the desire to survive will dictate the course. Already Dr Mahatir has assured his people MAS will retain its name.

What conclusions can you draw in an airlines survey?

SIA courtesy SIA

WE continue to be fascinated by rankings of the world`s best airlines, although the results of most surveys – take away some bias here and there – are quite predictable and almost similar across the board. The winners by and large boast excellent cabin service, great food, comprehensive in-flight entertainment and innumerable choices, more generous legroom than what their competitors offer, and frills such as complimentary champagne and brand name overnight kit. It is all about creature comforts. And the impressions are understandably almost always skewed by the luxuries of the upper classes.

Traveller magazine Conde Nast has just posted its list of the world’s best airlines, surveyed among some 128,000 readers. Of course this is not the definitive list of excellence to the detail, in the same way that no other list can be as definitive without considering factors such as the type of respondents involved, the scope of the survey and the criteria adopted, but there are nevertheless interesting conclusions to be drawn from them. So often it is more interesting to look at the omissions.

Long haul can impress or disappoint

Singapore Airlines (SIA) is a perennial favorite of Conde Nast readers, ranking top for 27 of 28 years. It is hardly surprising, which to be saying it seems even redundant. The airline has long earned the reputation as one of the world’s best airlines, and is frequently celebrated in other surveys as well. It was ranked second after Qatar Airways in the last Skytrax survey. It is hard to find a match that depicts consistency in excellence. The real clincher seems to be in its long haul operations – such flights that are likely to elicit the flaks when passengers are apt to become more stressed and demanding. Here is where SIA is able to make the difference by a well-trained crew that anticipates a passenger’s needs, always mindful the passenger’s comfort first and foremost in the service.

All the airlines in Conde Nast’s top ten are long haul operators, with the exception of Porter Airlines which is more a city shuttle that flies between Toronto in Canada and US destinations such as Boston, Charleston and Myrtle Beach.

While the long haul impresses, it can also take apart an airline’s reputation, which explains why some airlines are inundated with complaints about being handled like a can of sardines. Interestingly, the Conde Nast list of best American carriers is made up of short-haul operators to the exclusion of the big three of United Airlines, American Airlines and Delta Air Lines. Virgin America is ranked first followed by JetBlue, Hawaiian Airlines, Southwest Airlines and Alaska Airlines.

Dominance by Asian and Gulf Carriers

Again, it is not surprising that Conde Nast’s top ten ranks are dominated by Asian and Gulf carriers, which together were placed in not only in the top three ranks but also seven of the top ten positions. The Gulf big three of Emirates Airlines, Qatar Airways and Etihad Airways were second, third and fifth respectively. Qatar was tops in the earlier Skytrax survey, ahead of Emirates (5th) and Etihad (6th). Other Asian airlines in the Conde Nast list are Japan Airlines (6th), Korean Air (7th) and Cathay Pacific (10th). Both SIA and Cathay were also ranked among Skytrax’s top ten airlines.

Dominance by Asian and Gulf carriers means the stark exclusion of airlines of other regions. Only one European airline – Virgin Atlantic – was listed, and in fourth placing. One asks: Where are British Airways, Air France and Lufthansa although going further down the list you will find Swiss International Air Lines (17th) and Finnair (20th)?

That and the marked absence of US carriers demonstrate the superior service culture of Asian and Gulf carriers and their growing popularity that continue to put pressure on their rivals in the competition. The US big recently accused the Gulf big three of unfair competition supported by state subsidies. In truth, North American airlines are not inefficient, but they lack the soft pampering touches of their competitors. There is a host of pertinent questions. Can US carriers be as friendly or, to go one further, do better? And, ultimately, do they even see the need?

Luxury improves image

Etihad boasts the “residence” suite that comes with a bedroom, private bath with shower and lounge. That is for now the forerunner in the race for the ultimate luxury in the air, leaps ahead of SIA’s first class suites and all the other airlines’ flat bed allures. There are also the extras: Etihad provides a concierge service that will make a dinner reservation for you when you land, and some airlines offer door-to-airport limousine services. The slant towards premium classes is to be expected, for that is what makes news even as the perks are limited to a smaller but more lucrative market of the travelling population. If there is one airline that seems to be doing much more for coach than many others, it is Air New Zealand, which offers “Skycouch” in economy – seats that can be converted into a lie-flat double bed – but then again, this is limited to only three seats in the cabin, reminiscent of the days when EVA designates a small number of seats as the ill-defined premium economy before the subclass takes on an identity of its own today.

Comparison is the crux

In any survey, the crux is the comparison, particularly when they are all said to be providing good cabin service and excellent food amongst the creature comforts. The Conde Nast survey again surfaces the rivalry between SIA and Cathay Pacific in the top ten, favoring the former. Interestingly, Japan Airlines (6th) is ranked ahead of All Nippon Airways (11th), and Korean Air (7th) ahead of Asiana Airlines. That indicates a reversal of order that has been the reading of many past surveys, and may well portend how the competition may be trending.

In the case of Gulf carriers, the ranking rivalry among Emirates, Qatar and Etihad is very much a close call going by several international surveys. At the same time, we cannot ignore the inclusion of Turkish Airlines in Conde Nast’s top 20. Turkish was fourth in the Skytrax survey.

In the close rivalry between Qantas (15th) and Virgin Australia (19th), the former continues to enjoy an advantage over the latter.

What else matters? All the hype about going green as the world becomes increasingly conscious of the impact of climate change? That Korean Air prepares its food from humanely raised and organically grown produce. That El Al offers an iPad rental program. That Virgin Atlantic has a stand-up bar. That Qantas offers Select on Q-Eat that allows you to pre-order your meal. That Air New Zealand makes its safety presentation more entertaining than others. That British Airways allows you to log on to a movie as soon as you board and stay with it until the aircraft is docked at the gate on arrival. The list goes on. And one wonders.

This article was first published in Aspire Aviation.

The times they are a-changing: Singapore Airlines may reintroduce executive economy

Photo courtesy Singapore Airlines

Photo courtesy Singapore Airlines

THE word goes round that Singapore Airlines (SIA) may be introducing premium economy, or rather reintroducing executive economy, pending the outcome of a secret study. Ever since the Singapore flag carrier did away with the short-lived though allegedly popular executive economy on its non-stop services from Singapore to New York and to Los Angeles when they were converted into exclusive all-business class flights, SIA has been adamant about not going down that road again. The non-stop services to New York and Los Angeles have ceased operating since the end of last year.

However, any turnabout if it happens should not be a surprise. One cannot turn a blind eye to the reality of the changing business landscape, and certainly SIA cannot ignore the apparent success of rival Cathay Pacific’s premium economy. It is quite normal for any business entity, and a visionary one at that, to change course to stay in the competition.

So it was when SIA turned its nose up on the budget travel business, challenged by Singapore’s first budget carrier Valuair which was founded in 2004 by no other than former SIA chairman Lim Chin Beng who together with predecessor J Y Pillay were largely credited for the airline’s astronomical growth in its early days and its reputation as one of the world’s best loved airlines, ranking it amongst the industry’s top earners. Today SIA is a majority stakeholder of Tigerair besides its wholly owned budget subsidiary Scoot. The threat posed by budget carriers has all but broken down the belief that they were different and exclusive markets for legacy and budget operators. SIA could not remain outside the circle when Qantas set up Jetstar Asia based in Singapore itself and as Malaysian carrier AirAsia spread its wings across the region. It could even be said to be a late starter.

When the business class first emerged in Europe, Swissair which was in many ways like SIA having earned the reputation for efficiency and good service, and which some observers might even suggest was an early model that SIA might have tried to emulate, similarly rejected the concept. But it changed its tune when the trend became entrenched. The national carrier of Switzerland ceased operations in 2002, and today’s Swiss International Air Lines is a subsidiary of the Lufthansa Group.

Whether SIA will eventually put premium economy on its flights will depend on how it perceives air travel will trend as befitting its modus operandi and situation of time and place. It would be unfair to suggest that SIA should ape Cathay, in the same way that Cathay cannot be faulted for not jumping on the budget travel bandwagon – at least not for now – although it has expressed dissatisfaction that Qantas and China Eastern Airlines should be given the licence to jointly operate Jetstar Hong Kong in spite of its insistence that Hong Kong cannot sustain budget operations.

Timing has plenty to do with Cathay’s successful implementation of its premium economy. As the global economy continues to wallow in uncertainty but with some signs of recovery, Cathay is catering to hitherto business class travellers who may otherwise downgrade to economy for not wanting to spend as much and to those economy class travellers who may want a better product but are not willing to pay that much more for business class. Yet Cathay is not the only airline that has introduced this sub-class of travel. EVA Air pioneered this in the 1990s on a very limited basis. The difference is that Cathay has made premium economy a different product – and a class of its own – rather than one that is only marginally better more in name than in the actual product that could be nothing more than just slightly wider seats further up front, orange juice served in glasses instead of plastic cups, and on the ground priority check-in and boarding. In a way, Cathay makes the difference visible, something that we can expect SIA to match or do better if it decides to go down that road.

As a leading premium carrier making about 40% or more of its profits from the upper classes of travel, SIA has been banking on the good times returning when the premium economy may well become redundant. The downside is that if premium economy is proven to be too good, it can grow at the expense of the business class and impact the overall yield negatively over the long term. For an airline that wows in the upper classes and provides an adequately impressive economy class service, this may result in dilution and compromises across the classes that will narrow the differentiation so critical in the sale pitch. The question is whether SIA can afford to wait – or has it already waited too long – to see how the landscape pans out while the rest of the industry moves in the direction of premium economy. Historically, the business class has replaced the first class for some airlines and for some routes even for those which generally offer a three-class configuration.

Geographically, there is a place issue. The premium economy is a more likely product for the long-haul routes. It may make sense for an airline like SIA which is largely a long-haul operator although the recent global economic crisis has increased its focus on the mid-range Asian market. With the competition intensifying between Changi Airport and Dubai International Airport for the Europe run, and between Changi Airport and Hong Kong International Airport as an Asian gateway for trans-Pacific traffic, SIA’s modus operandi in this connection may to some extent depend on the fortune of Changi as a hub airport, noting that Changi has in recent years been seeing higher growth presented by budget carriers than by legacy airlines. SIA’s cessation of its non-stop flights to New York and to Los Angeles may be a case in point.

In the end, it all boils down SIA;s vision of the kind of airline it will be in the years ahead against a constantly changing landscape. It seems a superfluous question, but it is a necessary soul-searching exercise. As the airline prepares to announce its full year result ending March 31, with little to celebrate judging by the penultimate quarter performance and the slow take-up in the closing months, SIA may yet excite with announcement of new initiatives moving forward. One of these could be the re-introduction of its executive economy

Dark clouds over Asia-Pacific

THERE has not been much good news lately in Asia Pacific aviation. This is worthy of note, not that airlines in other parts of the world are faring better – far from it – but that this region, in particular Asia, in these challenging times has been touted as the only region expected to be showing any growth.

Air Australia went bust. It is not the first nor will it be the last to bite the dust in light of rising fuel costs against the backdrop of a sluggish global economy. The Australian carrier’s demise raises the question as to whether there is room for such a supposedly boutique airline that grew from the charter business, relying heavily on government contracts, to expand into the wider and more competitive commercial arena of the more established carriers.

The future of India’s Kingfisher Airlines is hanging in the balance as it posted deeper losses – R4.44 billion in the last Oct-Dec quarter compared to R2.54 billion in the previous year, plunging 75%. The airline has never made a profit since it was launched in 2008. In a statement that it issued, Kingfisher said: “Steep depreciation of the Indian rupee coupled with consistently high crude oil prices has led to a challenging quarter for the Indian aviation industry.” Its fuel costs had risen by 37% to R1.9 billion. The company has already wounded up its budget arm.

Tiger Airways reported a net loss of S$17 million for 3QFY11/12 (Oct-Dec) compared to a profit of S$22.5 million in 3QFY10/11. Both Tiger Australia and Tiger Singapore were in the red. Latest data for Jan 2012 showed a fall in the number of passengers flown by 16% to 466,000 against seat capacity of 621,000 – giving a load factor of 75% compared to 83% in Dec 2011. High fuel costs and fleet under-utilisation were cited as the culprits.

Malaysia budget carrier AirAsia reported a 56% decline in Q4 (Oct-Dec) profit from M$311.1 million a year ago to M$135.7 million. However, full-year result showed increased operating profit by 12% to M$1.2 billion compared to M$1.0 billion the previous year. This was achieved despite a 36% increase in fuel costs. The airline had earlier announced it was terminating flights to Europe and India because of high fuel process and weak demand.

Performance for AirAsia’s 49% stakes in both AirAsia Thailand and AirAsia Indonesia was not encouraging. Although both carriers reported growth in revenue, AirAsia Thailand posted a profit of Bt2.04 million against Bt2.01 the year before, and that for AirAsia Indonesia dropped 53% to Rp150 billion from Rp312 billion. Two new joint-ventures – AirAsia Japan (in which AirAsia has a 49% stake) and AirAsia Philippines (40% stake) have been added to its stable this year.

It is not just the smaller airlines that are feeling the pinch, but the big guys too. Qantas posted a 52 per cent drop in first half profits before tax from A$417 million to A$202 million. Earnings for the airline plunged from A$165 million to A$66 million, down 60%. This was attributed largely to the cost of industrial action amounting to A$194 million and increased fuel costs that jumped 26% or A$444 million to A$2.2 billion.

Singapore Airlines (SIA) too reported that fuel prices had adversely affected its performance as net profit for 3QFY11/12 fell 64% from S$378 million to S$137m. Expenditure on fuel – which accounted for 40% of expenditure – went up by US$386 million or 33%. All three wholly-owned subsidiaries also recorded fall in operating profit: SIA Engineering, S$28 million down from S$34 million; SilkAir, S$32 million, down from S$45 million; and SIA Cargo, S$40 million from S$48 million. Looking ahead, SIA expects passenger yields to remain under pressure while cargo yields will continue to decline.

Thai Airways International posted a net loss of Bt10.2 billion for the year ending Dec 31, down from Bt14.7 billion the year before. Again, this was attributed largely to a 38.7% increase in jet fuel prices.

In announcing the results for Qantas, chief executive Alan Joyce said: “The highly competitive markets and tough global economy in which we operate mean that we must change.” For Qantas, it means cutting jobs and unprofitable routes – the most likely route that most other airlines would similarly adopt. An added strategy is to grow budget subsidiary Jetstar, which achieved record EBIT of A$147 million, up A$4 million and focus more on the Asian market with the setting up of two new subsidiaries – a joint-venture with Japan Airlines and Mitsubishi Corporation and a regional all-Asia premium carrier.

SIA is also well supported by SilkAir, Tiger Airways (for which it has a 32.8% stake) and a new budget arm – Scoot – to be launched in July, operating regional long haul to destinations in Australia and China. In a climate of uncertain trends, it is a catch-all strategy.

Loss-making Malaysia Airlines is probably working on a similar strategy, announcing its intention to cooperate with compatriot AirAsia to divide the market between them, with Malaysia Airlines focussing on the long-haul full-service, AirAsia on budget and the likelihood of a regional premium airline in the fashion of Qantas amidst growing speculation that it could be a three-way partnership which, if it materializes, will base the new carrier in Kuala Lumpur.

While some airlines such as SIA, Thai and Hainan Airlines have reported improved traffic in January this year (and all eyes are now turned to Cathay’s impending result announcement in mid-March), dark clouds still loom large overhead considering the debt crisis that Europe continues to face and the escalating fuel price especially now that Iran has curbed its export to the European Union and the likelihood of its extension to other political foes. This is apt to squeeze the low-cost operators more than their bigger competitors, considering that fuel expenses make up a higher proportion of the former’s total operating costs. Full-service airlines may be able to cushion the impact by new rounds of fuel surcharge hikes, something that budget carriers are less likely to afford doing without losing market share.

The higher fare as a consequence of higher fuel costs may reduce the demand for leisure travel, which is likely to affect more the budget carriers that operate to vacation destinations (as in the case of Air Australia), whereas business travel is largely price inelastic. Several full-service airlines which thrive on the high yield of the premium market are hopeful of its recovery. The market has strengthened towards the end of 2011, contributing to a full-year growth of 5.5%. While mindful of the risks posed by the Eurozone crisis, the International Air Transport Association (IATA) is expecting some increase in business travel, lending some support to premium travel, in the months ahead. One cannot be too sure too if this lends enough credence to HongKong Airlines’ optimism to launch all-business class flights between Hong Kong and London.

What is happening in Asia-Pacific may be reflected in the strategy of an airline outside the region, namely Swiss International Air Lines – the successor of once the world’s most reputed airline, Swissair, that went bust in 2001. The resurrected Swiss airline has identified business class as its main focus in the competition, and its catchment has to extend beyond Switzerland.

It has also identified Middle East carriers such as Emirates as the “real” competitors, which are threatening to shift intercontinental hubs to where they are based – clearly the same threat that Qantas is facing on the kangaroo route as these carriers are offering strong connection alternatives, and a similar concern for SIA that an airport like Dubai is diverting hub traffic away from Singapore Changi Airport.

Swiss International chief commercial officer Holger Hatty opined that budget and network carriers would become increasingly similar in the short and medium haul business, and that the main battleground for competition is shifting to the long-haul trunk routes. Are the days of unprecedented growth for short-haul budget carriers over, which explains how some of them are already looking beyond the 4-hour flight-time limitation of the conventional budget model?

As for the long haul, Swiss International believes it has the right ingredients, where it can compete on product quality providing such creature comforts as air-cushioned seats and freshly-made food in first and business class, and on personalized customer service with some “intimacy”. That should be good news for airlines such as SIA and Cathay Pacific, and perhaps Qantas as it restructures its international arm.

Currency conversion
US$1 = A$0.93 = R48.98 (Indian rupee) = S$1.25 = M$3.02 (Malaysian ringgit) = Bt30.32 (Thai Baht) = Rp9,046 (Indonesian rupiah)

Banking on premium economy

EVEN as the airline industry looks forward to reaping a net profit of US$8.9 billion this year – tripled the previous forecast – industry experts are not convinced the upward trend can be sustained. Already there are signs of a slowdown heading into the last quarter, and the International Air Transport Association (Iata) is forecasting profits to fall to US$5.3 billion in 2011.

Iata chief Giovanni Bisignani warns: “It’s no time for a big celebration, just a small party.”

Against this background of continuing uncertainty and increased competition from budget carriers, major airlines that are banking on a resurge of business travel in the front end of the aircraft are re-thinking their product mix.

Cathay Pacific Airways, which has been pushing back plans to introduce a class between business and coach, looks set to roll out the product by 2012. Early in the year, Cathay chief executive Tony Tyler told Bloomberg: “There are pretty good arguments for it.”

Premium economy, however, is not new. Pioneered by Taiwan’s EVA Air in the 1990s, many airlines have similarly introduced this before the economic downturn. Singapore Airlines (SIA) used to offer Executive Economy on its non-stop flights between Singapore and Los Angeles as well as New York until it decided to reconfigure the aircraft as exclusively business class.

Many airlines are beginning to recognise premium economy’s cash cow potential, thus the renewed effort to market the product. Its appeal lies in wider seats and more legroom than in economy, more crew attention and, varying from airline to airline, perks such as better meals, premium wines, in-seat power points for laptop use, wider TV screens, exclusive cabin for added privacy, additional baggage allowance, priority check-in, boarding and disembarkation, and the flexibility to change flights without penalty.

It looks like value for money. You pay not half as much but get a good dose of business class treatment.

Flying business class (and, of course, first class) is as much about status as it is about comfort. However, companies crunching numbers during the global recession have found it expedient to overlook the psychological feel-good factor as they downgrade executive travel. Now airlines are reworking strategies to recoup that lost business.

Major airlines such as SIA and Cathay which in better times derive more than 40 per cent of revenue from the upper classes have reported a return of the traffic but there is no telling if it has regained its erstwhile level. Premium economy seems to be the answer, not to replace business class but as a step nearer that ideal. The traditional 3-class configuration of first, business and economy may well be replaced by a new standard of business, premium economy and economy. It’s a matter of nomenclature.

Qantas, which first introduced premium economy in 2008, has plans to expand premium economy availability. Chief executive Alan Joyce told The Age: “With the configuration changes that we’re doing, we’re going to grow the premium economy cabin by 26 per cent and that’s an initiative that we believe will also improve the yield mix and the premium traffic.”

Other airlines that have introduced this include Air New Zealand (whose Skycouch will allow passengers to lie flat), British Airways (which goes by the brand World Traveller Plus), Virgin Atlantic, Scandinavian Airline System, Air France, KLM, Air Canada, United Airlines, Japan Airlines (featuring the JAL Sky Shell Seat which won the 2008 Good Design Award) and All Nippon Airlines. Even budget carriers that boast business class availability are by comparison offering in reality a version of premium economy.

With Cathay set to join the ranks, noticeably absent in the Asian “A” list are SIA and Emirates Airlines. These two airlines, among the world’s most avant-garde, have so far been silent on any plans to keep up with the Joneses. Will they pay dearly for staying out?

SIA for its reputation stands to gain more than most airlines as the economy recovers. There are already signs of the business class cabin filling up. So while its rivals busy themselves with pushing premium economy, SIA may even sell on being one that is truly premium, not economy attempting to be premium. It will be spared the problem that competitor airlines may face as the economy continues to strengthen, when loyal erstwhile business class travellers find themselves too comfortable in the mid-class to want to move up even as they can afford. The risk is SIA customers switching loyalty for the cheaper alternative.

In light of air travellers’ changing preferences, SIA may be losing out on new business opportunities. Early studies have shown that about 40 per cent of passengers are business travellers, and at least half of them travel in economy. Premium economy is the carrot for those with limited budgets. There is also a new generation of leisure travellers who will spend a little more to enhance their holiday experience. JAL is targeting baby-boomer retirees with money to spend on themselves.

When European airlines first introduced business class, then Swissair (predecessor of Swiss International Airlines) insisted it would stick to its 2-class configuration of first and economy. It had to eat humble pie subsequently.

Don’t put it past SIA to surprise us. After all, its short-lived Executive Economy – the unfortunate victim of a Sophie’s choice – was popular among travelers. When that happens, expect Emirates to follow suit. The UAE carrier has for a long time after its inception prided itself as an airline modelled after SIA.

Jetstar increases competition at Changi Airport

BUDGET carrier Jetstar Airways looks set to increase its presence at Changi Airport. There is market speculation that it will be appointed Singapore’s third ground handling agent – besides Singapore Airport Terminal Services (Sats) and Changi International Airport Services (Cias) – replacing Swissport, which closed shop on April 1 last year, barely four years after it started.

Already Jetstar has announced it will be flying direct daily services between Singapore and Melbourne from December and between Singapore and Auckland from March next year. Jetstar chief executive officer Bruce Buchanan said this would build “a solid foundation for future growth beyond Singapore to North Asia and Europe.”

Jetstar is eyeing other long-haul destinations such as Beijing, Shanghai, Tokyo, Rome and Amsterdam, operating through Singapore.

Some observers think Singapore Airlines (SIA) will feel the heat of the competition from Jetstar. But competition is no stranger to SIA wherever it flies. Priding itself as a full-service network airline with premium product and service offerings, SIA believes it caters to a different market. Nonetheless, SIA said it welcomed the competition from Jetstar.

Some other observers think Jetstar’s long-haul venture would backfire on parent Qantas instead if their products were not sufficiently differentiated. Jetstar would grow at the expense of Qantas.

While SIA is unlikely to feel much of a pinch from Jetstar’s network expansion through Singapore, Sats will suffer a significant loss of its market share if Jetstar becomes its rival on ground.

Sats will lose the business of not only Jetstar (including its offshoot Jetstar Airways Asia) but also Qantas, which is its biggest client after SIA. This is to be expected, in the same way that Sats lost the clientele of Emirates Airlines when owner Dnata of the United Arab Emirates flag carrier acquired Cias in 2004.

Other potential risks to not only Sats but also Cias will depend on Jetstar’s ability to penetrate the markets held by them.

This should augur well for Changi, whose authorities have reiterated that the objective of introducing a third handling agent is to increase competition and provide airlines with more choice.

However, if Swissport with its global reputation as one of the best in its field had failed, could Jetstar with limited experience succeed?

While Swissport’s entry into Singapore might have been ill-timed considering how the global economy would soon nosedive, the Swiss company was not blessed with adequate local or regional pedigree advantages.

Swissport did not have a sustainable base that Jetstar enjoys in itself as a growing carrier and in Qantas with its high frequency through Singapore. The familial support provided by Swiss International Air Lines (which had ceased flying to Singapore) to Swissport did not have the volume that Qantas would bring to Jetstar – in the same way that Sats used to enjoy the support of erstwhile parent SIA and continues to benefit from its volume of business.

What Jetstar lacks in experience may be made up by Qantas’ expertise in ground handling. Jetstar may also be able to leverage on Qantas’ network connections in much the same way that Sats has benefited from its relationship with SIA. The Swiss national flag carrier does not enjoy the same standing that Qantas and SIA enjoy as major airlines in the region and as key players flying the kangaroo route. Opportunities for reciprocity are therefore limited.

In as much as Swissport might have learnt too late from its failure at Changi, the Changi Airport Group (CAG), which manages the airport, too would have become wiser from its appointment of Swissport.

Jetstar’s growing business through Singapore and its Qantas connection make it a suitable candidate for sustainable operations, even if it means self-handling for a start. CAG cannot allow a repeat failure by a third ground handling appointee since it is convinced this is in the best interest of Changi as a regional hub.

 Cost is an important consideration, especially when Changi wants to attract more of the growing regional budget airline business, whose growth has been phenomenal as full-service airlines suffered the lashings of the global recession. That alone may justify the appointment of a low-cost operator which is able to offer a budget-type ground handling package beyond just operating out of a budget terminal that even some full-service airlines may be enticed to consider.

Statistics released by CAG showed healthy traffic growth for Changi – 33 million passenger movements, which is an increase of almost 22 per cent in May over the same month last year, much of the growth attributed to budget carriers. The time may be right to pursue an old dream.