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Scoot and Tigerair drive Singapore Airlines Group expansion in China; 14 new destinations in 5 years
The Singapore Airlines (SIA) Group is pursuing further expansion in China, which is already the group’s single largest market and perhaps strategically – its most important. Tigerair’s 28-Apr-2016 launch of services to Wuxi gives the SIA Group 23 scheduled destinations in mainland China.
SIA now has more Chinese destinations than the rival group Cathay Pacific, and more than any foreign airline group outside North Asia. Five years ago the SIA Group had only nine Chinese destinations.
Over the last four years SIA has grown capacity to China by approximately 50%, with nearly all the growth generated by its LCC subsidiaries Scoot and Tigerair. SIA currently only has slightly less capacity to China than Southeast Asia’s leading LCC group – AirAsia. Cathay Pacific, AirAsia, Asiana and Korean Air are the only foreign airline groups that are now larger in China than SIA.
The Singapore Airlines (SIA) Group will in Oct-2016 become the second airline group after AirAsia to serve all 10 ASEAN countries. Laos is the last piece of the puzzle and will be served by SIA full service regional subsidiary SilkAir with a new thrice weekly Singapore-Vientiane-Luang Prabang-Singapore circle routing.
Following the launch of Luang Prabang and Vientiane, SilkAir will have 32 Southeast Asian destinations and the SIA Group will have 42. Connecting secondary markets in the fast growing Southeast Asian region is critical for SIA as it tries to unlock a new era of growth and differentiate itself from competitors.
This is Part 2 in a two part series of reports. The first part focused on expected growth in the Lao international market and how SilkAir is trying to benefit. This part will focus on how the launch of services to Laos is an important step in the SIA Group network strategy.
SilkAir Part 1: Luang Prabang, Vientiane launch positions SIA to benefit from growth in Laos tourism
Singapore Airlines' full service regional subsidiary SilkAir has confirmed plans to launch Luang Prabang and Vientiane in Laos in late Oct-2016. SIA will become only the eighth foreign airline group to serve Laos, which has a small but fast-growing international market.
SilkAir’s new Singapore-Vientiane-Luang Prabang-Singapore circular route is strategically important for the SIA Group as Laos is the only Southeast Asian and ASEAN country not yet served by the group. AirAsia is now the only airline group serving all the 10 countries that make up ASEAN.
Enhancing regional connectivity is an important component of the new SIA Group strategy as it aims to differentiate itself from competitors and grow, despite intensifying competition. The group’s Southeast Asian network will exceed 40 destinations by the end of 2016. In 2016 SIA is also expanding its network in China and India, two other strategically important markets, to 23 and 15 destinations respectively.
Luang Prabang in Laos is emerging as one of Southeast Asia’s fastest growing tourist destinations, driving rapid passenger growth with services by at least four new airlines in 2016. Thai AirAsia will become the first LCC to serve Luang Prabang Airport in Mar-2016 as it launches flights from Bangkok, ending a long battle to gain access to the previously restricted Luang Prabang market.
Malaysia AirAsia and HK Express are also planning to launch service to Luang Prabang, while Singapore Airlines regional subsidiary SilkAir is planning a new route from Singapore on a circular routing that also includes the capital Vientiane. The new SilkAir route is strategically important for the SIA Group as Laos is the only ASEAN country currently not served by any SIA Group airline.
Vientiane had approximately twice the traffic of Luang Prabang in 2015, but Luang Prabang is the bigger tourist attraction and has tremendous growth potential. Luang Prabang completed an expansion project in 2012 which enabled the airport to accommodate jets, and the Lao government is now planning to expand the tiny international passenger terminal to meet surging demand.
The Singapore Airlines (SIA) Group plans to advance its multi-brand strategy by fully taking over and integrating short-haul LCC Tigerair. The proposed acquisition of the remaining 44% stake in Tigerair is a long overdue move which will improve the group’s overall position, in particular the outlook for long-haul LCC subsidiary Scoot.
SIA should have opted for a bigger role in Tigerair when the LCC was established in 2003, to fly in the following year. SIA also repeatedly opted against taking over Tigerair in recent years although such a move became increasingly inevitable as Tigerair struggled and the launch of Scoot meant that strategically SIA could no longer afford to continue playing a passive role. Better late than never. And it is not too late. The amalgam will give SIA far cleaner operating and partnership options than it had previously.
SIA still faces challenges as competition continues to intensify, both regionally and in key long haul markets. The 6-Nov-2015 offer to take over the remaining stake in Tigerair is just one of several components in a still evolving group strategy aimed at improving SIA’s long-term outlook.
Singapore Airlines (SIA) is approaching a critical juncture with its multi-brand strategy as the group reviews its overall network and pursues new synergies between its four airline brands. The transition of short haul LCC Tigerair from a partially owned affiliate to a majority owned subsidiary has particularly opened up opportunities for medium/long haul LCC subsidiary Scoot and the overall group.
SIA recently began selling Scoot operated flights and is now looking at also forging an interline arrangement with Tigerair. Placing full service and even premium passengers on budget brands was previously unthinkable for SIA but has become a necessary and sensible step as Scoot and Tigerair give the group access to over 20 additional destinations.
SIA’s frequent flyer members can also now accrue and redeem points on Tigerair and Scoot, another recent development that highlights the strategic shift in the group’s multi-brand strategy. SIA is committing to improving the position of its two budget brands, which for now remain unprofitable but are critical components to the group’s long term strategy.