SINGAPORE: The integration of Tigerair and Scoot will strengthen parent company Singapore Airlines’ (SIA) position in the low-cost segment and provide new opportunities in a challenging global environment, SIA CEO Goh Choon Phong said on Friday (Nov 4).
In the second half of next year, Tigerair will come under the Scoot brand name and both airlines will operate under a single licence, according to a statement from Budget Aviation on Friday, which owns and manages the low-cost airlines under the SIA Group.
Commenting on the decision, Mr Goh said the group realised that the creation of Budget Aviation in May was insufficient to capture the full benefits of an integration, and hence “the best way is to go with one brand”.
“There are other synergies that we cannot fully exploit because they remain different brands,” he said. “One single brand will bring about the ultimate benefits of full integration in all aspects in the budget side of the business.”
Mr Lee Lik Hsin, CEO of Budget Aviation, added that both Scoot and Tigerair have contributed to the group’s profitability, with both airlines’ earnings improving over the past six months. The integration will help to improve revenue further, he said.
“Economies of scale will definitely have benefits but there will be a limit on what that can bring. On the revenue side, we are a lot more optimistic on what we can gain from a single brand.”
In response to queries from Channel NewsAsia on manpower plans, Mr Lee said the group will need more staff despite the integration.
“We have talked about growth over the next one year and beyond that. We recently had some communication about pilots and cabin crew growth that we need. In general, it will be that kind of situation and we need more people.”
The announcement of a timeline for the integration of Scoot and Tigerair comes one day after a disappointing earnings report card from SIA.
For the three months to September, the national carrier posted a near 70 per cent plunge in net profit to S$64.9 million, compared to S$213.6 million a year ago. Group revenue fell to S$3.65 billion from S$3.84 billion.
With the exception of Scoot and Tigerair, all other companies in the group – including parent airline SIA, as well as SilkAir, SIA Cargo and SIA Engineering – saw their earnings take a hit in the second quarter.
KEY STRATEGIES PLAYING OUT WELL: SIA CEO
In a briefing with media and analysts on Friday, Mr Goh outlined the group’s continued emphasis on four key areas: Strengthening its premium positioning, having a varied portfolio of airlines, maintaining a multi-hub approach and seeking new business opportunities.
While he does not expect the gloom in the global economy to “last forever”, structural challenges such as an increasingly competitive landscape will likely remain, he said.
“We continue to enforce these strategies that we have implemented over the past years,” Mr Goh said. “They are taking shape and augurs well for the group.”
As part of its positioning as a premium airline, SIA will continue to roll out its new SilverKris Lounges, with the latest opening slated to be in Bangkok during the first quarter of 2017.
Other initiatives include extending its premium economy class to more aircraft, as well as the recent introduction of Teochew dishes to its in-flight menu.
The national carrier also plans to add 12 new destinations this financial year, Mr Goh revealed, noting that this is “not a small feat” given the challenging business environment.
“We will not be able to do so without the push with the portfolio model and taking decisive steps to acquire new aircraft,” he said. “Our portfolio allows us to be nimble … With new aircraft types, we are able to grow in a manner that is feasible for the airline.”
