As we have heard by now, Singapore Airlines would be setting up another subsidiary airline under its wings- an all new mid to long haul budget carrier. It is aimed at challenging other established budget carriers notably Jetstar and Airasia X, the latter which flies from KL to London at a low price of USD$500.
Singapore Airlines already has a wholly owned “sister” airline called Silkair covering South East Asia routes, partially owns Tiger Airways and not to forget they also have a 49% stake in Virgin Atlantic. Therefore this move by the company have been deemed as a bold move and even invited some doubters. From a consumer point of view, it is a welcomed move as consumers get a wider variety of choices. Now let us look at the pros and cons of setting up this all new budget carrier which will be launched by 2012.
- Family branding – Singapore Airlines is a well-known and established brand name in the airline industry therefore the budget carrier’s name will somehow be associated with them.
- Consumers will get more options. Definitely this new budget carrier will set itself out to be different from the rest of the operating carriers. For example, for a hundred-dollar price difference comparatively, a passenger can expect extra baggage and meals to be served onboard.
- Boost revenue and resources. The new subsidiary will use older airplanes disposed by parent company, and the parent company will purchase newer planes which are more fuel-efficient; Win-Win situation.
- Staff recognition. This new carrier may present new options to operating cabin crew to jump ship due to different commitments and different requirements while remaining in the company. Being pioneers, may seem like a better prospect for some.
- Brand Loyalty. Some travellers who love the brand but could not afford the ticket; some choose to fly with others due to the huge price difference. This presents a new set of customers for the company.
- Asia is set to become an airline hub. Singapore, Hong kong and Korea airports have increased their traffic count year on year. The company sees this as an opportunity not to be missed with the high connectivity of flights in Singapore airport.
- Fuel prices. Probably one of the major factors on the profitability of an airline company.
- A global epidemic like Bird Flu or SARS will definitely hurt the airline badly, not to mention the industry.
- High expectation of a budget carrier by a reputable brand. Consumers will expect more as compared to their peers because it is a carrier operated by Singapore Airlines.
- How low is the air fare offered by the new budget carrier, pecked with a premium airline brand name. Consumers will definitely compare the price with their competitors; after all they are targeting a segment who are more price sensitive.
- Current customers of Singapore Airline choosing economy class will defect to the new budget carrier. This will bring down the load factor of Singapore Airlines.
These are just some of my personal views. It is not meant as a promotional article. In conclusion, it could be a wise decision by the company by being able to remain competitive in the industry while maintaining profitability. Travellers will also get to enjoy a new experience onboard while travelling to different parts of the world at an affordable price!