Is Singapore Airlines Ltd Set To Bid Good Bye To Tigerair Forever?

Singapore Airlines Ltd  (SGX: C6L), the owner of Singapore’s national carrier, currently runs four airline brands.

One is the company’s namesake and flagship long-haul carrier, Singapore Airlines. There is also the premium short-haul carrier Silkair. Then, there are the two budget carrier brands, Tigerair and Scoot; Singapore Airlines had owned a stake in Tigerair for many years, but made a full acquisition earlier this year.

Today, Singapore Airlines announced that it would be putting the Tigerair brand to sleep, for good. Singapore Airlines has decided that its two budget carriers would be integrated by mid- to end-2017 and would operate under a single Scoot brand after the integration. The integrated budget carriers would be run under a common operating license and as a single business unit.

Singapore Airlines thinks the integration can bring operational synergies between the two brands to a higher level. By integrating, the budget carriers’ customers can have a smoother experience.

Currently, Scoot and Tigerair have two different booking websites and run two different airline crews. This could be confusing for customers given that both airlines are essentially the same company within the same segment of the aviation industry.

The business environment for budget carriers is highly competitive. Some of Scoot and Tigerair’s largest competitors in the region include AirAsia Berhad (KLSE: 5099.KL) and LionAir. Both have a fleet of over a hundred operational aircraft and have orders for a few hundred more. In comparison, Tigerair and Scoot only have 34 planes in service today along with 48 planes on order.

So, if Singapore Airlines’ two budget carrier brands are to stand alone, they might find it hard to gain the scale needed to compete successfully with both AirAsia and LionAir in the region.

But, it is worth noting that even by combining the two brands, the budget division of Singapore Airlines would still be significantly smaller than the larger AirAsia and LionAir.

Would Singapore Airlines be able to grow its budget carrier into a business with sustainable growth and profitability in the near future?

It is hard to know at the moment. But the integration of Scoot and Tigerair is definitely a good start. The only sad news is that, for fans of Tigerair out there, it is time to say their final good byes…

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim does not own shares in any companies mentioned above.