Singapore Airlines’ budget subsidiary Scoot’s announcement that it will fly to Perth will tighten SIA group’s grip on that market, but will also have an impact on low-cost sibling Tigerair.
Services to Perth, which will start from 19 December, will be the last route announced by Scoot in the short term. The carrier has five Boeing 777-200s in service, and with the arrival of a sixth leased 777 that will allow it to launch Hong Kong and Perth services, its fleet will be fully accounted for until its 787s start arriving from late 2014.
With its 777s configured for 402 seats, FlightMaps Analytics show that Scoot will hold a 10.9% share of total seats on the route, despite having the lowest frequency among the five carriers on the route. This will likely cause a short-term reduction in yields for all carriers while demand grows into the capacity.
Source: FlightMaps Analytics
Overall, it will give the SIA group a commanding 73.9% share of seat capacity on the route, compared with 26.1% held by Qantas Airways and affiliate Jetstar Asia. Qantas cut back its frequency on the route in April from twice to once daily as a result of it moving its European hub to Dubai.
More interesting, though, is how Scoot will compete with Tigerair on the route, despite the fact that SIA has a 33% stake in Tigerair.
It is not the first time that the two budget brands have competed with each other. Scoot launched a daily service to Bangkok in July 2012, noting that it would provide more connections for its passengers and boost its fleet utilisation. It then started flying to Taipei, and in November, it will launch services to Hong Kong, both of which are also served by Tigerair.
The increasing overlap seems to run counter to SIA chief executive Goh Choon Phong’s portfolio strategy under which, the two carriers would complement each other in their respective short-haul and long-haul markets. Rival carriers AirAsia X and AirAsia operate on a similar model.
Thus far, Tigerair has not announced any capacity reductions on the routes where it competes with Scoot - which may signify that it sees sufficient differences between the two brands for each to hold a sustainable market position over the long term.
For Scoot, choosing Perth may have come out of necessity. With such large capacity, bilateral constraints and its tight operational requirements, Perth may have been a better fit operationally compared with Melbourne, which was widely tipped to be the next Australia city it would serve.
It may also be a sign that Scoot is planning to aggressively target routes that Malaysia-based competitor AirAsia X flies on. Following the revision of the Australia-Malaysia bilateral agreement earlier this year, AirAsia X announced that it would increase its services to Perth to double daily frequencies, while Australian government data shows that in July 2013 it had 3.4% share of the international market, making it the tenth largest airline serving the country.
AirAsia X, on its part, was quick to issue a statement welcoming Scoot’s Perth announcement.
“We welcome competition in the market and believe that new entrants will help stimulate travel for all operators and provide greater choice for travellers,” said chief executive Azran Osman-Rani.
While Scoot's entry on the route provides travellers with more options, it will also mean more pain in the short term for competing airlines, especially Tigerair.