SIA to form long-haul low-cost subsidiary

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Singapore Airlines (SIA) plans to establish a no-frills low-fare subsidiary that will serve medium and long-haul routes using widebodies.

Operations at the Singapore-based wholly-owned subsidiary will begin within a year, and it will be managed separately from SIA, said the Star Alliance carrier.

"The new airline is being established following extensive review and analysis. It will enable the SIA Group to serve a largely untapped new market and cater to the growing demand among consumers for low-fare travel," added the airline.

This is the airline's first major decision under new CEO Goh Choon Phong, who took over the reins at SIA on 1 January and has largely kept a low profile while reviewing the carrier's medium to long-term strategy.

"We are seeing a new market segment being created and this will provide another growth opportunity for the SIA Group," he said. "As we have observed on short-haul routes within Asia, low-fare airlines help stimulate demand for travel, and we expect this will also prove true for longer flights."

The company remains committed to its flagship airline's premium model, and this new subsidiary will supplement the existing businesses, he added. "We remain fully committed to the further growth of SIA, which will continue to offer the highest-quality products and services to our customers."

Kuala Lumpur-based AirAsia X, in which Malaysian low-cost carrier AirAsia has a 16% stake, pioneered the long-haul low-cost model in Southeast Asia and has gradually grown since it began operations in November 2007. Its network now includes London, Paris, Tehran, Gold Coast, Melbourne, Christchurch, New Delhi, Mumbai, Chengdu, Tianjin, Hangzhou, Taipei, Seoul, Tokyo and Perth.

From Singapore, Qantas associate Jetstar Asia flies Airbus A330s long-haul to Melbourne and Auckland. It also plans to offer services to Japan and points in Europe in the near term.

Details related to the new airline's branding, products and services, and route network will be announced by its management team "in due course", said SIA.

Aircraft will initially be sourced from the parent carrier, which has 20 Boeing 787-9s and 20 Airbus A350-900s on order. SIA's spokesman said that subsequently, "all options are open on aircraft sourcing".

He added that there could be routes on which both the parent airline and the new subsidiary could operate on, although this will be decided by the management team.

SIA's regional airline SilkAir will retain its business model, he said. "SilkAir is a network carrier while this subsidiary will have a point-to-point model," he added.