Singapore Airlines takes wider aim with new strategy moves

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Goh Choon Phong has deliberately taken a low profile since becoming chief executive of Singapore Airlines at the start of the year, but two significant announcements in as many weeks have revealed much about the carrier's ambitions for growth on his watch.

In late May, the Star Alliance member said it would establish a no-frills low-fare subsidiary to serve medium- and long-haul routes using widebodies. Details are still scarce, but the independently managed carrier is likely to start within a year, using ex-SIA Boeing 777-200s that will be upgraded to increase their range.

The decision, says SIA, was made after "extensive review and analysis" to serve a market that was largely untapped amid growing demand for low-fare travel. This would also tap into Singapore's position as a major regional short-haul low-cost hub, it says.

"We are seeing a new market segment being created and this will provide another growth opportunity for the SIA Group," Goh says. "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."

In June at IATA's annual general meeting in Singapore, Goh was thrust into the limelight as chairman of the event by virtue of being the host airline's boss.

During the AGM, SIA and Virgin Australia signed an agreement that could pave the way towards a long-term alliance. If approved by regulators, the airlines plan to co-ordinate schedules between Singapore and Australia and beyond. They would also offer reciprocal loyalty programme benefits and lounge access, and engage in joint sales, marketing and distribution activities.

Codeshares on each other's international and domestic flights will lead to an "enlarged network" - Virgin Australia customers will access over 70 more destinations via SIA, while the Star Alliance carrier's passengers will be able to tap 30 more destinations via Virgin Australia.

"The partnership will enable us to offer even more choice for domestic and international air travel," Goh said in a statement.

Speaking after the press conference during the IATA AGM, Goh did not veer far from the official statements. But company sources say that even before he took over, SIA had been studying how it would be able to generate new revenue streams while staying faithful to the premium model that continues to serve it very well after decades. As Goh pointed out during the low-cost subsidiary announcement: "We remain fully committed to the further growth of SIA."

Taken together, the announcements signal a change in SIA's medium-term strategy. Growth on the premium side will remain in single digits, given the competition from Gulf carriers such as Emirates and Qatar Airways. It faces a different threat from Malaysia's AirAsia X, which has grown its long-haul low-cost network out of Kuala Lumpur, and Qantas subsidiary Jetstar, which has similar aims from Singapore.

SIA's solution appears to be to remain committed to the premium model, complement it via entry into a major market - Australia - and supplement it by being competitive in a new market segment via a long-haul low-cost subsidiary. This strategy could push the airline into double-digit growth figures and open it up to a new market of travellers.

And SIA may not stop there - Goh says it will continue to roll out new developments to expand its business. "I've always maintained that to be in this business, you have to be flexible and nimble," he says. Slowly, the big ship that is SIA is altering its course under its quiet new captain.

Read our cover interview with Goh's predecessor at SIA, CS Chew, from January 2010