Singapore Airlines (SIA) is to enter the low-fare market in partnership with foreign investors including the founder of Europe's Ryanair Tony Ryan and David Bonderman.

Tiger Airways is due to launch in the second half of 2004 from Singapore's Changi Airport, operating a "substantial fleet" of narrowbody aircraft to destinations within 4h of Singapore. An aircraft type selection is due to be made shortly.

SIA will hold the largest single stake of 49%; Indigo Partners, the aviation partnership of US investors David Bonderman and former America West Airlines head Bill Franke, takes 24%; Irelandia Investments, owned by the family of Tony Ryan, will hold 16%; and SIA's majority shareholder, Temasek Holdings, will have 11%.

"We recognise the potential for low-cost travel in this part of the world and wish to participate in this new segment of the market," says SIA. "As SIA itself is a premium, full-service airline, it does not have experience with the low-cost carrier business model. We are therefore pleased to invest in this new airline with partners who have the right credentials and a relevant track record of success."

Low-fare carriers have yet to take off in Asia in the same way they have in Europe or North America, but there has been intense market activity in recent months. Malaysia's successful low-fare domestic carrier AirAsia has just launched its first international services and is establishing a joint-venture carrier in Thailand, where other low-fare airlines are also being launched.

AirAsia has at the same time been looking at starting a joint-venture airline in Singapore. Also in Singapore, a new carrier called ValuAir plans to launch services in the middle of 2004, initially with two leased Airbus A320s.

"We have been studying the growth and success of the low-cost carrier model in Europe and the USA. We have come to the conclusion that the low-cost carrier model can succeed here as well," says SIAchief executive Chew Choon Seng. "It will open new markets and make air travel more accessible to more people."

Some in the industry are sceptical about whether the low-fare model adopted by the main US and European players can be applied to Asia, especially as often restrictive bilateral air services rights issues can complicate matters.

But Tony Ryan notes that Southwest Airlines started operating well before the US domestic market was deregulated, while Ryanair did the same "before there was freedom of the skies in Europe".

"Freedom of the skies evolves," says Ryan, adding: "I think over time it will evolve in this region as well." Ryan also believes that "10 or 15 years from now, maybe 10% of the traffic [in Asia] will be low-cost". Former Ryanair director of operations Charlie Clifton, has been appointed to establish the carrier's base of operations in Singapore and set up stations in parts of South-East Asia. He says Tiger is "looking at going direct and using the Internet" for ticket sales.

SIA, at one point, considered converting regional, full-service unit SilkAir into a no-frills operator but decided against the move, saying it was better to start with a "clean sheet". Chew says SilkAir will continue operating its A320-family fleet to secondary destinations in Asia and Tiger may even operate on some of the same routes.

"It will complement SIA, as well as SilkAir," he says. "We will continue to grow SilkAir and invest in SilkAir. We think Tiger Airways will create its own market. The possibility of both carriers operating to the same points is not ruled out, but they will be vying for different segments of the market."


Source: Airline Business