This was published 12 years ago
Singapore Airlines to take on Jetstar with budget offshoot
By Matt O'Sullivan
Qantas's budget offshoot, Jetstar, faces a major threat to its strategic plans in Asia after Singapore Airlines revealed that it will set up a low-cost carrier to fly medium- to long-haul routes.
Singapore Airlines said it planned to launch the yet-to-be named low-cost offshoot within a year, using wide-body aircraft.
It will be operated independently and managed separately from Singapore Airlines, which will have a 100 per cent stake in the carrier.
Singapore Airlines did not reveal the route network for the new airline but it is possible Australia could be on the list of destinations.
"All options are open," a spokeswoman said.
The launch of another low-cost airline is a direct threat to Jetstar and Malaysia's long-haul airline AirAsiaX, in which English entrepreneur Richard Branson has a part stake.
Shares in Qantas ended the day down 3 cents, or 1.4 per cent, to $2.06 on the day when the overall market had its best day in almost six months. The Qantas closing price is the lowest since July 2009.
The airline is also facing industrial action from its long-haul pilots and aircraft engineers within the next month over demands for controversial job-security clauses to be inserted in contracts.
"[Singapore Airlines' plan] is definitely a competitive threat [to Jetstar] as it is squarely aimed at the same market," Angus Gluskie, the managing director of White Funds Management, said today. "It is logical that others look to it as well, and seeing another player go for the same market has to be expected."
Singapore Airlines's announcement comes just weeks after speculation emerged that Qantas was considering launching a premium airline in Asia, as part of a wide-ranging review aimed at increasing its presence in the world's fastest growing aviation market and slashing costs.
Jetstar has stepped up its efforts over the past year to boost its presence in Asia, seeking airline alliances in Japan, Indonesia and the Philippines. The Qantas subsidiary has most recently been in talks with Japan Airlines about setting up a joint venture to service the domestic market in the world's third-biggest economy.
The no-frills airline already flies long-haul routes to Tokyo and Hawaii but has long harboured plans to service destinations as as far afield as Rome and Athens once it takes delivery of Boeing's 787 Dreamliner aircraft.
Singapore Airlines said the plans for a long-haul budget offshoot were aimed at serving a "largely untapped new market and cater to the growing demand among consumers for low-fare travel".
"We are seeing a new market segment being created and this will provide another growth opportunity for the SIA Group," Singapore Airline's chief executive, Goh Choon Phong, said.
Mr Goh succeeded Singapore Airlines's long-time boss, Chew Choon Seng, on January 1.
The launch of a mid- to long-haul offshoot will not be a direct threat to the Singapore-based budget airline Tiger Airways, which focuses on short-haul routes.
Singapore Airlines is Tiger's biggest shareholder with a 33 per cent stake.
Qantas has a 49 per cent stake in Jetstar Asia, which is based in Singapore. It has struggled since it began services in 2004 but did record a $S5.9 million ($4.6 million) profit last financial year.
In 2009 Qantas boosted its stake in Jetstar Asia to 49 per cent and Dennis Choo, a Singaporean businessman and long-time Qantas associate, raised his holdings to 51 per cent by buying out minority shareholders, including the Singapore government's investment arm Temasek.
mosullivan@smh.com.au
- Business Day
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