SCOOT AND TIGER MERGE FOR THE BETTER

By Jack Yu

On 25 July 2017, two budget airlines operating out of Singapore, Scoot and Tiger Airways, formally completed their merger. The airlines had been placed under newly-created Budget Aviation Holdings Limited a year back in preparation for an eventual merger, and July marked their formal integration. Today, the merged entity comprises one code designator, one reservations system, two fleets of aircraft, as well as both unique and overlapping destinations. Cabin crew don Scoot’s uniforms, and Tiger’s narrowbody aircraft spot Scoot’s livery. Behind the customer-facing front, however, lie a complex decision-making process and regulatory considerations. In this article, The Corporate Insider looks at the reasons for the merger and its implications on the companies and the aviation marketplace.

Scoot and Tiger Airways were both well-known budget airlines in Singapore. Between them, they covered a diverse range of destinations in the Asia Pacific region. While Scoot focused on short- and medium-haul business and holiday destinations like Bangkok, Taipei and Osaka, Tiger’s focus was on short-haul cities, including the gateways for migrant workers, like Dhaka and Tiruchirappalli, as well as emerging cities, such as Tier 2 cities in China like Wuxi. Scoot operated the widebody Boeing Dreamliner 787-8 and 787-9. Tiger Airways’ fleet, on the other hand, comprised exclusively the narrowbody Airbus A319 and A320.

Both Scoot and Tiger Airways, along with premium regional airline SilkAir, were subsidiaries of Singapore Airlines. Together, the four airlines made up the passenger airline side of the Singapore Airlines Group, the other companies being SIA Cargo and SIA Engineering Company. Both low-cost airlines, with their strong network in the Asia Pacific, fed traffic from regional destinations to their parent Singapore Airlines, which flies to long-haul destinations in the Middle East, Europe and the United States.

There were destination overlaps between the airlines. Singapore Airlines, Scoot and Tiger Airways all served Singapore, Guangzhou, Hong Kong and Taipei. While Singapore Airlines and SilkAir served desetinations almost mutually exclusive of each other, the overlaps between the low-cost subisidiaries were significant, leading to the cannibalisation of each other’s revenues. Given the tough operating environment under which airlines operate, especially in light of the emergence of new airlines in the Asia Pacific region, Singapore Airlines Group management had to make a call with regards to the future of the low-cost airlines.

Given the tough operating environment under which airlines operate, especially in light of the emergence of new airlines in the Asia Pacific region, Singapore Airlines Group management had to make a call with regards to the future of the low-cost airlines.

A conscious decision was made to merge Scoot and Tiger Airways, with the step being housing them under a common holding company, Budget Aviation Holdings. It made sense to combine two low-cost subsidiaries into one to improve operating efficiencies and synergies. As the rights to fly were dependent on bilateral arrangements with other countries and Tiger Airways served more countries than Scoot did, it was decided that the merged entity would retain Tiger’s Air Operators Certificate (AOC) and hence its code designator, TR. With this arrangement, the airline would only need to negotiate landing rights with four countries, as opposed to eight, if Scoot’s AOC was retained. Scoot’s branding was retained, however, as a reflection of the management’s approach to using a fun brand for the low-cost arm of Singapore Airlines.

Today, the merged airline flies to a single set of destinations with two fleets of aircraft. Customers book their tickets under a single reservations system. Back-end systems have been streamlined so as to realise synergies between the two former disparate operations.

The Corporate Insider believes that with the merger now officially completed, Singapore Airlines Group now appears to be streamlined with Singapore Airlines and SilkAir serving the full-service segment of the long-haul and regional markets, and the rebranded Scoot taking on the budget space. We believe that the merger was a move in the right direction, given the proliferation of low cost carriers in the Asia Pacific region and the need to be more efficient than ever before. This is made all the more important given Singapore’s unique status as a global aviation hub that has no domestic market to fall back on.

Asia Pacific is now the world’s fastest growing region in the global aviation market.

Asia Pacific is now the world’s fastest growing region in the global aviation market. New airlines are being set up and the skies are becoming crowded by the day. The Corporate Insider believes that the rebranded Scoot will be able to take on the challenges in the next several years to come.

This article was contributed to The Corporate Insider (https://www.Facebook.com/CorporateInsider/)