FOX ON FRIDAY

 

Fox On Friday: SAG-ing; Singapore Airlines Group

I was diverted from my trawl through key Asian airline stats for WYSKs (what you should know) by news about the Singapore Airlines group. (I abbreviate that to SAG – rather appropriate given current traffic results.)

 

I wondered how much longer before management at SAG admitted that things are not going right. (It took 10 years to extract itself from the mistake of investing in Virgin Atlantic, so it may not be quick.)

 

As I have been saying since 2012, SAG’s Scoot should not have been established (Tiger should have been expanded instead), and Silk should be SAG’s LCA*, not regional-airline/SA-sometime-substitute. Indications are that Tiger is being suffocated out (of routes, to give to Scoot, and thereby life).

 

For the first 3Qs, SAG’s seat sales grew under 1%! Poor old Tiger (which, as I noted before, is giving tigers a bad name) fell 5% and seat sales for the mighty SA were flat. Scoot can thank Tiger’s fall for part of its growth – which is now running at good rates monthly, and +15% YTD.

 

Then this week SAG announced that it had offered to buy the 44% of Tiger that it does not already own. I presume shareholders will accept, because they can see Scoot is squeezing Tiger out of routes – which is hardly a good sign for future business potential. As a 100%-SAG owned airline, Tiger’s strategy could be part of SAG’s for the overall benefit of SAG – even if Tiger itself does not do so well.

 

SAG made comforting noises about ‘long-term success’ etc, but that is for public consumption today. I reckon what SAG does tomorrow will be based on what it will describe as ‘changed circumstances’ and a ‘redefined corporate strategy’ – or similar.

 

At present, SAG says it intends to take Tiger private. What this means is not yet clear.

 

I still think there is no need for SAG to have two NFAs* (Scoot, Tiger), so one will presumably go. Yet maybe not. Because also there is no need for two FSAs* (SIA, Silk), but one FSA (SIA) and one LCA (Silk).

 

Make your bets.

 

 

*Notes:

-FSA = full-service-airline. Offering first/business/economy, travel agency bookings, meals/bookings/baggage/cancellations included, etc. As its name indicates – full service.

 

-LCA = low-cost-airline. (Not a no-frills-airline; see next.) An FSA but with lower operating costs – cheaper longer-hours flight-deck crew, younger/new longer-hours cabin crew, tighter cost control (twinned 3-star hotel rooms, for instance), fewer fare types, which may have first and business cabins, and which allows bookings through travel agencies etc. If relevant, usually similar to the parent airline, but a different name, and competition against parent airline allowed.

 

-NFA = no-frills-airline. We believe that among the many essential elements that make a successful NFA are: market freedom in terms of routes and aircraft choice; single aircraft type; where relevant, competition against parent airline allowed; fares that are extremely low when booked at least three months in advance, say US$25; one fare at one time (no wholesale rates, travel agency commissions, etc); no refunds; no service frills; single economy-class cabin; no seat selection; two toilets for 150-seat aircraft; 25-minute turnaround time; cabin crew do daytime cabin cleaning; name and flight change charged at least US$25 each; no trade shows; plenty of consumer advertising and promotion; and much more.

 

 

 

The Fox

Remember, I’ll be famous after I’m dead.