Singapore Airlines said it will start operations of a new no-frills, low-fare airline on medium and long-haul routes within one year, in response to the growing challenge from Southeast Asian rival, Malaysia’s AirAsia X.
AirAsia X, an affiliate of Asia’s largest discount carrier AirAsia, has grabbed market share from Singapore Airlines on routes to London, Paris, Seoul and Tokyo.
“The new airline is being established following extensive review and analysis,” said its chief executive Goh Choon Phong. “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.”
He noted that the decision to establish the new airline is aimed at expanding passenger volume and catering to growing demand among consumers for low-fare travel.
Singapore Airlines currently operates SilkAir, which mainly operates within Southeast Asia. It also owns 32.9 percent of budget carrier Tiger Airways.
The new airline will be wholly owned by Singapore Airlines but will be operated independently and managed separately from its mother company.
Further details about its branding, products, services and route network have not been disclosed.
The Singapore Airlines decision will increase competition within the Asian budget-carrier sector. AirAsia CEO Tony Fernandes posted a sarcastic message on his Twitter account saying “AirAsia staff should be proud that we have been copied again...Wonder if Singapore Airlines will call it Singapore X.”
The launching of the new low-fare carrier could affect Korean budget carriers because it is considering Seoul as one of its flight destinations.
“Once the low-fare airline is launched, there is a high possibility that it will offer flights to Korea because it is considered a medium and long-haul route,” said an official from Singapore Airlines in Korea.
There are currently five local budget carriers - Jeju Air, Jin Air, Air Busan, Eastar Jet and T-Way - that operate both domestic and international flights to Southeast Asia and Japan.
Among foreign low-cost carriers, AirAsia X started offering flights from Kuala Lumpur to Seoul last November. The Malaysian carrier has been well received in the Korean market and has actively promoted itself online using social networking services like Twitter and Facebook.
According to Azran Osman-Rani, AirAsia X’s chief executive, the carrier’s load factor per flight is around 80 percent. In addition to AirAsia X, Philippine-based Cebu Pacific and Thailand-based Business Air operate flights from Incheon to Cebu and Bangkok, respectively.
When AirAsia X launched its services last year, local budget carriers said they were not worried about the competition because there is little overlap in terms of flight routes. No Korean budget carrier flies to Kuala Lumpur.
But with more foreign budget carriers eyeing the Korean market, their concerns are expected to grow.