Singapore Airlines shifts routes to budget arm Scoot amid strategic review

Monday, 31 July 2017 00:01 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters): Singapore Airlines Ltd’s budget arm Scoot last week said it would take over two routes from sister carrier SilkAir as the parent company conducts a wide-ranging strategic review designed to cut its cost base.

Singapore Airlines (SIA) has said the review, announced in May after a surprise fourth-quarter loss, could result in job losses and changes in its network and fleet as it battles intense competition that has slashed ticket prices.

SilkAir, SIA’s premium narrowbody arm, said it would transfer to Scoot its services from Singapore to Kuching, Malaysia and from the city-state to Palembang, Indonesia from October and November, respectively.

“There are sometimes opportunities whereby the budget side of the business can do a more effective job of serving the route,” Scoot Chief Executive Lee Lik Hsin told reporters on Tuesday. He cited a previous shift of the Hangzhou route from SilkAir to the budget carrier.

Scoot plans to double the size of its fleet over the next five years, driven primarily by an expansion of the narrowbody A320 fleet, Lee said. He did not rule out acquiring routes from SilkAir or Singapore Airlines as part of that process.

Scoot completed on Tuesday its merger with budget carrier Tiger Airways, marking the end of the latter brand. Tiger was set up by SIA and Singapore’s national investment firm Temasek Holdings in 2004.

Lee said combining the two airlines under the Scoot banner would result in cost savings with suppliers and could boost connecting traffic.

In addition to the Kuching and Palembang routes, Scoot will be flying from its Singapore hub to Honolulu in the United States, Kuantan in Malaysia and Harbin in China by June 2018.

Honolulu is Scoot’s second long-haul destination, after Athens. That flight will be routed Singapore-Osaka-Honolulu, meaning it will compete on the Osaka-Honolulu route with rival low-cost carrier AirAsia X Bhd.

“Competition is just par for the course,” Lee said. “We just have to face it and try to win customers to our product.”