Scoot to Tiger Air Forge Ventures on Asia Travel Growth

Singapore Airlines Ltd. (SIA)'s budget carrier Scoot and Tiger Airways Holdings Ltd. (TGR) formed partnerships in Taiwan, Thailand and India as demand for budget travel grows across Asia.

Scoot will own 49 percent of its venture with Thailand's Nok Airlines PCL (NOK), the carrier said in a statement today. Tiger Air, 33 percent-owned by Singapore Air, separately said it will form Tigerair Taiwan with Taoyuan-based China Airlines Ltd. (2610)

The carriers are expanding through tie-ups as they seek to attract more cost-conscious travelers amid rising competition from AirAsia Bhd. and other budget airlines in the region. Overcapacity among Asian low-cost carriers is driving down ticket prices and airlines need strong revenue growth, according to Bloomberg Industries research.

"Competition in north Asia is intensifying," K Ajith, an analyst at UOB-Kay Hian Pte. in Singapore, said by phone. The agreement "gives Tiger a foothold into north Asia so it could feed air traffic into Singapore. It's a way of taking on competition."

Tiger Air separately announced a three-year pact with Indian discount carrier SpiceJet Ltd. (SJET) that would allow flight connectivity between the airlines. It also signed an alliance with Scoot to expand their cooperation.

Market Share

China Airlines, Taiwan's largest carrier, was unchanged at NT$10.65 at the close in Taipei trading. Tiger rose 3 percent in Singapore while SpiceJet jumped as much as 12 percent, poised for the biggest gain since April 25, in Mumbai trading.

Tigerair Taiwan could be profitable in three years, China Airlines Chairman Sun Huang-Hsiang told reporters in Taoyuan, Taiwan, today. The new carrier will operate 12 planes by 2017, Tiger Air Managing Director Ho Yuen Sang said.

Low-cost carriers are increasing market share in Asia faster than anywhere else in the world, with capacity in the region rising 29 percent in the six months to June compared with 0.8 percent in Europe and 1.5 percent in north America, Amadeus IT Holding SA (AMS) said in a blog post Oct. 28.

Traffic on Asian discount airlines has tripled since 2008, according to data compiled by Bloomberg, with passengers traveling 114 billion kilometers in 2012, compared with 37 billion kilometers in 2008.

Untapped Markets

Tiger Air has fallen behind AirAsia and Qantas Airways Ltd. as the two carriers have expanded their operations over the past two years, according to Bloomberg Industries data. AirAsia flew passengers 38 billion kilometers during 2012 and Qantas unit Jetstar's total was 35 billion kilometers, compared with 11 billion kilometers by Tiger. Scoot doesn't release operating statistics.

AirAsia is establishing an affiliate in India and expanding in the Philippines. Qantas and Japan Airlines Co. in October injected 11 billion yen ($107 million) into their Jetstar Japan joint venture, and the Australian carrier is aiming to set up a Hong Kong unit with China Eastern Airlines (670) Corp. and gambling tycoon Stanley Ho.

Taiwan's TransAsia Airways Corp. (6702) is also planning to start a low-cost carrier serving destinations in Japan, Thailand, and Singapore, the company said Nov. 20.

"The new JV will allow us to extend our presence into the new, untapped markets of Taiwan, Japan, and Korea," Koay Peng Yen, Tiger Air chief executive officer, said in a statement today. "There is vast potential for growth in these markets and also areas of synergy to be explored between the two airlines." The airline plans to operate 70 planes by the end of 2015, Koay said.

Small Capital

Scoot's Thai venture will require an initial investment of 2 billion baht ($62 million). Tiger will have 10 percent of its NT$2 billion ($67 million) venture in Taiwan.

Closely-held Oasis Hong Kong Airlines Ltd., a budget carrier that challenged Cathay Pacific Airways Ltd., entered liquidation in 2008 after collapsing with about HK$1 billion ($129 million) in debt. Indonesia's Batavia Air PT said in January it was stopping operations after going bankrupt.

The relatively small amount of capital committed to the deals is a positive aspect of the announcements, Ajith said.

"This shows an alignment between Scoot, China Airlines (2601), Nok and Tiger," said Ajith. Tiger's partnership with China Air "is going to be worth more to Tiger than the cumulative partnerships over the last three to five years."

Source: Bloomberg News By David Fickling 

from China Travel & Tourism News http://www.chinatraveltourismnews.com/

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