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News & Advice

Thai Airways and Singapore's Tiger to form budget carrier

Singapore's budget carrier Tiger Airways and Thai Airways announced Monday plans for a low-cost airline expected to start operations next year, potentially hastening a shake-up in the region.

Thai Tiger Airways will fly domestic and international flights from Suvarnabhumi International Airport in Bangkok, starting in the first quarter of 2011, the two companies said.

Thai Airways and another Thai entity will hold 51 percent in the airline, with the remaining 49 percent under Tiger Airways.

Tiger Airways group chief executive Tony Davis said the new budget carrier's paid-up capital was around six million US dollars and details of the aircraft fleet would be announced once the operations plan has been finalised.

He said the joint venture would further spur the Singapore-based budget carrier's ambitions in the increasingly competitive Asian low-cost airline segment.

Around 45 low-fare airlines operate in the region, from Japan to Pakistan.

Many weathered the 2008-2009 global recession better than premium airlines, according to analysts.

In January, Jetstar, a no-frills affiliate of Australia's Qantas, picked Singapore as its Asian hub for both short- and long-haul flights.

Malaysia's AirAsia, Southeast Asia's leading budget carrier, has also been expanding. In April, it inked a deal to launch a low-cost carrier in Vietnam called VietJet AirAsia, making Vietnam its fourth country base after Malaysia, Thailand and Indonesia.

Davis, the Tiger Airways CEO, said the alliance with Thai Airways would boost his company's Asian presence.

"We have always said that it was the strategic objective of Tiger Airways to become a pan-regional Asian carrier," Davis said in a media conference call.

"The key thing we are seeing at the moment is that demand for air travel is returning in a very robust way."

Thai Airways said the venture would also allow it to beef up its presence in the budget travel market.

"We believe that this move will provide revenue opportunities for Thai (Airways) and allow Thai to be more competitive in the region with the anticipated growth in the low cost market," said Thai Airways president Piyasvasti Amranand.

Analysts from the Centre for Asia Pacific Aviation (CAPA) said the new budget carrier could potentially hasten a shake-up for the industry in the region, where some markets are still inhibited by entry barriers.

"The new joint venture... raises the bar in low cost airline operations competition in Asia and could have a major impact on the pace of airline liberalisation in the region," Sydney-based CAPA said in a commentary.

"There will be many more moves in this regional tapestry of low cost airline competition before the end game, but Tiger's announcement today should not be underestimated in scope."

Tiger Airways, partly owned by national carrier Singapore Airlines, flies to 37 destinations in 11 countries and has a fleet of 19 Airbus A320s, with plans to expand to 68 planes by December 2015.

Besides plying routes in Asia including to popular holidays spots such as Phuket, Tiger Airways has also expanded into Australia, where it offers domestic flights.

Publicly listed Tiger earned a net profit of 28.2 million Singapore dollars (20.85 US million) in the year ended March, a sharp turnaround from losses of 50.8 million dollars the previous fiscal period.