Third time lucky? Singapore Airlines sets sights on India

Sep 22 2013, 17:20 IST
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Singapore Airlines has entered into partnership with Tata Group in the Indian market. (AP) Singapore Airlines has entered into partnership with Tata Group in the Indian market. (AP)
SummarySingapore Airlines has entered into partnership with Tata Group in the Indian market.

Almost 13 years after pulling the plug on its last attempt to enter the Indian market, Singapore Airlines Ltd is taking another stab at the country by again teaming up with the Tata Group as part of a broader strategic shift.

Last week, the two companies applied to set up a new New Delhi-based full-service carrier, pledging a combined $100 million to get it going. This follows an unsuccessful attempt to do the same in the mid-1990s and a failed attempt to buy state-owned Air India in 2000.

The new carrier, if approved, will initially serve the 1.2 billion Indian market. Barring no political or regulatory obstacles, it could be airborne in about a year.

SIA, which will have a 49 percent stake in the carrier, will be banking on its success.

Intense competition on its mainline medium and long-haul markets from Gulf carriers like Emirates Airline and neighbours such as Garuda Indonesia and Malaysian Airline , and weak demand on services to Europe, means that SIA, Asia's second-biggest airline with a market value of $10 billion, has changed course in recent years.

Sources familar with the airline's strategy say that the management, led by low-profile chief executive Goh Choon Phong, is pushing ahead with a "portfolio" strategy that revolves around increasing the company's exposure to the fast-growing Asia Pacific and the low-cost markets.

By diversifying its revenue streams and creating new ones, like the Indian joint venture, Goh and his team plans to reduce SIA's dependence on the flagship carrier over the medium term, say investors and analysts.

"They just have to address why their brand should still be at a premium. They still have a lot to do to actually get investors to be a bit more confident of their prospects," said Kristy Fong, an investment manager at Aberdeen Asset Management, which holds a stake of about 4 percent in SIA.

CASH POWER

Despite the near term pressure on profits, SIA's cash pile of $4.5 billion - the biggest among Asian airlines - means that it has the ability to invest in existing and new airlines, the Centre for Aviation (CAPA) said in a report.

It started Scoot, a long-haul low-cost airline, last year to tap the low-fare leisure markets that SIA left behind as it focused on the premium business. Its one-third stake in short-haul LCC Tiger Airways Holdings Ltd could also potentially go up to 46.5 percent.

SIA bought a stake in Virgin Australia Holdings Ltd

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