Singapore Airlines plans to launch its new medium-haul LCC in April, which will be a wholly-owned subsidiary. At the same time, SIA is moving to take control of its low-cost short-haul carrier Tiger Airways by having a rights issue that will dilute the equity of minority shareholders that fail to participate in the capital raising. SIA estimates its stake in Tiger will increase from 33% to as high as 49%. This will give it effective control, because SIA's major shareholder, Temasek Holdings, is also a sizeable Tiger shareholder.
But the more I think about it, it makes no sense to keep Tiger and the medium-haul LCC seperate.
SIA plans to brand the medium-haul LCC Scoot, but I think it would make more sense to brand it Tiger and connect the short-haul and medium-haul network. After all, that's partly why SIA mainline is successful. Its medium, long-haul operation receives passenger feed from its short-haul subsidiary SilkAir.
AirAsia X's founder Tony Fernandes has said his medium, long-haul operation is successful because it can draw on the short-haul feed from AirAsia and that if AirAsia X didn't have that, it would have been unsuccessful. Fernandes attributes the demise of Viva Macau and Hong Kong's Oasis partly to the fact these were stand-alone businesses, with no passenger feed from which to draw upon.
At this stage SIA is adamant that Tiger and the new medium-haul carrier will remain separate businesses.
But I'm thinking maybe deep down, they do want to connect the two, but are reluctant to say this publicly because one implication is that, Tiger would have to abandon Singapore's Budget Terminal, a major blow to Changi Airport Group. The Budget Terminal is not designed to handle widebodies nor is it designed to cater to transiting passengers. With hindsight, may Changi should have done that.