Scoot Airlines Essay

1199 Words5 Pages
Introduction In May 2011, Singapore International Airlines Group (SIA) announced that it would be setting up a subsidiary low-cost carrier business named Scoot Airlines. The new airline will be concentrating on the emerging low-cost travel consumer market and fly to destinations within 5 to 10 hours reach of its operating base in Changi International Airport in the Asia-Pacific region. This move throws up two interesting questions for the observer. Firstly, how will Scoot Airlines compete with already-established competitors in the low-cost travel market? Secondly, how will SIA manage its new subsidiary and full-service arm concurrently in terms of segmenting, positioning and differentiation to prevent internal cannibalization? Reasons for setting up subsidiary One key trend identified in the article is the steady growth of the low-cost industry in recent years. At Changi International Airport, budget travel currently accounts for 25% of total volume compared to almost nothing a decade ago (Associated Press, 11 January 2011). Airlines are also affected greatly by macro-environmental shifts, of which the current global economic slumps as well as soaring fuel prices are the most influential factors (Dan Milmo, 6 June 2011). The current business models of airlines will likely face increasing pressure in the following years, with rising costs and weak growth in demand being the two most critical factors. Thus, a new segment of consumers are entering the market for air-travel, thus providing a potential source of business and revenue. On the other hand, Airlines will have to shift their business models drastically to cater to this new market. For SIA, its traditional strong position in the business and first-class air travel market has come under threat from other players such as Cathay Pacific and Emirates. The rise of low-cost carriers has also eaten away
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