Are low-cost carriers Scoot and Tiger Airways tying the knot?

Will it be win-win, win-lose, or lose-lose?

Speculations of a possible tie-up between low cost carriers Scoot and Tiger Airways rose as SIA CEO in an interview with a local paper hinted increasing collaborations.

Here’s what analysts had to say:

Paul Yong, CFA, Transport & Industrials, DBS Vickers

A tie-up between Tiger Airways and Scoot will definitely be a win-win situation for both as they have nothing to lose and much to gain. With Tiger Airways' fleet of A320 aircraft targeting routes of less than 5 hours and Scoot's fleet of (intially) B777s targeting medium and long haul routes, their respective business models are complementary to each other and a tie-up will allow better feed unto each others' network of destinations. For example, a customer from Ho Chi Minh can fly on Tiger Airways to Singapore and catch then a flight to Sydney and vice versa. Moreover, regional competitors such as AirAsia (and its Scoot equivalent AirAsia X) and Jetstar already offer such connectivity on their networks.

There will however, be some obstacles. Right now, the two carriers are flying from and into different terminals (so maybe a free bus service between terminals for customers) and managing the flight schedules to offer good connection timings will also be challenging (both carriers will be trying to maximise aircraft utilisation hours). Nonetheless, a tie-up will definitely be a positive for both carriers as it should boost both feed traffic, and appear more appealing to travellers by offering more destination options.

Derrick Heng, Analyst, Phillip Securtities

We certainly think that there is a strong potential for collaboration between the two affiliated companies of the SIA Group. For operations out of Singapore, Scoot would be operating out of T2 and following the closure of budget terminal in Sep 2012, Tiger would be shifting to T2 as well. Hence, interline operations are possible. For its operations in Australia, Tiger Australia would be setting up its second base operating out of Sydney in July 2012. This sets the stage for more opportunities for collaboration as Sydney would be one of the first destinations for Scoot. We actually highlighted this potential for collaboration earlier in our reports in March (see attachment). However, scheduling would more complicated with interline operations due to the need to coordinate flight schedules and would be a deviation from the traditional LCC model of point to point with no networking. In the long run, we see the SIA Group developing two distinct business models that could cater to different customer base, the budget network (Tiger & Scoot) and premium network (SIA & SilkAir and its codeshare partners such as Virgin Australia).