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Singapore Airlines regional unit SilkAir poised for rapid growth after quietly emerging as SIA's gem

Analysis

The Singapore Airlines Group is accelerating expansion at full-service regional subsidiary SilkAir, which has quietly emerged as a strong competitor in a short-haul market dominated by low-cost carriers. While sceptics in 2004, when the Singapore market was revolutionised with the launch of three new LCCs, questioned whether SilkAir would be able to survive the onslaught of low-cost competition in its home market the small carrier has instead thrived as Singapore's LCC penetration rate has exploded. SilkAir has steadily outperformed its LCC competitors, including SIA affiliate Tiger Airways, as well as SIA's mainline operation.

SilkAir is now preparing to undergo the biggest expansion phase in the 20-year history of the SilkAir brand. The SIA Group is planning to increase capacity (ASKs) at SilkAir by about 23% in the current fiscal year commencing 01-Apr-2012 (FY2013), outpacing the planned 3% capacity increase for SIA mainline as well as the expected capacity growth of the three main LCC groups serving the Singapore market: AirAsia, Jetstar and Tiger. Continued high double digit annual capacity growth is expected over the next decade as SilkAir's fleet expands from 21 aircraft currently to a projected 54 aircraft by the end of 2021.

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