Singapore Airlines invested (31-Aug-2011) USD235 million (SGD283 million) in cash to build the equity capital of its proposed new low-cost long-haul unit. SIA subscribed to 283 million new shares of New Aviation Private Ltd at an issue price of SGD1 per share. After the issue of the new shares, New Aviation will remain a wholly-owned subsidiary of the carrier. [more]
Singapore Airlines invests USD235 million new long-haul LCC's equity capital
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Scoot 2017 outlook: challenging market conditions and Europe launch could impact profitability
Singapore Airlines (SIA) medium long haul LCC subsidiary Scoot faces a potentially challenging 2017 as it launches flights to Europe and merges with the short haul LCC Tigerair. Scoot is also planning a series of network and schedule adjustments, which are critical to the future success of the European routes and long-term profitability.
Scoot has been successful in the initial four and a half years since its mid-2012 launch, becoming profitable in a relatively quick timeframe and unlocking a new phase of growth for the SIA Group. However, 2017 will bring intense competition and ambitious expansion in markets that are not likely to be profitable in the short to medium term.
Scoot’s newfound profitability could be at risk due to yield pressures, higher fuel costs and expenses related to new long haul route launches. Scoot and its ongoing integration with Tigerair are necessary strategically, and should improve the SIA Group’s long-term position, but the short-term outlook is relatively cloudy.
Turbulence will hurt Southeast Asia’s airlines in 2017 as overcapacity bites
Southeast Asia is a region with enormous growth potential but a relatively cloudy outlook for airlines given the intense competition and overcapacity concerns.
Demand is on the rise, boosted by a growing middle class, rising discretionary incomes and relatively strong economies. Nearly every country in Southeast Asia continues to post GDP growth above the global average. The Philippines, Vietnam, Myanmar and Cambodia have been particularly strong with GDP growth in the high single digits.
However, GDP growth slowed to less than 5% in the rest of Southeast Asia in 2016 and is expected to only pick up slightly in 2017. In several Southeast Asian markets, capacity has been growing faster than demand, impacting yields as competition has intensified. With an order book that equals the size of the current active fleet and several airlines pursuing strategic expansion, capacity may again be added at a rate exceeding demand in 2017.