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Singapore Airlines’ (SIA) is to launch a low-cost carrier by next year to compete with competitors already taking chunks out of its premium market, and to stand up against Australia’s budget carrier JetStar, which is planning long-hauls to Europe.

According to the Shipping Gazette, SIA will offer medium- to long-haul destinations in wide body aircraft despite risks to diluting its brand, or worst yet eating into its own premium travel revenue that amounts to 40-50% overall.

Despite huge capital needed to start an airline from scratch, the risk could bring a big pay-off for an airline who needs to rely on more than just its healthy cash reserve of S$7 billion (US$5.7 billion), say analysts quoted by the Times of Oman.

“The trick for them is to find the right mix of aircraft, destinations and feeder traffic,” Shukor Yusof of Standard and Poor’s Equity Research said of a company he is confident has done its homework.

With premium and business air travel becoming competitive with the big players’ Hong Kong’s Cathay Pacific, UAE’s Emirates and Etihad muscling into a sector already dominated by neighbouring Malaysia’s AirAsia and SIA, the challenge is to mitigate risk rather than rely solely on the top end of the market.

Its budget airline, already coined as ‘SIA X’ by industry insiders will run alongside its wholly-owned subsidiary SilkAir and its third-stake owned low-cost airline Tiger Airways. – Shipping Gazette

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