SilkAir Steps Up Market Expansion

Manila BUlletin
September 3, 2012

The Singapore Airlines (SIA) group is accelerating expansion at full-service its regional subsidiary SilkAir, which has quietly emerged as a strong competitor in a short-haul market dominated by low-cost carriers, according to the Center for Asia Pacific Aviation (CAPA).

SilkAir has thrived as Singapore's low-cost carrier (LCC) penetration rate has exploded. It has steadily outperformed its LCC competitors, including SIA affiliate Tiger Airways as well as SIA's mainline operation.

CAPA said SilkAir is 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 starting April, 2012, 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, said CAPA.

SilkAir earlier announced by far the biggest aircraft deal in its history, signing a letter of intent with Boeing to order 23 737-800s and 31 737 MAX 8s with purchase rights for an additional 14 aircraft.

CAPA said the expansion at SilkAir represents sound strategy for the SIA Group given that the airline has emerged as the most profitable brand based on profit margins in the group’s four-brand portfolio.

“The SIA Group has turned to SilkAir to take over or supplement SIA’s intra-Asia routes, several of which have become unprofitable as LCC competition has intensified.” As LCC competition has intensified, narrow-body aircraft have become more suitable for an increasing number of SIA’s regional routes.

“With SIA only operating widebody aircraft, the group looks to SilkAir’s all-narrowbody fleet whenever there is a need to downsize a particular regional route.” SilkAir also continues to expand by opening up new destinations for the group, following its original model of serving smaller boutique markets that help feed SIA’s long-haul network.

SIA, over the next decade, plans to continue rapidly expanding SilkAir in traditional SIA business-focused markets as well in traditional SilkAir markets, which are typically more leisure-focused. (EHL)