Singapore Airlines Breaks into Budget Carrier Industry

Aviation industry giant Singapore Airlines has unveiled a long-haul budget carrier which will operate in medium and long haul flights beginning with destinations such as China and Australia.

The new carrier, SCOOT, would cost S$280 million. Out of this, S$60 million will be spent on start-up costs in the initial 24 months.

Using a SWOT analysis and Porter’s Five Forces Diagram could provide a better understanding of the airline’s decision to compete in the budget industry.

THESE ARE THE MAIN POINTS TAKEN FROM THE SWOT ANALYSIS:

STRENGTH:

1. Distinguished Brand Name

2. Sufficient capital injection from SIA

WEAKNESS:

1. Unable to serve the US market due to limitations of aircraft.

OPPORTUNITIES:

1. Increasing market trend for demand for low-cost flights

2. Vast markets available for SCOOT to cater to

THREATS:

1. Many other budget airlines in the region have established their position in the industry.

The strengths identified by the SWOT would put SCOOT in good stead in the starting up of the business. SCOOT is able to overcome the high barrier to entry due to its financial backing from Singapore Airlines. At the same time, the brand name of Singapore Airlines would positively influence the image of the new budget airline.

Although SCOOT is currently unable to serve the US market, it could do so in the long run when expansion to that sector seems viable enough.

Competition from rival airlines in the region should not be an issue should there be a deliberate “price war” in an attempt to drive the new-comer out, because of SCOOT’s financial backing from Singapore Airlines. Therefore, this substantially neutralizes the airline’s threat.

Citation:

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1162834/1/.html