Taking Tigerair under its wings will unlock new horizons for SIA, say analysts

Management flexibility is just one of many benefits.

With SIA’s mainline registering disappointing results, privatising the budget airline may just be the much-needed whiff of fresh air for Singapore’s flag carrier.

According to analysts from OCBC, acquiring Tigerair whole would pay larger dividends for SIA over a longer-term as it provides management flexibility and the ability to accelerate the process to unlock synergies within the group to achieve cost savings and maximisation of revenue.

“Within SIA’s portfolio, we believe there are much more in terms of route rationalization that can be done between Scoot and Tigerair to capture interlining traffic,” OCBC said.

OCBC says the decision is made even more rational given the competitive landscape of the regional airline industry.

“SIA’s traditional strategy of pursuing growth through its full service parent airline will not help. We believe pressure on passenger yields on its parent airline is likely to remain with the continued capacity expansion of the Gulf carriers, especially for the Europe routes,” OCBC added.

Meanwhile, analysts from RHB Research concur, saying Tigerair is the key element for SIA’s turnaround and growth.

“Tigerair becoming 100% subsidiary would enable SIA to expedite the turnaround. While a merger of Tigerair and Scoot would bring cost savings, management plans to keep the entities separate,” RHB Research added.