Qantas to heat up competition with Singapore Airlines

Cutthroat competition has intensified. Positioned as a premium airline, SIA has always faced tough competition in the aviation industry. Middle Eastern carriers, such as Emirates, Qatar Airways and Etihad Airways, are now competing head-on with SIA in premium air travel. Yet despite SIA’s status as a premium airline, it is also susceptible to the competition from rapidly growing low-cost carriers around the region. To top it all, Qantas is now planning a new Asia-based full-service carrier. Qantas is deciding between Kuala Lumpur and Singapore as the new carrier’s base. If Singapore is chosen as the base for this new airline, SIA will face new competition in its core segment at its backyard.

Threats – Qantas new Asia-based full-service carrier (RedQ) Qantas has confirmed that it is planning to start a new 49%-owned full- service carrier to be based in Asia. Media speculation indicates the new airline will be named RedQ and Qantas is deciding between Kuala Lumpur and Singapore to be the new carrier’s base. By basing the new airline in Asia, Qantas is looking to ride on Asia’s growth, and especially China’s booming aviation market. This move by Qantas signals its intention to further its competition with Singapore Airlines, especially if the new airline picks Singapore as its base, as it seeks to get a slice of the booming Asian aviation pie.

Back in 2004, then-senior minister Lee Kuan Yew publicly said the government will give priority on maintaining Singapore’s edge as an aviation hub over the fortunes of SIA. Given Singapore’s better air connectivity and its government’s inclination, there is a good chance of Qantas new carrier will be based here.

Competition is not new to SIA. SIA has faced competition from global legacy airlines, LCCs and Middle Eastern carriers for years and it has emerged relatively unscathed. For example, despite the presence of competition the Group in FY11 made earnings of S$0.90 per share, up more than 400% from the crisis-hit FY10. Looking back further, FY11 net earnings was also 2.9% higher than in FY09. In addition, SIA has successfully maintained its standing as a premium carrier and has probably the strongest balance sheet among airlines to weather downturns.