Third time lucky? Singapore Airlines sets sights on India

Sun Sep 22, 2013 3:03am EDT
 
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By Siva Govindasamy and Anshuman Daga

SINGAPORE (Reuters) - Almost 13 years after pulling the plug on its last attempt to enter the Indian market, Singapore Airlines Ltd SIAL.SI is taking another stab at the country by again teaming up with the Tata Group as part of a broader strategic shift.

Last week, the two companies applied to set up a new New Delhi-based full-service carrier, pledging a combined $100 million to get it going. This follows an unsuccessful attempt to do the same in the mid-1990s and a failed attempt to buy state-owned Air India in 2000.

The new carrier, if approved, will initially serve the 1.2 billion Indian market. Barring no political or regulatory obstacles, it could be airborne in about a year.

SIA, which will have a 49 percent stake in the carrier, will be banking on its success.

Intense competition on its mainline medium and long-haul markets from Gulf carriers like Emirates Airline and neighbors such as Garuda Indonesia GIAA.JK and Malaysian Airline MASM.KL, and weak demand on services to Europe, means that SIA, Asia's second-biggest airline with a market value of $10 billion, has changed course in recent years.

Sources familiar with the airline's strategy say that the management, led by low-profile chief executive Goh Choon Phong, is pushing ahead with a "portfolio" strategy that revolves around increasing the company's exposure to the fast-growing Asia Pacific and the low-cost markets.

By diversifying its revenue streams and creating new ones, like the Indian joint venture, Goh and his team plans to reduce SIA's dependence on the flagship carrier over the medium term, say investors and analysts.

"They just have to address why their brand should still be at a premium. They still have a lot to do to actually get investors to be a bit more confident of their prospects," said Kristy Fong, an investment manager at Aberdeen Asset Management, which holds a stake of about 4 percent in SIA.   Continued...

 
A catering truck parks next to a Singapore Airlines (SIA) aircraft at Changi Airport in Singapore May 13, 2009. REUTERS/Vivek Prakash