scoot is Singapore Airlines (SIA) budget carrier. This is a response to the competition posed by other low cost carriers such as Tiger Airways and Jetstar. In my opinion, SIA's move into the budget segment is not a good idea because it will confuse customers and is a sign of a confused strategy. SIA should continue creating value for existing customers and new customers who want the SQuality and premium. This has been SIA's competitive edge.
Of course by having scoot, SIA would have an additional stream of revenue. Budget air travel is a growing market. I myself only travel on SQ for business purposes and find it much better than either SilkAir or other budget carriers.
However, it is likely that this venture will not work out well because it does not gel with SIA's current competitive edge. For instance, how are you going to convince your own staff that working for scoot is better than SQ, which is a carrier by the same company? The lack of motivation may result in a reduced customer experience, even for a budget carrier.
Therefore, I would think that it is likely that the low cost carrier be unprofitable going 2-3 years in the future.
There is growing demand, so SIA either to catch it or lose it. And, different brand, different management team is a wise way to do it, because totally different strategy.
ReplyDeleteYes I agree. And I do realise that there is a conscientious effort to keep the both businesses as different as possible. But I think it will be difficult and possibly unprofitable eventually. On the one hand, you have a proven brand in a full service carrier, on the other hand, you have an isolated business unit (scoot) trying to go into a even more competitive segment, but less the history and management expertise.
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