SIA’s move “value destructive”: DMG Research

Although it sees SIA standing a chance unlike many other airlines which failed to differentiate their LCC product.

Following Singapore Airlines’ announcement that it will be setting up a medium-long haul LCC subsidiary, DMG Research has opined: “We think it would be value destructive to SIA’s premium branding and would potentially dilute yields, as was the case with Malaysia Airlines which was unable to generate any yield growth, as seen from its 1QFY11 results.”

They also noted that Qantas, with Jetstar, “has successfully differentiated its LCC product but there are many airlines which have made similar attempts i.e. Oasis Hong Kong, but have failed due to their inability to shift to a low cost base structure.”

DMG Research said SIA, being in the premium market, may face this hurdle although they think the group stands a better chance of succeeding compared to MAS given its tight cost discipline.

Like everyone else, we await further details from SIA.

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