Tiger Airways may be a relative newcomer to the highly competitive Asian market, but it has wasted no time in making a name for itself, growing from a fledgling airline to one of the region’s top low-cost carriers in just over three years.
When it launched services in September 2004, Tiger Airways operated two aircraft to three routes out of Singapore Changi.
Today it serves more than 30 destinations across eight countries using a fleet of eight A320s and has a newly launched subsidiary, Tiger Airways Australia, operating domestic services in Australia.
And a recent order for another 50 aircraft has cemented the airline’s status as one of the region’s largest and fastest growing airlines. To date, it has flown more than four million passengers.
Low-cost carriers have been quick to tap into the booming Asian and trans-Pacific airline business – some going it alone – others, like Tiger Airways, as a no-frills spin-off of established, full service operators. In Tiger’s case, it is 49% owned by Singapore Airlines.
Either way, it can be a risky business, with success far from guaranteed. Recent aviation history shows a succession of failures by low-cost market early entrants.
And in Australia – identified as a key market for Tiger’s growth – the airline faces stiff competition from the LCCs of two aviation heavyweights – Richard Branson’s Virgin Blue and Qantas subsidiary Jetstar.
Steve Burns, Tiger’s Singapore-based chief operating officer and the man responsible for driving the implementation of the group’s regional expansion plans has no doubt the airline will succeed in wooing Australians.
His confidence is based on his belief that Tiger’s strength is “filling voids in a market” and in the case of Australia, Burns argues, low-cost passengers were not getting what they wanted.
“We don’t see other airlines as big competitors,” he says. “We see the opportunity for growing markets, for enabling people to fly when they couldn’t before and for persuading those once-a-year air travellers to fly more frequently. We will be adding market share, not stealing market share. We are creating low fares for high passenger volumes.”
Burns says Tiger Airways has adopted a proven business model, closely following the success of Ireland’s Ryanair when it set up a number of mainland Europe bases.
He insists that this amounts to scrutinising every aspect of the business to remove non-essential costs, but at the same time avoiding cutting corners on passenger safety, security and punctuality.
Strategies include promotion of online sales to help keep sales and distribution costs down and, as a result, 85% of flights overall (and 99% of ticket sales in Australia) are booked through the airline’s website.
Burns also claims that the airline’s fleet of “brand new” aircraft are equipped with new technology, that ensures greater fuel efficiency.
Efficient air traffic planning by the airline maximises the number of sectors served by its aircraft in one day and short turnaround scheduling keeps ground time low and flying time high, adds Burns.
He also stresses that the high utilisation of its aircraft means that more seats can be sold on more flights.
By any measure, Tiger’s expansion has been dizzying. In one month alone (January 2008), it launched services between Singapore-Kuala Lumpur, Melbourne-Adelaide, started a daily Melbourne-Hobart service and doubled frequency on the Melbourne-Newcastle route.
For Australian passengers, each new destination delivered a ticketing bonanza. While the sensational €0.50 a seat fare that marked Tiger’s inaugural Singapore-Darwin launch might have been a one-off, subsequent routes came with the promise of consistently low prices.
In fact its fares appear to have led to a mini price war in Australia, for when it offered destinations like Mackay in tropical north Queensland and Alice Springs in Central Australia for less than €18, rival Jetstar countered with €0.60 fares. And in January, Virgin Blue put up 1,000 seats for one cent each, laying claim to the lowest fares ever seen in Australia.
Tiger, however, insists that it is not into “gimmicky fares”, and that its low prices – 80% of Tiger Australia seats sell for less than €60 – are sustainable. “There is no such thing as a free lunch,” Burns says. “We don’t promise customers the frills. There’s no free food and no airport lounges, just a very simple product with a focus on reliability, integrity and low fares overall.”
Its business development plan does however allow for some optional extras, such as an excess luggage add-on, sports equipment check-in and seat selector. The airline is also teaming up with various partners to offer deals on hotels and budget accommodation, car rental and even travel insurance.
Without doubt, says Burns, Asia-Pacific is the most exciting airline market in the world. Over the next 10 to 20 years, he expects Asian route development will replicate the growth earlier experienced in the US and Europe – only this time, with more people to move around and a much broader geography.
As the market becomes more liberalised and strong players emerge in the low-cost arena, Burns believes that some of the long established airlines will have to become more competitive.
“Some have had an easy time up until now, and those who don’t adopt change face tough times ahead,” he says.
“Newer carriers enter the market knowing that the only way to succeed is with a tightly managed business. Established carriers, on the other hand, are not used to being exposed at that level. They might find it difficult to service the market unless there is change.”
Another of Tiger Airways’ strategies is to establish hubs in its target markets. For Australia its hub is in Melbourne, and a Korean hub is planned for later this year, when Incheon Tiger Airways is launched in South Korea.
“The nature of the Asia-Pacific region is that if you’re going to properly serve a market like Australia, you need to have a base there,” admits Burns. “Direct selling is one of our key challenges. Our ticket sales don’t rely on a travel agent or middleman, and to justify our investment in the market, having a based operation (locally) is critical.”
He flagged the possibility of more bases in Australia over the next three to five years, and potential hubs elsewhere in Asia-Pacific as the airline investigates future partnerships. “We expect to pick up opportunities over time,” says Burns.
Burns insists that the airline is a stand-alone entity, and as such is free to compete against Singapore Airlines on certain routes.
“Tiger has no commercial arrangement with Singapore Airlines, we are in control of our own fate,” he says. “People are quite surprised that we go head to head with Singapore Airlines on its own turf. We won’t shy away from it. We’re a market specialist with a broad shareholder base. We have been following our own strategy since day one and we have been successful from day one.”
Meanwhile, Tiger is now eyeing the world’s two most populous nations – India and China. It already has five routes in southern China, and will this year launch Singapore-Bangalore, its third service to the subcontinent. Tiger Airways also operates a growing network in Indonesia, the Philippines, Thailand and Vietnam.
He says that the airline believes that it has identified an enormous demand for the low-cost model in emerging Asian economies, especially among the millions of migrant workers who are forced to leave their homelands for work in far-flung places.
“By making low-cost services available to the masses we are making it possible for people to see their families more often,” enthuses Burns.
“In the business travel sector, the airline makes travel affordable for people who run their own business or small and medium-sized enterprises – people for whom cost matters.
“The one thing that unites Tiger Airways passengers is sensibility to the cost of a ticket.”
The Chinese “are very keen on the low-cost model”, according to Burns, who is circumspect about whether Beijing is on the airline’s radar screen.
“One of the key factors of our success is our ability to build relationships,” he muses. “We will look at all opportunities at Asia-Pacific airports, big or small. We don’t need extra lounges and frills, and we wouldn’t rule out any airport based on its current size.”
Part of its business model, however, is to operate at budget terminals and secondary airports to reduce operating costs – which is possibly why, even from its Australian base, Tiger doesn’t fly the lucrative Melbourne-Sydney leg, the world’s third busiest airline route.
It also possibly helps explain how the group can lay claim to operating from the second lowest cost base in the world, and the lowest in Australia.
While enthusing about the potential, Burns is remarkably upbeat about risk. “Quite frankly,” he says, “It is difficult to see many risks at all. We have a very clear business model and as long as we stick to a simple product, offering low fares, more savings and more choices, then all we see is fantastic opportunity right across our network.”
Whatever opportunities or challenges may lie ahead, he is certain that Tiger Airways will be the master of its own destiny.
“We don’t get distracted by what other people are doing. Passengers will vote with their feet if they don’t get what they want. And we are in the business of low fare travel.”
This article features in Routes News 2008 Issue 1