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SRQ-2012-04 - GROWTH
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SRQ-VISIT BOROCAY (CATACLAN)-2010-A
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SRQ-VISIT BOROCAY (CATICLAN) - 2012-04
Formed and started operations in 1995. Domestic, regional and international, scheduled & charter, passenger & cargo jet airplane services.
Diosdado Macapagal International Airport
Clark Special Economic Zone (CSEZ)
2009 Clarkfield, Philippines
The Philippines (the Republic of the Philippines) was established in 1898, covers an area of 300,000 sq km, its population is 72 million, its capital city is Manila, and its official languages are Pilipino, Tagalog, and English.
April 1995: SEAIR (SRQ) was established by Iren Dornier (grandson of Claudius Dornier), Nikos Gitsis, and Tomas Lopez Jr. It was based at the former US Air Force at Clarkfield (A K A Diosdado Macapagal International Airport). (SRQ) initially offered airplane leasing and chartering services and unscheduled domestic flights.
Unsurprisingly, the initial airplanes were 2 9-seat Dornier Do 28D Skyservants used primarily for flights from Manila to Caticlan (Boracay).
September 2003: SEAIR (SRQ) was cleared to operate international charters.
November 2005: New operating bases were established in Manila, Cebu, and Puerto Princesa.
December 2006: Had plans to become the 1st overseas partner of low cost carrier (LCC), Tiger Airways (TGR), but these were delayed and eventually dropped in 2008.
April 2008: Asian Spirit Airlines (later to be renamed Zest Air (RIT)) owner, Alfred Yao made an abortive attempt to purchase SEAIR, intending to merge the 2 carriers.
February 2010: Plans to introduce international services in conjunction with Tiger Airways (TGR) were successfully relaunched.
December 2010: SEAIR began services on the Clark (CRK) to Singapore route.
February 2011: Tiger Airways (TGR) announced the acquisition of a 32.5% shareholding, acquired from co-founders Iren Dornier and Nick Gitsis, who retained a combined 7.5% stake after the sale.
May 2011: SE Asian Airlines (SEAIR) (SRQ) operates leisure market based scheduled services linking Batanes, Boracay, Cebu, Clark, Manila, and Tablas (Romblon). (SRQ) also operates additional seasonal routes, domestic and regional charters and holiday package deals, primarily to Boracay and Palawan. Also operates an international service between Manila Clark and Singapore in conjunction with Tiger Airways (TGR).
(IATA) Code: DG. (ICAO) Code: SRQ.
Employees = 350.
Parent organization/shareholders: Tiger Airways (TGR) (32.5%); Iren Dornier & Nikos Gitsis (7.5%); and local investors (60%).
Main base: Diosdado Macapagal International airport (CRK); Cebu Mactan International airport (CEB); and Manila Ninoy Aquino International airport (MNL).
Hubs: Catican airport (MPH); Puerto Princesa (PPS), and Zamboanga airport (ZAM).
December 2011: The Philippine regulatory authority (CAB) gave approval to launch SEAIR International, a full service domestic and international airline serving leisure destinations.
April 2012: Starting next month, SEAIR (SRQ) will fly to Cebu and Davao, a move that was blocked for 10 months by Philippine Airlines (PAL), Cebu Pacific (CEB), and airphilexpress, which claimed that such domestic routes violated cabotage rights because of foreign control of the airline. Also in May, flights begin to Kota Kinabalu, Sabah, Malaysia. Future destinations include Kuching, Penang, Langkawi, in Malaysia, and points in China, S Korea, and Japan.
SEAIR (SRQ) has a lot of ground to make up, as domestic passenger traffic decreased by -35% to 124,500 last year, but plans to have 20 twin jets in 3 years.
June 2012: Tiger Airways (TGR) has finalized a sale and purchase agreement to acquire 40% in SE Asian Airlines (SEAir) (SRQ) for $7 million. The investment will be held through (TGR)’s wholly owned subsidiary, Roar Aviation and will see (SRQ) adopt the (TGR) business model.
“The investment in (SRQ) is in line with our strategy to develop the business into a pan-Asian one, one that will enable us to leverage on the strength of our Singapore base and scale up the size of our business across the region,” (TGR) (CEO) Chin Yau Seng said.
(SRQ) operates 2 A319s leased from (TGR) and operates domestic service within the Philippines as well as international flights to destinations including Singapore, Hong Kong, Bangkok and Kota Kinabalu.
(SRQ) will add 3 A320-200s to its fleet in July and August that will be used to expand its low-cost operations in cooperation with Tiger Airways (TGR). It will use the airplanes on new domestic routes from Clark Diosdado Macapagal International (CRK) to Kalibo (KLO), and Manila Ninoy Aquino International (MNL) to Bacolod (BCD), Davao Francisco Bangoy International (DVO) and Kalibo (KLO), and on international services from Clark Diosdado Macapagal International (CRK) to Bangkok Suvarnabhumi International (BKK), Hong Kong Chep Lap Kok International (HKG), Kota Kinabalu International (BKI) and Singapore Changi International (SIN) airports. The 1st A320 flight is currently scheduled from Clark to Singapore Changi on July 31.
2 A320-232 (5188, RP-C6319; 5228, RP-C5319), ex-(D-AVVD & F-WWBQ), Tiger Airways (TGR) leased.
August 2012: SEAIR (SRQ), the Philippine airline associated with Tiger Airways (TGR) of Singapore, launched 5 new domestic routes out of the country capital Manila (MNL) this month. (SRQ) launched 2x-daily flights to Davao (DVO) in the south of the country on 18 August and daily operations to Bacolod (BCD) in central Philippines on August 20. Both routes are highly competitive with the Davao route facing competition from Cebu Pacific (CEB)’s 56, Philippine Airlines (PAL)’s 35, Airphil Express (PHP)’s 16 and Zest Air (RIT)’s 14 flights a week, while the Bacolod route is operating against 3 airlines; Cebu Pacific (CEB) with 35, Philippine Airlines (PAL) with 28 and Airphil Express (RIT) with 21x-weekly flights. All routes are operated with the A319 and A320s that (SRQ) leases from Tiger Airways (TGR).
September 2012: SE Asian Airlines (SRQ) has suspended all regional operations with Do 328-100s and Let 410s as its original shareholders, who had sold a 40% stake in the airline to Tiger Airways (TGR) have decided to relaunch the regional operations under a separate air operator certificate (AOC). SE Asian Airlines (also called Seair) (SRQ) will continue to operates as a low-cost carrier (LCC) in cooperation with Tiger Airways (TGR) using a fleet of two A319-100s and three A320-200s. The regional operations including the current fleet have been transferred to a new airline Seair International (based at Clark Diosdado Macapagal International airport (CRK)) that is in the process of obtaining an air operator certificate (AOC). Seair International plans to launch with 3 Do 328-100s and 1 Let 410UVP-E. It hopes to be able to launch operations in October or November on similar routes, as previously served while SE Asian has temporarily suspended regional flights until then. Using its regional airplanes, Seair had been serving Basco (BSO), Caticlan Malay (MPH), El Nido (ENI), Tablas Romblon (TBH) and Taytay (RZP) from Manila Ninoy Aquino International (MNL) as well as Caticlan Malay (MPH) from Clark Diosdado Macapagal International (CRK). Seair International also plans to establish a new regional base at Puerto Princesa International (PPS) next year.
Tiger Airways (TGR) on February 1 will implement "Tigerconnect' in collaboration with Singapore’s Changi Airport Group (CAG). This system allows passengers to transfer through Changi Airport without the need for a travel visa to enter Singapore, immigration clearance, or to retrieve and recheck-in bags for onward flights.
Tigerconnect is hosted on the Changi Connects platform that was launched by (CAG) in November. It will be available to passengers connecting through Singapore on (TGR), partner airlines: Mandala (MND) and SEAir (SRQ), and on joint itineraries offered with Scoot (SCT).
Changi Airport has seen a strong increase in transfer traffic over the past year, with a +21% year-over-year increase in the 12 months ending November 2012. Tiger (TGR) has also seen growing demand for connecting flights across its network, with >120,000 passengers transiting Changi Airport in 2012.
February 2013: Mandala Airlines (MND) is looking at adopting the Tiger Airways (TGR) brand name for its operations in Indonesia. (MND) is working towards re-branding itself as "TigerMandala," says its President Director Paul Rombeek. "We'll like Tiger Indonesia to be more consistent as a group, but the Mandala name has to stay, so that's where we are," he added.
Tiger Airways (TGR) bought a 33% stake in Mandala (MND) after a financial restructuring in (MND). (MND) then restarted operations last April, after emerging from bankruptcy. It operates a fleet of seven A320s and plans to grow this to up to 25 airplanes by 2015.
Philippine carrier Seair (SRQ), in which (TGR) holds a 40% stake, has meanwhile applied to the country's Exchange Securities Commission to "do business under the name and style of Tiger [Airways]".
It is understood that both carriers want to take on the Tiger name so as to capitalize on the brand name in the region. (TGR) said in January that its focus is on bringing its Indonesian and Philippine affiliates back to profitability as the longer-term potential of both markets is promising.
July 2013: Tiger Airways Holdings slipped back into the red for the quarter ending June 30 2013 (1st Quarter, Fiscal Year FY2014) as its affiliates in Australia, Indonesia and the Philippines were again unprofitable. The group is confident its new partnership with Virgin Australia (VOZ) will soon lead to profits at Tigerair Australia (TAU) and there will also be improvements at Tigerair Mandala (MND) and Tigerair Philippines (SRQ), but challenges remain at all 3 low cost carriers (LCC)s.
Meanwhile, the group faces potential over-capacity in its home market as Tigerair Singapore (TGR) accelerates expansion. (TGR) is adding 5 airplanes over the next 9 months for a total of 26 A320s, marking the biggest expansion in 2 years, when over-capacity led to losses.
There are bigger potential opportunities for growth in Indonesia, but Tigerair Mandala (MND) has not yet become profitable. The outlook for Tigerair Philippines (SRQ), which has been stuck at only 5 A320s for the last year, is bleaker.
Tigerair Philippines (SRQ) started flying on the 2,300 km route from Kalibo (KLO) to Singapore (SIN) on July 18. (SRQ), which already serves Singapore from Clark with daily frequencies, added 3x-weekly frequencies from Kalibo to its offering. An additional weekly flight will be added to the schedule from August 16. A320s are deployed to operate the route.
Tigerair Philippines (SRQ) is planning to add charter flights from the Chinese cities of Shanghai Pudong, Ningbo and Nanjing to the Filipino island of Boracay via Kalibo airport, beginning in 2nd quarter (Q2) 2014. Tigerair (TGR) also launched the only direct service between Kalibo and Singapore Changi earlier this month with plans to increase its selection of international flights to both Singapore and Thailand in the long term.
August 2013: Tigerair Philippines (SRQ) is planning to launch a new hub in Cebu with plans to leverage the city's strong travel brand in the Asia-Pacific region. "Cebu is a very strong brand in Asia and is known as a favorite destination for business and leisure by Asian tourists," said Olive Ramos (CEO) of Tigerair Philippines (SRQ). "Cebu is very strategic to (SRQ). We see it as another hub of ours." (SRQ) currently uses Clark and Manila as its primary hubs for operations. The Philippine Flight Network writes that (SRQ) is also keen on obtaining more frequencies to Japan, and will hence participate in a forum for Filipino carriers ahead of talks between Manila and Tokyo on a potential "Open Skies" deal. Tigerair Philippines (SRQ) currently operates 2 A319-100s and 3 A320-200s.
(SRQ) currently serves 5 countries, 15 destinations and 15 routes.
September 2013: Tigerair Philippines (SRQ) (until recently known as SEAIR) has introduced 2x-weekly flights between Manila (MNL) and Phuket (HKT) in Thailand, using its A320s. The outbound flights on the 2,600 km route from Manila operate late on Tuesdays and Saturdays, while return flights are operated very early on Wednesdays and Sundays. Competition on the route is provided by Cebu Pacific Air (CEB) who operate 3x-weekly flights. This new route is Tigerair Philippines (SRQ)’s 7th route from Manila, and its 1st international route from the country’s busiest airport. It does also serve Bangkok, Hong Kong, Nanjing, and Singapore from other airports in the Philippines.
December 2013: Tigerair Philippines (SRQ) has resumed its domestic service from Manila (MNL) to Davao (DVO). (SRQ) (when it was still called SEAir) originally served the 960 km route with 2x-daily flights from August 18th 2012 to July 21st 2013. Since December 2nd, (SRQ) has been operating the route with a single daily A320 service and has faced competition from Cebu Pacific Air (CEB) (69x-weekly), Philippine Airlines (PAL) (52), AirAsia Zest (RIT) (21), and AirAsia Philippines (APG) (7).
January 2014: Cebu Pacific (CEB) will acquire 100% ownership of no-frills carrier Tigerair Philippines (SRQ) as part of a strategic alliance between (CEB) and Singapore-based Tigerair (TGR).
The deal includes the 40% of (SRQ) owned by (TGR) as well as the 60% stake owned by local partners, and is reportedly worth $15 million.
(TGR) said (SRQ) had been loss-making since the 40% stake was acquired in 2012 and expected to receive $7 million for the sale of that stake. (TGR) said, “Assuming the proposed sale had completed September 30, 2013, the estimated net loss arising from the proposed sale is -S$13.5 million/-$10.6 million.”
The strategic alliance will see (CEB) and (TGR) collaborating commercially and operationally on international and domestic air routes to and from the Philippines, harnessing synergies and efficiencies to enhance their network coverage, flight frequencies and customer service. The airlines will jointly market routes using code share and interline arrangements plus, subject to regulatory approval, will jointly operate common routes between Singapore and the Philippines.
Tigerair Group (CEO) Koay Peng Yen said: “Tigerair (TGR) and (CEB) share a vision for both airlines to join forces and create the largest budget airline network between Asia and the Philippines. This partnership with (CEB) is consistent with our asset-light strategy and builds upon our other alliances.”
Both carriers will brand themselves as partners in communication material, and both (TGR) and (CEB) websites will be used as sales and distribution platforms to market all routes operated by both carriers. They also expect to collaborate on other common destinations in Asia.
(CEB) President & (CEO) Lance Gokongwei said the strategic alliance “will allow both (CEB) and (TGR) to leverage on our extensive networks spanning from North Asia, (ASEAN), Australia, India, all the way to the Middle East.”
Tigerair Philippines (SRQ), which will initially continue to operate under the Tigerair (TGR) brand, operates to 11 domestic and international destinations with five airplanes from bases in Manila and Clark. (CEB) has a fleet of 48 airplanes serving 24 international and 33 domestic destinations.
The 2 alliance partners said that by combining their resources, (CEB) would be able to provide services to high growth markets including Australia and India, while (TGR) would have access to (CEB)’s extensive network in the Philippines and N Asia. They said the arrangement “allows both airlines to deploy capital more efficiently.”
August 2014: Tigerair ((IATA) Code: TR, based at Singapore Changi) (TGR) has completed the phase-out of its A319-100 fleet with the last 2 of the type (3757, 9V-TRA) and (3801, 9V-TRB) having now been ferried to Alice Springs for storage.
The outback Australian storage facility is proving popular with the airline, with subsidiary Tigerair Philippines ((IATA) Code: DG, based at Clark) (SRQ) having recently ferried 1 of its A320-200s, former (RP-C6319) now (5188, 9V-TRO), to Alice Springs for storage as well.
October 2014: Tigerair Philippines (SRQ), which is now a fully owned subsidiary of Cebu Pacific Air (CEB), has launched 3 new routes from Manila (MNL). All of the routes will be served daily by (SRQ)’s A320s and include a service to Clark (CRK), a sector length of just 90 km. No other carrier serves this route, but the other new routes to Roxas (RXS) and Tagbilaran (TAG) are already served with 3 and 8 daily flights, respectively.
Manila (MNL) to Clark (CRK) A320 7x-; to Roxas (RXS) A320 7x- vs Cebu Pacific Air (CEB) 7x-, (PAL) Express (PHL) 7x-, Philippine Airlines (PAL) 7x-; to Tagbilaran (TAG) A320 7x- vs AirAsia Zest (RIT) 21x-, (PHL) 14x-, (PAL) 14x, (CEB) 7x-.
December 2014: Tigerair Philippines (SRQ), which is a now a fully-owned subsidiary of Cebu Pacific Air (CEB), began 3 new domestic routes in the Philippines. The shortest of these is the 200 km flights between Cebu (CEB) and Cagayan de Oro (CGY), while the longest is the 1,036 km link between Manila (MNL) and General Santos (GES). (SRQ) will compete against its parent company on all 3 routes. Somewhat confusingly maybe, the launch flight between Manila and General Santos was operated by a Cebu Pacific (CEB) airplane.
Cebu (CEB) to Cagayan de Oro (CGY) A320 2x-weekly vs Cebu Pacific Air (CEB) 23x-; To Davao (DVO) A320 3x- vs (CEB) 31x-;
Manila (MNL) to General Santos (GES) A320 5x- vs (CEB) 21x-, Philippine Airlines (PAL) 7x-.
May 2015: News Item A-1: Tigerair Philippines (SRQ), which was acquired by Philippine low-cost carrier (LCC) Cebu Pacific Air (CEB) in March last year, has been rebranded as "Cebgo."
(SRQ)’s new logo incorporates the Cebu Pacific (CEB) colors to reflect (SRQ)’s relationship with its parent company.
Cebgo (SRQ) President & (CEO) Michael Ivan Shau said: “The new Cebgo brand clearly identifies us as part of the Cebu Pacific Air (CEB) group, and streamlines our operations further. Cebgo (SRQ) will continue to leverage (CEB)’s distribution channels and network, and work together to serve more guests,” he said.
Cebgo (SRQ) operates flights from Manila’s Ninoy Aquino International Airport Terminal 4 and Clark International Airport, flying to 16 domestic and regional destinations. Since its acquisition by Cebu Pacific (CEB) last March, the wholly owned subsidiary has made a rapid turnaround, narrowing its financial losses. In 2014, Cebgo (SRQ) carried 1.3 million domestic passengers, compared to 970,000 in 2013.
August 2015: Cebu Pacific Air ((IATA) Code: 5J, based at Manila) (CEB) will begin transferring some of its domestic network to its Cebgo ((IATA) Code: DG, based at Manila) (SRQ) subsidiary with effect from September of this year. According to "AirlineRoute," flights from Manila to Busuanga, Caticlan, and Naga will begin from September 25 onwards, while Laoag will switch from October 1.
Thereafter, effective October 1 through to October 26, Cebgo (SRQ) will begin operating the following flights out of Cebu: Caticlan, Dipolog, Siargao, Tacloban, Camiguin, Tandag, Butuan, Dumaguete, Iloilo, Legaspi, Ozamis, Pagadian, Surigao, Cagayan de Oro Laguindingan, and Bacolod.
Flights from Davao to Cagayan will also switch from early October onwards.
Formerly Tigerair Philippines ((IATA) Code: DG, based at Clark), Cebgo (SRQ) will be transformed into an all-turboprop operation following an order for sixteen ATR72-600s (with options for an additional ten) placed with Avions de Transport Régional (ATR) (Toulouse Blagnac) earlier this year.
October 2015: Filipino low-cost carrier (LCC) Cebu Pacific (CEB)’s regional arm, Cebgo (SRQ), will use ATR72s on all routes and will transfer its remaining Airbus A320 aircraft to the parent operation.
Cebu Pacific (CEB) bought Cebgo (SRQ) (formerly named Tigerair Philippines), in March 2014, and has seen what (SRQ) (CEO) Michael Shau described as a “significant turnaround” from its previous 2013 last quarter loss of -$9 million.
(SRQ) increased passenger numbers +34% to 1.3 million in its 1st full year of Cebu (CEB) ownership, and introduced +10 new routes through May 2015.
For Cebgo (SRQ), the change to all-turboprop operations will involve changing terminals (to exclusive use of Terminal 4) at Manila’s Ninoy Aquino International Airport.
In parallel with the move, Cebu Pacific (CEB) will stop using ATR aircraft for services, and will transfer its existing 8 ATR72-500 aircraft to Cebgo by the end of October.
(CEB) has an outstanding order for 16 ATR72-600 aircraft it placed at the 2015 Paris Air Show, plus options on a further 10 of the type, in a $673 million deal.
Deliveries of the new aircraft (which Cebu (CEB) said will mostly be used for fleet renewal) are scheduled to start in the 3rd quarter of 2016.
June 2016: "Value Alliance: the Hubs, Focus Airports and Routes Where Alliance Members Might Gain Synergies", by (CAPA), June 20,2016.
Since the Value Alliance was announced in May 2016 as the 2nd low cost carrier (LCC) alliance, there has been industry interest about how and where the alliance can deliver synergies. The 9 initial members of the Value Alliance include Cebu Pacific (CEB), Cebgo (SRQ), Jeju Air (JJA), Nok Air (NKA), NokScoot (NSC), Scoot (SCT), Tigerair Singapore (TGR), Tigerair Australia (TAU) and Vanilla Air (VNL).
Tokyo Narita is the alliance hub with more service from Value members (five) than any other. But Asia's most popular airports for Value members are not where the alliance has a local member: Taipei and Hong Kong.
In terms of frequency, Manila and Bangkok Don Mueang have the most Value flights, reflecting their local membership there. The local Value member based at an airport typically dominates the hub, accounting for >90% of Value flights. That creates a strong feed network for other members but also (potentially) competition that may be too strong. Members overlap on only 6 routes so far and their combined frequency gives them a scale advantage against non-Value (LCC)s. Although it is premature to evaluate the effectiveness of the alliance (new members will join and existing members will grow) this analysis looks at where there are network opportunities for cooperation.
* Airports most frequented by Value Alliance are not member hubs.
There are services from 3 or more members of the Value Alliance at 15 airports in Asia. This includes Tigerair (TGR) and Scoot (SCT), which have the same ownership, but excludes Cebu (CEB) and Cebgo (SRQ), since (CEB) owns (SRQ). (TGR) and (SCT) are expected to merge, with only one brand surviving.
5 airports have services from 4 or more alliance members. The 2 most popular airports (Taipei Taoyuan (6) and Hong Kong (5)) are not local hubs for the Value Alliance. 3 airports have services from 4 Value members: Hanoi, Osaka Kansai, and Tokyo Narita. Only Tokyo Narita is a Value hub (served by Vanilla Air (VNL)), although Osaka Kansai is a growing focal point for (VNL) and in time, will likely become a hub.
Taipei is home to 2 (LCC)s: Tigerair Taiwan (TTW) and V Air (VAX) (but neither is a member of Value (or of U-FLY)). Tigerair Taiwan (TTW) is 10% owned by the Tigerair Holdings but is not a member, and is expected to be wholly under control of the China Airlines (BEJ) Group, once the expected Tigerair (TGR)/Scoot (SCT) merger occurs. V Air (VAX) is owned by TransAsia (FSH) and has no partnership affiliations. TransAsia (FSH), a full service regional airline, is not a member of a global alliance.
It is not without coincidence that the most commonly served airports are in NE Asia. Taipei and Hong Kong are accessible from both SE Asia and northern NE Asia with narrow body aircraft, making the 2 airports accessible for all members. Only Jin Air (JIN) (not an alliance member) is a NE Asian wide body (LCC) operator, so NE Asia’s (LCC)s are restricted from flying deep into SE Asia.
In contrast, SE Asia has 3 wide body (LCC) operators that are belong to an alliance: Scoot (SCT), NokScoot (NSC) and Cebu (CEB). (CEB) can access NE Asia with narrow body aircraft, although it sometimes uses wide body aircraft on trunk/congested routes. There are services from 3 Value members at 10 airports, and all but 3 are Value member hubs.
* Measured by frequency, most services are at Value alliance member hubs.
This analysis next looks at the largest airports in the Value Alliance based on weekly frequencies. This analysis comprises the 21 largest airports (the 20th and 21st largest have the same number of frequencies). The 6 largest airports are all member hubs.
The 4 largest (Manila, Bangkok (DMK), Singapore, and Cebu) are significantly larger than the rest. Of the 10 largest airports based on member frequency, only 2 (Hong Kong and Taipei Taoyuan) are not member hubs.
* Largest Value Alliance airports are dominated by their members.
13 of the region's largest airports have >7 daily flights from alliance members. Each is dominated by its local alliance member. At the 2 largest (Manila and Bangkok (DMK)) the local alliance hub member operates 98% and 94% of all flights by the alliance. In other words, of all Value flights at Manila, Cebu (CEB) operates 98% at Manila, while NokScoot (NSC) and Nok (NKA) operate 94% of all Value flights at Bangkok (DMK).
A Value Alliance Member typically accounts for over 90% of alliance flights at its home. Four airports are around the 80% mark, while there is no Value Alliance member operating flights at Bangkok (BKK) (they instead operate out of Bangkok (DMK)).
* Value Alliance members overlap on 6 routes.
There is a possibility that the Value Alliance could help (LCC)s gain scale on routes, especially where due to infrastructure constraints ( slots, air traffic, bilaterals) organic growth may not be an option.
In the week commencing June 12, 2016 the Value Alliance members overlap on only 6 routes. This excludes overlap only between Scoot (SCT)/Tigerair (TGR) (owned by the same company and expected to be merged) and Cebu (CEB)/Cebgo (SRQ) ((CEB) owns (SRQ)). (CEB) has the most overlap (4 routes) followed by Jeju (JJA) (3), Tigerair (TGR) and Scoot (SCT) (2) and then Vanilla Air (VNL) (1).
No route has >2 operators. The frequency split varies between relatively even and lopsided. As this analysis is focused on the opportunity to offer more flights, frequency (not seats) is considered. The use of wide bodies at Scoot (SCT), and sometimes Cebu (CEB), would alter a capacity share analysis.
* Value Alliance opportunity to link NE Asia with SE Asia.
The geography of E Asia means that (LCC)s cannot serve the entire region with existing narrow body technology, although (LCC)s in some markets can come close. The final analysis in this report considers the ability of the Value Alliance to link NE Asia with SE Asia, and vice versa.
6 of the members have routes between NE and SE Asia. Vanilla Air (VNL) operates wholly within NE but is examining a Taipei base to use 5th freedom rights to fly to SE Asia. Cebu Pacific (CEB) has the greatest number of flights between NE and SE Asia. This is probably unsurprising given the Philippines' geographical position, which is more between the regions. Tigerair (TGR) and Scoot (SCT) have approximately 10 routes between the regions.
Evaluating the opportunity is complex: routes are often to points where there is no service from another Value member, or there is limited frequency, and it may not enable a same-day connection, or a connection within reason. Some connections would be circuitous. But as noted earlier, it is too soon to evaluate the opportunity for the alliance.
* Outlook: long haul operator, member with central geography, could bring opportunity but also competition.
The Value Alliance faces the same conundrum as full service alliances: adding members brings opportunities but also competition. A member that is more central between the regions (such as in Hong Kong or Taiwan) could enable more links and connection opportunities.
Alternatively, that member may prefer to serve points on its own. (As (CAPA) has previously recorded, some Value members are expected to work with HK Express outside the (LCC) alliance organizations). More long haul operations could mean that an airline gains access to the strong regional hub of a partner in a different part of Asia. Alternatively, this could preclude cooperation between other members.
The opportunities for the Value members today are varied, but they do exist. With time, the synergies within the alliance should become greater. Most critically, this is all being developed with minimal cost, unlike the high joining and membership fees of full service alliances. While the gains may not seem as significant, neither are the costs.
Conclusion: As (CAPA) has previously concluded of the alliance:
* Joining the Value Alliance should be an appealing option for Asia’s independent (LCC)s since the cost and risk of membership are small. At the May 16, 2016 launch event, executives representing the founding members stressed that the concept is to add incremental passengers without incurring additional cost or adding any complexities. The members said that they would not have joined, if they had not been able to retain their business models.
* The main objective is for each member to increase their brand awareness across Asia-Pacific. The main objective is for each member to increase their brand awareness across Asia-Pacific and augment their distribution network through cross-selling. The alliance members pointed out that most of their brands are not well known outside their respective home markets.
* The members expect that the alliance will only generate a small increase in their interline traffic volumes (at least in the initial phase).
* Interline traffic for most members is a very small part of their overall business (for some it has even been non-existent) and most members do not expect that interline traffic will ever account for a large share of their overall traffic.
* The Value Alliance essentially offers its members a nothing-to-lose alternative for attempting to increase transit traffic and attract passengers in new markets who are now flying with other airlines. Even if the alliance only brings each member a +1% incremental gain in passenger traffic, it can be deemed a success, given the limited cost and the simplicity of the new offering.
* Asia’s independent (LCC)s need to evolve and embrace new alternatives if they are to maintain their growth trajectory and succeed in an increasingly competitive marketplace.
February 2017: ATR72-600 (1394, RP-C7282), ex-(F-WWEH) delivery.
May 2017: ATR72-600 (1429, RP-C7284), ex-(F-WWEZ) delivery.