By late next year, Tigerair will cease to exist as a Singapore carrier.
The airline is to be subsumed under the Scoot brand to make it less confusing for consumers. Tigerair first roared onto the scene in 2003.
The move is part of plans by Singapore Airlines, owner of both budget carriers, to claim a bigger share of the growing low-cost travel market.
The merger, which includes repainting Tigerair's planes in Scoot's colours and getting the necessary approvals from regulators in Singapore and other nations the airlines fly to, is expected to be completed in the second half of next year.
The decision to move to one brand comes less than six months after SIA announced in May that it had set up a new company - Budget Aviation Holdings - to own and operate both Tigerair and Scoot.
Before that, each airline had its own boss and office.
BUILDING BRAND LOYALTY
A single brand is less confusing for consumers and more effective to build brand loyalty and affinity.
MR LEE LIK HSIN, chief executive of the new company running Scoot and Tigerair.
Coming together as one brand under a single operating licence makes sense, SIA's chief executive and chairman of the new entity, Mr Goh Choon Phong, said yesterday, a day after the group announced an almost 70 per cent dip in profits for the July to September quarter.
He said: "The integration (in May) has already led to commercial and operational synergies between Scoot and Tigerair that are providing growth opportunities for both airlines... Following a review, we have determined that the logical next step is to pursue a common operating licence and common brand identity to enable a more seamless travel experience for customers."
Mr Lee Lik Hsin, chief executive of the new company running Scoot and Tigerair, said: "A single brand is less confusing for consumers and more effective to build brand loyalty and affinity."
On the benefits expected, he said: "There's a limit as to what (economies of scale) can bring. On the revenue synergy side, however, I think it's fair to say we are a lot more optimistic about what we can get from a single brand."
An area of focus is to grow connecting traffic through Changi Airport between Scoot, which operates medium- and long-haul routes, and Tigerair which does shorter regional flights.
Even as the merger is under way, it is not clear what will happen to Tigerair Taiwan, in which Tigerair Singapore owns 10 per cent, and Tigerair Australia - a former subsidiary now fully owned by Virgin Australia Holdings.
Discussions are ongoing with the relevant parties, Mr Lee said.
Growing its foothold in the budget-travel segment is a key part of SIA's strategy amid a sluggish global economy which has hit the group's premium business in particular.
Aggressive competition from rival carriers and an increasing supply of seats, as airlines continue to add new aircraft, have forced SIA to offer heavy discounts on fares which have hit yields and profits.
The gloom in the global economy is not expected to "last forever" but SIA also has to deal with structural challenges, which include an increasingly competitive landscape which is unlikely to go away, Mr Goh said at a media briefing yesterday.
This is why SIA has taken steps in the past five to six years to grow the low-cost travel segment, develop partnerships with other carriers to expand its global network and improve its product offerings, among other initiatives, he added.
Maybank analyst Mohshin Aziz said at the briefing that more drastic steps - for example, a downsizing of the poor-performing premium business - are needed if SIA wants to tackle the challenges effectively.
Mr Brendan Sobie, a Centre for Aviation analyst, said it is too early to make judgments. "These are long-term initiatives so it is a bit premature to conclude whether or not they have worked. In fact, one could argue that if not for the steps taken in the last few years, the drop in profits would have been more severe."