The Straits Times says

Seeking a greater way to fly together

The commercial logic of making Tigerair an integral part of a winning combination, rather than flying into oblivion by going it alone, should persuade its investors to accept Singapore Airlines' buyout offer on Nov 6.

It has been a turbulent ride indeed for them with Tigerair's share price going from $1.50 in January 2010 (when enthusiastic buyers made its initial public offering a huge success) to a paltry 31 cents on the day before the SIA offer was made.

With hindsight, it's hard to fathom the early optimism as Tigerair had already racked up accumulated losses of $127 million at the time of listing. Three cash calls followed in the five years thereafter which yielded $680 million.

For all the support given over the years by stakeholders, the largest being SIA, the budget airline's "development potential is limited", as noted by SIA chief executive Goh Choon Phong. It lags behind the region's bigger budget carriers and is unable to soar.

With SIA having to spend $453 million on the takeover (which is conditional on acquiring more than 90 per cent of Tigerair), one might ask if this is a case of throwing good money after bad. There are strategic reasons for SIA's decision to position its premium service and regional arm, SilkAir, alongside the low-cost operations of Scoot and Tigerair.

A multi-brand approach, rather than a simpler model based on just one full-service brand and one low-cost brand, is all about giving the group access to more destinations and giving passengers smooth travelling connections via network collaboration. With one ticket or check-in procedure, passengers, baggage and freight can be smoothly transferred from one sister carrier to another. In today's cut-throat aviation industry, SIA has to move nimbly to add value to services.

It must also extract synergies within the group for cost savings and improved efficiency. These could be in areas like ground services, reservations, scheduling and purchasing.

SIA is wise to not ignore the low-cost and regional travel segments as Asia continues to grow, and as competition heightens in the premium long- haul business - particularly from Gulf carriers who are out to dominate global air travel.

The group's success is critical as Singapore bets on a travel boom in coming decades by expanding Changi Airport energetically - to twice its present size, with the addition of a third runway and the provision of five passenger terminals. Closer integration of SIA's brands can boost traffic at Changi and help it to meet competition from rival hubs in the region and the Middle East.

The symbiotic relationship accounts for SIA's oft-declared "commitment to further developing our home base as a travel hub", in Mr Goh's words. It's against this broad strategy that Tigerair's buyout must be seen. It has a role to play in the larger effort of maximising the value of all brands to gain a collective edge in a bustling industry.

A version of this article appeared in the print edition of The Straits Times on November 17, 2015, with the headline 'Seeking a greater way to fly together'. Print Edition | Subscribe