Is it wise to open up an airline company in Singapore?

Sorry for being sarcastic, but the word “wise” triggered me off. This sounds like classical Dunning–Kruger effect

Wisdom is based on experience and knowledge. What do you know about airline profitability? Did you even google it? Do you have experience running an airline? Whats your knowledge about the competitive situation? Wouldn’t it be “wise” to check some basics here?

Question: Is it wise to found a political party in China?

Answer:

It’s not only not wise, its ridiculously stupid. Stupid (I know people will bash me for this) because a little bit of market research would show that there are other places in East Asia where it would be a lot easier. So even considering Singapore is “not wise”. Running an airline is a notoriously unprofitable business. Many survive and have survived only by subsidies, state intervention.

Any little political crisis, SARS, economic crisis, oil price movement, politics, vulcanic eruption, accident (or two, by chance, within three months, even if caused not by you, but by some weirdos with rockets or some suicidal pilot) can mess up your beautiful business plan and you can do nothing about it (There are six references to recent events in the last paragraph, if you cannot put a year and place behind each of them within 2min you should not even consider to spell the word “airline business”)

An airline is tied to an airport, that is landing slots (on both ends) and other facilities. So we go up against Singapore airlines, surely Changi will give you preference  and if not, there are other airports in Singapore that will happily handle your flight.

Note: I’m not an airline expert, having worked with multiple airlines as my customers, I know just enough about running airlines, that I’m on the low point of the Dunning Krueger confidence graph. It scares the hell out of me to even think about running one.

There is one particular small niche market for flights out of Singapore that Singapore Airlines would probably not be interested in. If one dominates in that market segment, one would have “won”.

The market segment would be that of private luxury flights in the likes of Gulfstream V, small 14 seaters to nearby short-hop destinations within Southeast Asia. Some models can be obtained for about USD 4 million, second hand. Companies currently operating such business models in other locations have prices lower than a first class Singapore Airlines ticket (Private Jet Charter | Hire | Gulfstream GV | PrivateFly), which testifies to the general operating cost.

The passengers would be delighted to be whisked through the VIP complex (JetQuay) onto the tarmac without the standard “arriving X minutes before departure”.

The cost could be low enough for people to want this “once in a lifetime” feeling. Companies will even offer it as part of their team building/incentive trips.

This is not a long term business plan. It will burn up within 3-5 years due to competition but one would have the bragging rights of running an airline. Hopefully one breaks even.

A short-term initial plan would be to book a private jet for a month and run a cool website.

No.

For no other reason than that line you put below the question. Yes, that “And compete against Singapore Airlines” line

If you are inserting that line, that means you haven’t even grasped who you are competing against, and you have absolutely no idea how the airline industry works.

Take any flight route, say from Singapore to Sydney. Your competitors will be those airlines that do offer such a flight.

Where Singapore Airlines’ office is located doesn’t matter. Where your office is located doesn’t matter. The flight route you are plying determines your competition.

No one plans a flight and says “Hmm, I’m going to look at which airlines are based in that country”.

Nope. They plan a flight and they look at the available flights for that flight route.

If you make Singapore the hub for your supposed airline, you’re not just going up against Singapore Airlines (SIA). Changi Airport is a (air)port of call for many global airlines using their 3 passenger terminals, so you’ll be competing against them too.

As for the budget passenger segment, there are 4 budget airlines that fly out of Singapore with 3 of them, Scoot, Jetstar and Tiger Airways, that use Singapore as their hub.

And if you think SIA is only in the “regular” segment of the market, you’ll be quite wrong. The airline has shares in Scoot and Tiger Airways, as well as its wholely owned subsidiary Silkair.

So to answer your question: Is it wise to open an airline company in Singapore? You’ll have to do a ton of market research to decide if you want to join in the fray.

Should you compete against Singapore Airlines? That’s just too vague a question.

By the way, if you think I’ve not mentioned the luxury market segment, here’s a bragging blog post on the $23,000 Singapore Airlines Suites Class that I recently came across: What It’s like to Fly the $23,000 Singapore Airlines Suites Class

So which segment of the airline market would you like to go up against Singapore Airlines?

If you have enough money to open an airline then you can hire my company to determine the current size of the airline market in Singapore and if the market is expanding and can support a new airline.

If the market is not expanding then one of the airlines is going to be out of business and adding a new airline is only going to contribute to the quicker destruction of one of these airlines.

If the market is not expanding then you can still decide to open the airline anyway and try to steal market share for all the other airlines.

This is not as easy as it seems.

If the Singapore market includes some of the largest airlines in the entire world then they have been preparing for this eventuality and they could cut all the rates in Singapore even if that means they are losing money on every flight just to cut all the oxygen from your tank and eventually kill you.

This attack on your new airline could be coordinated between two or more airlines or it could be unilateral.

In any case, you could be obliterated.

If you are only competing against the regional airlines then your chances of success are better but there is still some financial risk.

In some cases, it may make sense to simply buy an unprofitable airline and hire somebody like me as the CEO to run it and turn it around.

In some cases, it may make sense to sumply buy a profitable airline and hire somebody like me as the CEO to run it more efficiently.

A merger between two profitable or two unprofitable airlies could also work.

A merger between one unprofitable airline and one profitable airline could also work.

There are many moving parts in this kind of business and you should hire my think tank before you decide to open an airline or any other type of business.

I write about airlines every now and then.

Can Qantas be saved?

How to lose money with an airline – iFreePress

No.

It is decidedly unwise to start an airline anywhere if you do not have relevant experience to realize everything you need to pay for. It takes a ridiculous amount of capital with no certainty it will even make a profit.

Make a business plan, surround yourself with knowledgeable and skilled people, then ask again.

I suggest you write a business plan to answer that question. Look at the competition’s strengths and weaknesses and figure out how your company will compete and make money. For example Singapore Airlines is known for great customer service but also high prices so perhaps you con find a way to offer similar service for a lower price.

I would caution that Malaysia Airlines already tried that and it has not worked out so well for them. You should include that example in your analysis and how you intend to avoid crashing your planes.

Good luck.