Should Tigerair Australia and Scoot swap aircraft?

Tigerair Australia has slowed its fleet transition from Airbus to Boeing but could reaccelerate the project by swapping aircraft with Scoot.


Summary:

  • Tigerair Australia has slowed its transition from A320s to 737s;
  • Scoot is preparing to add 737s alongside its A320 fleet;
  • The two airlines are closely aligned and have a common history;
  • An aircraft swap would be sensible, as it would allow Tigerair Australia to reaccelerate its fleet transition and Scoot to avoid having to operate two narrowbody types.

Initially in Jul-2016 Virgin Australia announced plans to transition the Tigerair Australia fleet from A320s to 737s over a three-year period, but the fleet transition programme has since been delayed and is no longer expected to be completed in 2019.

Tigerair Australia has not specified when it will finally phase out its last A320 but the process is expected to take at least another few years as the LCC tries to match up A320 lease return dates with the transfer of additional 737-800s from its parent. Tigerair Australia has so far phased out only two of its A320s (from 14 to 12 Airbus aircraft).

Tigerair Australia operates four 737-800s alongside the 12 A320s, having added the first 737-800 in 2016, two more in 2017, and the fourth in late Aug-2018, according to the CAPA Fleet Database.

All four 737-800s were originally delivered to Virgin Australia in 2004 and transferred to the LCC subsidiary after retrofit to single class configuration. Three of the 737-800s were initially retrofitted to a 180-seat configuration with an extra legroom section and used on flights to Bali, Tigerair Australia’s only international destination. The LCC dropped Bali in early 2017 and later decided to add a row, resulting in the current 186-seat configuration.

Scoot, which completed a merger with Tigerair Singapore last year, is also in the process of adding 186-seat 737-800s. Scoot operates 26 A320 family aircraft but plans to begin operating 737-800s within the next few months.

See related report: Scoot to take over SilkAir 737-800s. Is Scoot the new SilkAir?

Scoot is expected to take most – or potentially all – of the 17 737-800s operated by its full service sister airline SilkAir, which are in 162-seat two class configuration but will be retrofitted to a 186-seat single class configuration. SilkAir also operates five 737 MAX 8s and has 32 more MAX 8s on order – to replace the 737-800s transferred to Scoot and its 10 remaining A320 family aircraft.

As The Blue Swan Daily and CAPA have previously stated, adding 737s at Scoot is not ideal because operating two narrowbody aircraft types adds cost and complexity. It is unusual for any LCC to have two narrowbody types – particularly when their fleet size is relatively small (less than 50 aircraft).

The transition to 737s at Tigerair Australia is sensible, given that its parent operates 737s. However, the delay in completing the transition is not ideal as it means incurring the extra cost associated with two aircraft types for longer, impacting the airline’s profitability.

Tigerair Australia’s 12 remaining A320s are three to 12 years old and are all leased, according to the CAPA Fleet Database. While the leases on the older aircraft are likely to expire soon, Tigerair may be forced to operate the younger aircraft for longer to avoid hefty early return fees.

An aircraft swap between Tigerair Australia and Scoot would enable Tigerair to accelerate the transition to 737s and allow Scoot to avoid adding a second narrowbody type altogether: Tigerair Australia could take 12 of SilkAir’s 737-800s and its 12 remaining A320s could be operated by Scoot until their leases expire. While Virgin Australia was initially planning to transfer some of its 737-800s to Tigerair Australia, these plans could be adjusted by revising Virgin’s 737 MAX 8 delivery schedule.

Tigerair and Scoot are already closely aligned as founding members of the Value Alliance. Scoot’s parent Singapore Airlines (SIA) has a stake in Virgin Australia (and therefore a stake in Tigerair Australia) and would benefit from fleet simplification at both LCCs.

The two airlines also already have aircraft in common, as Tigerair Australia’s original fleet was taken from Tigerair Singapore (now Scoot). One of the two A320s Tigerair Australia has returned so far was subleased from Scoot and one of its remaining A320s is still subleased from Scoot, according to the CAPA Fleet Database.

In 2007 Tigerair Australia launched as a 100% subsidiary of Tigerair Singapore. Virgin Australia took a 60% stake in Tigerair Australia in 2013 and the remaining 40% in 2014; at the time, Tigerair Singapore was still partially owned by SIA, which later took over Tigerair Singapore. An aircraft swap between Tigerair Australia and Scoot would be another chapter in their joint history and be a win-win for both airlines.