By Ameya Joshi
In 2022, Delhi was the ninth busiest airport in the world. The same year, Singapore’s award-winning Changi airport was ranked 36th. This was the same year when Singapore Airlines Group decided to agree on a merger of Vistara with Air India and infuse funds to hold a 25.1% stake in the merged entity. The airport rankings were different pre-COVID. In 2019, Singapore’s Changi airport was 18th worldwide while Delhi was 17th and Singapore Airlines counted India among its large source markets.
Come 2024, the merger is not yet a reality working through regulatory hurdles and service disparities, but the potential merger and ability to form two hubs are golden opportunities for both Air India and Singapore Airlines and what more – it sets up the airports at Delhi and Singapore on completely different growth trajectories.
Singapore Airlines, the national carrier of Singapore, has long been a major player in the global aviation industry. Renowned for its impeccable service and luxurious cabins, the airline has consistently ranked among the best in the world. However, in recent years, the airline has faced increasing competition from other carriers in the region, particularly from the Middle East. The traditional rivals in the region, Thai Airways and Garuda Indonesia have their own issues with the finances and low-cost giant AirAsia has been undergoing restructuring post-COVID. Singapore Airlines on the other hand has been going from strength to strength.
The airline invested in Vistara with 49% stake in 2013 as a joint venture with the Tata group. Ten years later, the airline is all set to get a 25.1% stake in Air India – a mix of the valuation of its stake in Vistara and adding investments for the additional stake. While it took time for Vistara to grow, the combined entity as Air India is way bigger and when merged will be bigger than the Singapore Airlines group which comprises Singapore Airlines, low-cost subsidiary Scoot and Singapore cargo. This will help Singapore Airlines and Air India to work towards a dual hub strategy, taking on competition effectively.
Is dual hub strategy a reality?
A dual hub strategy is where an airline operates two major airports as its primary points of connection for passengers and cargo. This allows the airline to offer a wider range of destinations and frequencies, as well as to take advantage of the different strengths of each hub. The possibility of having award-winning Singapore Changi and ever-growing Delhi Airport as the two hubs which are attractive for both airlines and importantly passengers.
There are several potential benefits to Singapore Airlines’ dual hub strategy. First, it will allow the airline to offer a wider range of destinations and frequencies. With two hubs, Singapore Airlines will be able to connect more cities around the world and offer more flight options to its passengers. Some routes in the Air India network, like those to Vienna or Birmingham in Europe, Vancouver or Toronto in Canada and Chicago or Washington in the US are not served by Singapore Airlines.
Second, the dual hub strategy will make Singapore Airlines more resilient to disruptions. If one of the hubs is closed due to bad weather or other factors, the airline will still be able to operate flights from the other hub. Third, the dual hub strategy will allow Singapore Airlines to take advantage of the different strengths of each hub.
This will not be the first case worldwide where airlines operate dual or multiple hubs. Air France and KLM group operate hubs at Paris and Amsterdam. Jet Airways operated dual hubs at Mumbai and Brussels, most US carriers use London Heathrow as its second hub.
The dual hub strategy comes with its own challenges, some of which are high costs – requiring matchable infrastructure and marketing. These costs need substantial revenue to justify. Additionally, both Delhi and Singapore face stiff competition from established carriers like Emirates or Qatar Airways.
Will airlines and airports gain?
While Air India operates non-stop to Australia, there is a sizable traffic that travels one-stop via Thailand, Malaysia or Singapore. Singapore Airlines flies to seven destinations in Australia, as compared to two of Air India making it a gateway beyond Sydney and Melbourne which will help passengers. The increased connectivity and synergy between hubs would mean enhanced global competitiveness for both the brands, establishing a strong presence in two key hubs could improve the brand image of Air India, faster.
Singapore’s Changi Airport will get more transfer passengers and Singapore Airlines will be able to offer new routes due to the increased feed from India – one of the fastest growing economies and airline markets in the world.
The positioning of Air India vis a vis Singapore Airlines could give passengers a choice to Europe and North America, one-stop via Delhi which gives Air India the ability to compete with the Middle Eastern carriers.
Tail Note
Air India has been under a precarious financial state leading up to privatization. The success of any hub strategy would hinge on Air India’s ability to address its financial issues and implement its turnaround plan effectively. The planned merger of Vistara with Air India has been on the slow path and is pushed by a year. Understanding evolving travel patterns and passenger needs would be vital for tailoring services and destinations offered through the hubs.
The quality of service will have to be the most important aspect for the transfer via hubs to be attractive, else the going gets tough for the dual hub strategy.
Ameya Joshi is an aviation analyst and columnist who runs the analysis website Network Thoughts
