VALUAIR: Singapore's First Budget Carrier

During the past month, one of the biggest headlines in aviation from Southeast Asia was the announcement by the Qantas Group about the closure of its Singapore-based budget carrier Jetstar Asia. After operating for nearly two decades from the highly competitive aviation hub of Singapore's Changi Airport, Qantas decided to close the airline as part of a restructure and reallocation of its resources within the airline group. Within a few years after its launch, Jetstar Asia strengthened its presence in Singapore with the acquisition of another former budget airline from the city-state – Valuair. While operating as a budget airline, some could argue that Valuair offered more than just low fares. Today Valuair is now part of Singapore's aviation history, though it played an important role for Qantas and Jetstar Asia before the brand was closed for good by the mid-2010s. 

Valuair's Founding

The late 1990s and the early 2000s was a time of change in Southeast Asia's aviation industry, as Low Cost Carriers (LCCs) began to form. Among the big players that emerged from this period that continues to operate to this day are Cebu Pacific in the Philippines, and AirAsia in Malaysia which has since expanded with its subsidiaries based in the region. While small, Singapore has and still is one of the more powerful countries in the region. It also arguably has the best hub in Southeast Asia with Changi Airport. Looking to capitalize on Singapore's position and the rise of budget airlines, a group of the city's businessmen – including former employees and executives of Singapore Airlines – formed what would be Singapore's first budget airline entry – Valuair.

Leading this new venture would be its Chairman, Lim Chin Beng who himself was a prominent figure in Singapore's aviation scene. Lim previously served as Managing Director, and eventually became the deputy Chairman of Singapore Airlines before retiring from the company in 1996. The company would then name another former Singapore Airlines executive – Sim Kay Wee – as its Chief Executive Officer.

Ahead of the first flights of the newly formed Valuair, Lim and the company would reveal the airline would be a variation of the low-cost model, saying it would be more in line with US-based JetBlue. While offering lower fares that the full-service competitors, Valuair would add some “frills” including meals, extra seat pitch, interline agreements, and more comfort.

After acquiring Airbus A320 aircraft through lease, Valuair's first flight would take place on May 5, 2004. Operating between Singapore and Bangkok, it was the launch of Singapore's first budget airline. After making headlines and the initial excitement, it would not be long before problems and stiff competition would eventually catch up with the ambitious budget carrier.

A Necessary Move

The team behind Valuair had ambitious plans which included flights beyond Southeast Asia to cities in Australia, though it would not be long before tough and well-backed competition would eventually make their entry. Just months after Valuair's first flight, Tiger Airways – backed by Singapore Airlines – launched its first flight. That was followed by Australia-based Qantas-backed Jetstar Asia before the end of 2004. By the end of 2004, Singapore had three budget airlines operating – Valuair, Tiger Airways, and Jetstar Asia.

Without a domestic route network, things would be further complicated for Valuair and its Singapore-based counterparts with the entry of Malaysia-based AirAsia. Each of the airlines would also face financial difficulties amid rising fuel costs during the mid 2000s. As Valuair sought investors, among the players that expressed interest in Valuair happened to be AirAsia and local counterpart Tiger Airways. Eventually, Valuair would merge with Singapore-based Jetstar Asia in 2005. The result of the first consolidation of budget airlines in Southeast Asia was the combined carriers under a new company – Orange Star.

The decision to merge with Jetstar Asia was a tough but necessary move for Valuair, which also prevented AirAsia from having a major presence in Singapore. In a blog post on Teamworkbound.com by Ebnu Etheris titled “Valuair airlines – The model did not work,” the former Valuair employee shared his account of the discussion within the company on whether to go with AirAsia or Jetstar saying:

“AirAsia wanted to buy Valuair, that would have meant employees then would have stayed intact and jobs could have been saved. However the endgame for Valuair was the merger with Jetstar. Even now I really wonder why the merger with Jetstar happened without any afterthought for the employees who worked with the airline. Singapore too may have been worried having AirAsia operating in our own backyard, with the Valuair AOC. That could have dented the profit margins for the GLC affiliated airlines, specifically Tiger. Perhaps that was why Valuair airline was started and let go of very quickly.”

While merged, Jetstar Asia and Valuair would continue to operate separately though Valuair was a much needed asset for parent company Qantas. In 2005, Indonesia imposed restrictions on new foreign LCCs from flying to cities within the country. Unlike Jetstar Asia, Valuair had already a presence in Indonesia so it was Jetstar's entry into the country using Valuair's “VF” flight code. This would continue until the restrictions were lifted in October 2014, and as a result the Valuair brand would eventually be ended. All remaining Valuair assets would be integrated into Jetstar Asia. 

Great Business Idea, Experience DOES NOT Always Translate to Success

During its short time operating independently, Valuair operated flights to Bangkok in Thailand, a few cities in Indonesia, and Hong Kong. In addition, the airline also had flights to Perth, Australia. Despite the lack of financial backing, it had other factors  working its in favor such as experienced employees and executives, and being based in a major regional hub. While potentially lucrative, Singapore is a competitive and challenging environment for any airline where strong financial backing is much needed. Even with great ideas and experience, it is a lesson that those two factors DOES NOT always translate to success especially in an airline.

While billed as a budget airline, it could be said that Valuair was among first of what we now refer to as a “hybrid airline.” The airline had meal service and extra legroom, offerings that some airlines that categories themselves as somewhere between LCCs and Full Service Carriers provide. It was in its own way ahead of its time, as we now see recent successes of similar models but operating longer routes with bigger aircraft such as Japan Airlines (JAL)-backed ZIPAIR Tokyo and Air Premia in  South Korea. However, we have also seen failures trying to implement a similar model such as with Hong Kong-based Oasis Hong Kong Air.  

Valuair's failure did have a long-lasting impact on Singapore's aviation scene that is still seen today. Singapore is already well served a variety of airline options to choose flying to and from the city-state, including local and foreign budget carriers offering lower fare options further boosting Singapore's status as a regional hub. Beyond the popular routes from the city such as between Singapore and Bangkok, budget airlines now have also opened up new connections from Singapore to secondary and tertiary cities that are under-served by the bigger Full-service airlines.

Even with the upcoming closure of Valuair's successor Jetstar Asia, Singapore will continue to be a major hub for budget carriers in Southeast Asia.

Powered by Froala Editor