Will the fledgling company prove the sceptics wrong? CAROLINE BOEY finds out.

Valuair, which aspires to be Singapore’s answer to a low-cost airline, was registered as a company on March 31. But until it is granted an Air Operator’s Certificate (AOC) – expected in October or early November – it is not saying much about its model or strategy.

All eyes are on its targeted launch in the second quarter of next year because sceptics say it will not work, partly because of the cost factor. Others believe Valuair – headed by former Singapore Airlines (SIA) top executive, Mr Lim Chin Beng, and a number of other ex-staff of the national carrier – is a strategy by the establishment, in support of SIA, to fend off potential competition on the low-cost front.

Speculation aside, Valuair is moving ahead, director and spokesman, Mr Jimmy Lau, told BTN Asia-Pacific.

“Until the AOC is approved, we don’t want to say too much because we don’t want our competitors to know,” Mr Lau said.

“The name has been carefully chosen, and Valuair is looking at all that low-cost airlines have, and more, and we will give a value proposition to our customers.”

He added: “It is too early to talk about our fares and the points we will be operating to. The routes will depend on what landing rights we are granted. But within the first few years, we are looking at destinations within a seven-hour radius. We will be flying a small number of similar aircraft, with capacity for no more than 200 passengers.”

Valuair had been in talks with Airbus and Boeing, he said.

Despite higher operating costs, Mr Lau confirmed Valuair would be flying out of Singapore Changi Airport, and not the no-frills, Seletar Airport alternative. The latter is where Malaysia’s Berjaya Air operates flights to nearby Tioman island, and is used mostly by private aircraft.

In early October, the Singapore government announced it was opening the skies to any home-grown airline flying out of Changi airport, ending the monopoly of traffic rights and routes which in the past were given to SIA, and sister company, SilkAir.

It is certainly good news for Valuair. But co-founder of former aircraft leasing company Region Air, Mr Prithpal Singh, believes the cost of operating out of Changi airport will weigh down Valuair, and prevent it from taking off.

He said: “Valuair is not going to work because it is going about it the wrong way by creating just another airline. It is so identical to SilkAir.

“There are three major costs in operating an airline – landing fees, parking charges and ground handling – and Changi is too expensive (for a low-cost operation).

“Even though landing fees and parking charges are free for the first two years, the ground handling alone would cost US$1,500 to turn around a small Boeing 737 aircraft for 145 passengers.

“If a Singapore-based carrier operates 10 flights a day and has to use SATS (Singapore Airport Terminal Services) or CIAS (Changi International Airport Services) at Changi airport, it works out to US$15,000 a day. But if you operate outside Changi airport and if you do not use a ground handler, the costs do not even come to US$1,000 a day.”

Industry observers have also pointed out it would be hard for Valuair’s management team to shake off the premier airline culture they have come from, and this is the reason why attempts to go the low-cost route failed for players such as British Airways, Lufthansa and KLM.

But Mr Prithpal believed Asia and the Asian mentality was suited for the low-cost product, saying it would catch on faster compared to the West. “Look at the towkay (meaning the big boss in the Hokkien dialect) who owns a bank, but who does not think he has to go and buy a jet.

“Safety, reliability and cheap fares are the principles of a low-cost airline and it will work in all of ASEAN, including Singapore, if the conditions are right. The conditions can be created in Singapore and at a cost which can compete with the air fares of AirAsia,” he added. Offering another view, an informed airline source said Valuair would work, but only if it had the “blessing” of SIA.

“SIA is a great national symbol, an aviation success story and an extension of Singapore Inc. So it enjoys a special status. Unlike Thailand, or the Philippines or Indonesia, which are natural hubs for low-cost airlines, Singapore, and a place such as Hong Kong, are not. You have to take into account the size of Singapore and the fact SIA has succeeded as a sixth freedom airline.

“It is also possible Valuair is a ploy. SIA wants to rationalise its cost and the setting up of Valuair sends a strong signal to its employees to accept the wage restraints. With a pressing need to manage costs and wages, the spectre of a low-cost carrier looming will not hurt,” he speculated. “And I believe others in the region are closely watching how the situation pans out in Singapore.”

Watch and wait, because that is the name of the game for now.