Singapore Airlines will be focusing on flights to smaller Asian cities as a weak global economy batters demand on long-haul routes and competition from premium airlines intensifies.

SIA, which posted its first quarterly loss in more than two years on Wednesday, has been hammered by rising fuel costs and slower cargo and passenger volumes on routes to Europe and the United States.

Competitors, Emirates and Qatar Airways have also been grabbing a bigger share of premium passengers with high service standards, attractive deals and gleaming new planes.

SIA, which has promoted itself as a prestigious global airline over the years, will focus on the network of Asian cities served by its regional arm SilkAir.

Connections to cities such as Xiamen, Bangalore and Koh Samu would be strengthened, encouraging customers to choose the SIA group for their entire trip instead of hopping onto budget carriers.

The airline’s new medium-to-long haul budget carrier “Scoot” will start flying in June to Sydney, Bangkok and Tianjin, in direct competition with Qantas’ Jetstar and Air Asia X. It would also compete with its bigger affiliate Tiger Airways in one sector.

SilkAir will expand its capacity at a faster pace of 22 percent in the year to March 2013 compared with SIA’s 3 percent, and is seeking proposals to buy next-generation single-aisle jets from Boeing or Airbus.

Reuters