Executive Interview
COOL SCOOT SPOT ON
Owned by Singapore Airlines, medium to long-haul budget carrier, Scoot, celebrates a year of operations this month. According to chief executive, Campbell Wilson, the airline has met or exceeded all targets.
June 1st 2013
Low-cost Scoot, Singapore Airline’s (SIA) answer to the region’s growing no-frills challenge, is described as a long-haul budget carrier, but for now chief executive, Campbell Wilson, has no plans for its fleet of five B777-200s to fly to Europe, the Gulf or North America. Read More »
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| 'Our initial focus has been on medium-haul and it will remain that way simply because of the opportunities available' |
| Campbell Wilson Chief Executive Scoot |
“We have always said we are a medium to long-haul low-cost airline,” he said. “But our initial focus has been on medium-haul and it will remain that way simply because of the opportunities available.
“If you take an eight to nine hour radius from Singapore it includes all of Australia, China, Japan and India. There are a lot of exciting and attractive opportunities in that region. The motivation and the pull factor of places further afield, with perhaps softer economies and high fuel prices, is not so strong.”
When and where Scoot does look further afield will depend on opportunities, he added. Meanwhile, the Asia-Pacific is providing plenty of scope for growth, even with increasing competition and new entrants in the budget airline sector.
“Part of the problem is that some of the dead men walking never actually die,” said Wilson.
“But in Asia there is enough cause for optimism. The OECD (Organisation for Economic Co-operation and Development) states the ASEAN region’s GDP will grow about 5.5% per annum for the next five years.
“We know from history air travel has typically outpaced GDP growth by about 1-1.5 percentage points. That means if you have a compound annual growth rate of 6%-7% you are doubling the number of people flying every 13 years.”
Scoot is performing well. While the SIA Group doesn’t publicly release the carrier’s financial results some analysts believe Scoot was “marginally profitable” in the first quarter of 2013.
The statistics back that assumption. Last month, it carried its one millionth passenger and average load factors have been a healthy 82%. “That is despite bringing in three additional aircraft and inaugurating nine, soon to be eleven, destinations, some of which are clearly developmental destinations,” said Wilson.
After its launch flight from Singapore to Sydney a year ago, Scoot added the Gold Coast in Australia, Bangkok, Taipei, Tokyo and Tianjin to its network. In January, Chinese cities Shenyang and Qingdao joined the network (Scoot has adopted the Chinese name of ‘ku-hang’, which means ‘cool’ in China). Early this month, another Chinese city, Nanjing, and Seoul were added to the carrier’s scheduled flights.
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| Low-cost, medium to long-haul Scoot: 20 B787s will start to arrive late next year |
“All of the benchmarks we set ourselves for passenger numbers, loads and operational and financial performance have been met or exceeded,” said Wilson.
“Of course, an airline is always a work in progress, especially one as young as ours. There is much we are working on, optimizing, refining and improving, but we are reasonably satisfied with what we have done so far.”
The carrier, which had 12 staff as it prepared to launch, now has 400. From an engineering perspective, some 97.5% of its flights depart within 15 minutes of schedule, on par with the global B777 fleet.
“That is despite our aircraft flying about 40% more hours per day than the worldwide average for B777s,” said Wilson.
He conceded that being a young airline with a small fleet means Scoot lacks network density. This has been overcome by forging a partnership with short-haul low-cost carrier (LCC) Tiger Airways, which is part-owned by SIA.
“We operate to 11 cities in our own right, which is fairly substantial, but in order to fill large aircraft flying medium-haul you require some short-haul connectivity.
“Tiger is the perfect partner for us because it focuses on the market for short-haul, low cost, which is complimentary to our medium to long-haul low-cost. Now, from Scoot’s perspective, we can offer some 47 destinations on our combined networks,” said Wilson.
Apart from Tiger, Scoot also partners with parent, SIA, and its subsidiary, SilkAir, on a unilateral basis.
“We will sell tickets on our conditions via our distribution from our network into certain points they operate, predominantly in Southeast Asia. They will not sell under their conditions and their brand onto us. That’s a very clear distinction,” said the Scoot boss.
Wilson said Scoot was talking to a number of other airlines, but would not name them. “Partnership has certainly served us well in Singapore. The partnership between the medium-haul and short-haul operators clearly, in almost all cases, benefits both parties,” he said.
The key to Scoot’s expansion and operational efficiency will be the arrival of the first of 20 B787 Dreamliners late next year. The planes were originally ordered by SIA, which switched its order to A350s.
While Wilson said a couple more destinations may be added to the network later this year, he said there would be an enforced hiatus in the next 12 to 15 months while awaiting the arrival of the B787s.
“This is not necessarily a bad thing. It allows us to focus on refining the business; making sure it is operating as efficiently as possible and is sufficiently equipped to expand rapidly when the 787s start coming en masse, in late 2014 and 2015,” he said.
Scoot is taking a mix of B787-8s and the larger B787-9. One aircraft will be delivered late next year and nine or 10 will arrive in 2015. The -9s will be delivered first. Scoot will be the second customer for the model, after Air New Zealand.
The LCC has been innovative with its products, such as ScooTV, unveiled in January. It has introduced the first inflight entertainment system in Asia that allows passengers to stream content to their own Wi-Fi devices.
In November, it launched Scoot-Thru, a streamlined transfer service at Singapore’s Changi airport. Costing US$13 if booked online, it allows transit passengers to skip immigration and bypass collecting their checked baggage during transit between Scoot flights and joint itineraries with Tiger Airways.
“Most people are very pleasantly surprised about the spaciousness of our 777 aircraft. Our cabin crew are fantastic. They’ve got a good service ethic notwithstanding it’s a low-cost airline. Also, people now understand the low-cost model better,” said Wilson.
“We are not cheap and nasty. We try to be fun and friendly. We are very clear about what we will and will not do, but people come with the right attitude and I believe they find the experience above expectations.”
Scoot takes innovation very seriously. “We recognize we are operating in a relatively new space. There isn’t much precedent for medium to long-haul low-cost,” said Wilson.
“So we do have this opportunity and obligation to experiment because the sector length we operate, the traffic we are carrying, the proposition that we offer hasn’t yet been fully explored and fully tested. We can offer new things. If they work, great. If they don’t, well we’ll try something else.”
