New Moves

So too did the decision to focus on emerging, secondary cities in China given the potentially huge demand for air travel among the expanding Chinese middle class. Of Scoot’s 13 destinations since launch, three are in Australia and four are in China. The airline also flies to Hong Kong.

Fast forward to the present day and Scoot chief executive Campbell Wilson admits the operating environment is a very different scene.

Chinese travellers have shunned traditionally popular South-East Asian markets of Singapore, Malaysia and Thailand – often visited together as part of a package tour – in response to the disappearance of Malaysia Airlines flight MH370 and the political turmoil in Thailand.

And with the Australian economy having come off the boil slightly and the currency off its lofty heights, suddenly Scoot finds itself heavily exposed in two markets that are now showing signs of weakness.

“When you fly to many countries the events of one country can be insulated by the presence in others,” Wilson says in an interview on a recent visit to Sydney.

“When you have widebody, medium-haul operations, by definition you don’t touch so many countries or you don’t have the frequency just simply because of the nature of the operation. ” “In our case, 39-40 per cent of our capacity operates to Australiaso a downturn in the Australian economy has quite a substantial impact in our operations.

“Where the market conditions have had an effect is on the yield that we can extract and I think we are not alone in this. You can see the pricing from all of the carriers – legacy, premium, whatever – is almost unprecedentedly low. ” Scoot’s beginnings can be traced back to May 2011, when Singapore Airlines began the project.

A name – Scoot – followed, along with bright yellow and black uniforms, a fleet choice of Boeing 777-200 aircraft configured with 402 seats and a catchy slogan to describe the vibe the airline was trying to create, “Scootitude”.

And 13 months later, on June 4 2012, Scoot’s inaugural flight took off from Singapore to Sydney, carrying with it Singapore Airlines’hopes for a slice of the emerging medium-haul, low-cost market.

Since then, Scoot has built up a fleet of six 777s sourced from Singapore Airlines and added destinations such as Tokyo, Seoul and Taipei, and Tianjing, Nanjing, Qingdao and Shenyang in China.

Perth, Hong Kong, Bangkok, which are closer to Singpore than some of the other points on the network, have helped improve aircraft utilisation.

Wilson says the airline has managed to maintain loads of about 80 per cent across the network.

“In terms of the performance metrics, operational reliability and robustness, it has gone very much to plan or even slightly better, touch wood,” he says.

“The fact that we have continued to fill 80 per cent is quite heartening because some of the destinations that we launched in more recent times – the Nanjings, the Qingdaos, the Shengyangs, the Tianjins – are very much developmental sort of destinations.

There was also the “second-year effect” of cities such as the Gold Coast and Perth, where the buzz and excitement of $200 fares to Singapore at launch had worn off.

“In your second year you say ‘well, I have been to Singapore for 200 bucks, do I want to go again? Where can I go now?’” Wilson says he soon realised after joining the Scoot management team that there needed to be a stronger focus on transfer traffic at Changi, which was not part of the original business plan.

And figures from the recent CAPA Australia Pacific aviation summit

Modelling . . . took it for granted that there would be enough point to point traffic.

in Sydney, as well as the volatility in the markets it flies to, showed why Scoot quickly changed tack and looked at interlining within the Singapore Airlines group, as well as with Tigerair.

In the first three months of 2014, 47 per cent of passengers on Malaysia-based AirAsiaX connected onto either another AirAsiaX (17 per cent) or AirAsia short-haul (30 per cent) flight.

In 2011, the figure was 27 per cent.

Those statistics are what makes the Competition Commission of Singapore’s (CCS) recent approval of the Scoot-Tigerair cooperation so important.

It is this transfer traffic, which until recently was regarded as the domain of the full-service carrier, that Scoot and Tigerair are trying to tap into.

And with regulatory approval, the pair can coordinate flight schedules, pricing, integrate their systems and work together on boosting connecting traffic at Changi.

Tigerair chief executive Lee Lik Hsin said the green light from the CCS would “empower” both carriers to deliver greater flexibility and value to the travelling public.

“This is not just a positive development for Tigerair and Scoot – it is also a win-win partnership between the alliance and our customers,” Lee said in a statement.

Wilson, who spoke with Australian Aviation before the regulator’s decision was made public, estimates the number of Scoot passengers connecting onto another service at Changi – whether to another Scoot flight or another carrier – is currently in the “double-digit percentage” range.

Compared with AirAsiaX, which has been around longer and has a much wider network to draw traffic from, the figure is small. It will, however, undoubtedly grow.

“When I was involved in the early stages of the project and we defined the aircraft configuration and determined that we could get 402 seats the necessity to go for transfer traffic became more acute,” Wilson says.

“The realisation that we needed to pursue it became clear whereas some of the more theoretical modelling that had been done before I came aboard sort of took it for granted that there would be enough point to point traffic. ” “Once the necessity of it became clear then we began thinking ‘how do we facilitate it?’ ” Exactly how many passengers that “double-digit percentage” represents is unclear as Scoot does not release operating or financial statistics.

The airline offers, for a fee, a Scoot-Thru product where passengers connecting onto another Scoot or Tigerair flight can approach a transfer desk at Changi where they will be issued with a boarding pass for their onward flight while airport staff intercept any checked luggage downstairs.

The airline is taking a pause from growth this year as it prepares to transition to an all-Boeing 787 fleet.

The first 787, which will be the larger -9 version, is due in Scoot colours in November, and Wilson says all six 777s will have exited the fleet by the middle of 2015.

Scoot is scheduled to receive 20 Dreamliners – 10 787-8s configured with 335 seats and 10 787-9s with 375 seats, both, like the 777, two-class with a ‘ScootBiz’ premium cabin.

Wilson says the transition to an all-787 fleet has come a bit earlier than he originally thought.

“Bringing in a new aircraft type – we will be the first 787 operator based in Singapore – carries with it a lot of preparatory work, regulatory work, transformative work with respect to the company and pilot training and all that,” Wilson says.

“It is a substantial change to the business and that’s why we will use the 787s to retire the 777s in fairly short order. ” The New Zealander, who has been with Singapore Airlines for close to two decades, says consumers will benefit from the improved economics of the Dreamliner.

Moreover, having the -8 and -9 in the fleet gives the airline greater flexibility to better match capacity with demand.

“For example, flying a 402- or 375-seat aircraft daily to the likes of Tianjin or Gold Coast might be an oversupply of capacity given the markets’ development, whereas a daily 335-seat aircraft may be just small enough to be viable,” Wilson says.

“It saves us money but it also perhaps improves the frequency of product for the consumer notwithstanding the onboard product change too. ” All passengers will have in-seat power, there will be inflight WiFi for a fee and Scoot will unveil a new Scootbiz seat.

While growth at Scoot is on hold for now the airline is not standing still, having formed a joint venture with Thailand’s Nok for a new medium-haul low-cost carrier, NokScoot, to be based in Bangkok.

The new airline is due to begin flying before the end of 2014, with initial destinations to be in North Asia.

Wilson says it has been an incredible three years.

“I think our team has done a great job not only getting the airline up and running in a very short time but solidifying a foundation, refining a brand new entity into something that is reasonably robust and performing well. ”