Time to Scoot?

From the loud, almost garish yellow paint jobs of its all-Dreamliner fleet to calling its cabin crew Scooties, the airline is determined to do things differently. And maybe teach its parent a thing or two in the process.

And as Scoot approaches its fourth birthday, it will be hoping that its dare-to-be-different approach proves the difference as it looks to secure its place in the increasingly competitive long-haul low-cost market.

The airline is on a furious growth path, with projected capacity growth of 49 per cent in the current year, including new services to Jeddah, Saudi Arabia, and yet-to-be-revealed points in India due to begin later in 2016. And looking further head, Scoot’s fleet of fuel-efficient Boeing 787 Dreamliners will double from 10 currently to 20 by 2019.

As the network builds up, so will partnerships with the likes of Tigerair Singapore, NokScoot and others to support the projected expansion.

Scoot is the newest of the four airlines in the SIA group, alongside short-haul budget carrier Tigerair Singapore, full-service regional airline Silkair and the parent Singapore Airlines.

Its chief executive Campbell Wilson, a New Zealander who has led the airline since day one and previously worked for Singapore Airlines, says his airline’s role is to stimulate new demand with cheap fares, fly to new destinations that the other airlines in the group cannot economically serve, and to satisfy a leisure, cost-conscious market segment consisting of travellers who do not desire all the “full suite of bells and whistles” at the world’s most awarded airline.

Further, Scoot’s mandate is also to serve some of the SIA group’s existing destinations more profitably. Wilson estimates the airline’s cost base is about 40 per cent lower than Singapore Airlines.

“We do not cannibalise,” Wilson says.

An example of this is Scoot’s approach to Japan, where it serves Osaka and Tokyo (Narita) via Bangkok, Taipei or Kaohsiung and has pickup rights on the fifth freedom sectors, rather than operate nonstop.

“Our mission is to bring in value to the SIA Group and they fly to most of the major cities in Japan, so I’m not sure there is space for us to do that. At the moment our strategy is going via Bangkok and via Taipei. It is proving pretty good. We are tapping new markets and able to mitigate any impact on SIA while making money doing that,” Wilson explains.

What Is Scootitude?

When Scoot was established in 2012, the bulk of the flight attendants who were initially hired came with experience flying with other carriers.

Wilson says those first few batches of cabin crew helped set the standard for the airline’s “cheeky, spontaneous and sometimes irreverent brand” and established the template for new hires as Scoot expanded its fleet, its route network and its service offering.

“Scootitude, it is a term we have coined to represent our unique attitude, our unique sprit, our creativity and in fact our quirkiness,” Wilson says.

And the cabin crew that have followed over the next three-and-a-half years have been trained in the mould set by their predecessors.

“We’ve got a great HR team. We recruited very well for the first two or three batches of cabin crew,” Wilson explains.

“We modelled a profile of the ideal crew and then we were able to recruit to that model. Because we recruit to that model and because there was an example of behaviour set, people quickly became attuned to the culture we wanted and had. If we hadn’t got that core group right in the first place, and inculcated the right values and behaviours within, I think it would be very different. ” Wilson compares the culture of Scoot and Singapore Airlines as “almost chalk and cheese”. And there is a good reason for that, given the customer segments both airlines target.

“We are carrying leisure customers, younger or retirees. People that are in the vacation mindsets before they get on board so we don’t need to be quite so formal or predictable,” Wilson says.

“A business traveller wants things when they want them and they want them the same way every time whereas our customers are a bit more comfortable with spontaneity. We can recruit people who have that personality and spontaneity and we don’t need to train that out of them. ” And that extends to Scoot’s open-plan head office at Singapore Changi Airport too, with Wilson and other senior executives often turning up to work in a Scoot-branded polo shirt.

That’s not to say there is nothing that the parent airline company, which is what Singapore Airlines is referred to in the company’s results presentations, cannot learn from its younger sibling.

Rather, Scoot’s approach to its social media communications, treatment of staff conditions such as allowances and even the use of electronic flight bags in the flightdeck are just some of the things Wilson says have been adopted by other airlines in the group.

Passenger Experience

While the 787 is a new generation aircraft, complete with all the modern conveniences an air traveller would require – the passenger experience on Scoot during Australian Aviation’s flights to and from Singapore for the Singapore Airshow stayed true to the airline’s low-cost mindset.

Fancy a pillow and blanket? Pay for a ‘Snooze Kit’. Need to charge your personal electronic device? Hand over a few dollars to the nearest flight attendant, or Scootee. Feel like firing off a few emails or posting some social media status updates from 38,000ft? Sign up with a credit card.

The unbundling of ancillary items also extends to priority boarding, lounge access and streaming inflight entertainment, among others, which are the typical pay-for offerings of a long-haul low-cost budget carrier.

However, there are some perks for those travelling in the ScootBiz cabin, which has 21 (787-8) or 35 seats (787-9) laid out in a 2-3-2 configuration offering 38in seat pitch with checked baggage, food, in-seat power and streaming inflight entertainment included. The seat can be compared with what you may experience in premium economy on a full-service carrier.

Behind the ScootBiz curtain, the economy cabin has adopted the standard 3-3-3 configuration seen in almost all 787 operators. There is a small child-free ‘Scoot in Silence’ section, where passengers under 12 years of age are prohibited.

“We unbundle everything,” But Wilson is adamant Scoot brings something more to the travel experience than merely transportation – that there is still an element of service on board those brand new Dreamliners. ‘Scootitude’ if you will.

“It is not all bare bones,” Wilson says.

“We are in Singapore, we are in Asia, there is an expectation of service, there is an expectation of respect. We are part of the SIA group.

“We may be cheap but we are certainly not nasty. ”

Scoot Reaches Profitability As Growth Set To Rocket

In the three months to December 31 2015, Scoot posted a positive operating profit of S$18 million, compared with a S$17 million operating loss in the prior corresponding period. Revenue rose 37 per cent to S$32 million, SIA announced in early February.

It was the airline’s best quarterly result since the inaugural flight touched down in Sydney on June 4 2012.

SIA’s quarterly results noted Scoot benefited from its network expansion and the transition to the 787 from 777-200ERs, as capacity measured by available seat kilometres rose by more than 30 per cent in the quarter.

Wilson says Scoot’s 787s (the airline has four 335-seat 787-8s and six 375-seat 787-9s) are in the air about 40 per cent more than the utilisation rates on full service carriers. And it will be the Dreamliner, along with low fuel prices, that will drive Scoot’s route network expansion in the period ahead.

“Routes that you might see in the next 18 to 24 months really will be underpinned by the 787 and the fuel price,” Wilson says.

“Unit cost, which is really a principal measure of our survivability, has come down by 11 per cent with the 787. That is excluding fuel. If you include fuel, it has come down by 20-odd per cent. ” Wilson describes the 49 per cent growth in the Scoot pipeline this year as an “investment in the future”.

“The percentage is quite a lot but it is quite a lot going from six aircraft to around 10 soon to be 14. That is just a consequence of being small and getting bigger. The percentage increase thereafter will be lower,” Wilson tells reporters during February’s Singapore Airshow.

It is not all bare bones. CAMPBELL WILSON

“This current year we take two aircraft, next year four. So the percentage capacity increase will go down. We will have established both our network and geographic coverage west, north and south and I think we will be in a strong position. ” The airline has reported a 20 per cent cost saving from using the 787 compared with the 777s it previously operated.

Wilson says the airline’s yield performance, in Singapore dollar terms, has been affected by a weaker Australian dollar against the Singapore dollar, although some weakness in the Japanese and Chinese currencies have supported yields.

“Australia accounts for about one-third of our capacity so it has a slightly disproportionate effect. So in Singapore terms yield was slightly down. In local terms yield was up,” Wilson explains.

“The more you grow the more the depreciation effect from new routes. It is going to flow into this coming year as well.

“We’ve got about 49 per cent capacity growth as we absorb the aircraft inducted at the end of last year and two new aircraft this year. I think you won’t see a significant yield improvement, but it is high growth off a low base. ”

Building A Network

Along with its own growth plans, Scoot also stands to grow its offline network in 2016 once Singapore Airlines’ takeover of Tigerair Singapore is complete. The transaction should allow greater integration between the SIA group’s two low-cost units.

Currently, the pair cooperates on a number of routes, the most recent example being Scoot taking over one of Tigerair’s flights to Guangzhou, and offer joint itineraries. However, the level of integration is at an early stage and the number of passengers connecting between Tigerair and Scoot flights is still very low.

And they also sell a “fly-thru” product, allowing passengers connecting from each other’s flights to remain airside in transit at Singapore Changi Airport, rather than having to clear immigration and recheck in.

A CAPA – Centre for Aviation – research note estimated about five per cent of Scoot passengers transferred to Tigerair, with the figure rising to 10 per cent when Singapore Airlines and Silkair are included.

By comparison, about 56 per cent of passengers on rival long-haul low-cost carrier AirAsia X connect onto another AirAsia flight.

Given there are only four overlapping routes among Tigerair’s 37 destinations and Scoot’s 17 online points, namely Bangkok, Hong Kong, Guangzhou and Taipei, there is plenty of potential, and a lot riding on, deepening cooperation between the two airlines.

“We have been working for quite some time with Tigerair,” Wilson says. “We have had anti-trust immunity for about 18 months or so. ” “We are in the process of merging our reservations systems so it will be much more seamless selling each other and servicing customers in the first half of this year.

“Over time our association with Tigerair should just get closer and closer. ” There is also cooperation between Scoot and Thailand-based low-cost airline Nok Air, which operates short-haul routes and long-haul focused NokScoot, which hopefully will grow in the period ahead. Scoot owns 49 per cent of NokScoot.

“NokScoot, if you look at their route network they are flying to Nanjing, Tianjin, Quingdao, all of which are routes that Scoot operates,” Wilson says.

“That is no coincidence. One, so they can rely on the experience and foundation we have already built in those markets. But two, it benefits us.

“If you are in Tianjin you have got the choice of selling to Singapore or to Bangkok or a combination of the two. It means the proposition to the consumer is much stronger than either of us operating alone. I think you will see more of this structural synergy as well as a lot of behind the scenes in terms of the same systems and planning and staff communication. ”

Australia Doing Well

Australia is the second largest market for Scoot, with four online points – Gold Coast, Melbourne, Perth and Sydney – and access to a number of offline destinations such as Adelaide, Brisbane, Hobart, Launceston and Ayers Rock (Uluru) through an interline arrangement with Virgin Australia.

While the directional flows are on average evenly split between inbound and outbound, there are seasonal variations such as when students return to Australia at the end of the Australian summer.

The “significant majority” of passengers on Scoots’s Australian services are origin and destination (O&D) passengers between Australia and Singapore, although some leisure destinations in Thailand and Vietnam do attract a little bit of connecting traffic.

Wilson says he hopes to eventually expand Scoot’s offline presence in Australia through a partnership with Tigerair Australia.

“We have got a partnership with Virgin Australia which is working quite well. That is a unilateral partnership where we feed onto them. They don’t feed onto us. And Tigerair [Australia] will follow in time. They have been focused on their new structure which is why Virgin is first, but they are obviously a good partner for us. I think there is more we can do with other carriers,” Wilson says.

Wilson says its Melbourne-Singapore route is exceeding expectations since launching in November 2015, while the remainder of the network was performing well.

“Melbourne, we have a huge Singaporean student population there so there is more demand from there as well as from Perth,” Wilson says.

“The Gold Coast is a bit thinner and Sydney is a bit more competitive. Of the four, Melbourne and Perth are probably the stronger two. ”

They (Tigerair Australia) are obviously a good partner for us. CAMPBELL WILSON