By Jeff Krendler / Published April 9, 2015

This article originally appeared in Airways magazine in February 2013.

Sydney was Scoot’s first destination. It’s American slang tagline, ‘Get Outta Here!’, was chosen from 3,000 submissions in a slogan competition conducted through Facebook. Image: Courtesy of Rob Finlayson

Late in February 2011, Singapore Airlines (SIA) executive Campbell Wilson and his wife were vacationing in his hometown of Christchurch, New Zealand, when he received a call from headquarters inquiring if he would be interested in heading the airline’s then unannounced low-cost carrier (LCC). The ‘Kiwi’, who served 15 years with SIA in New Zealand, Canada, Japan, Hong Kong, and at home base, accepted immediately and turned his attention to creating the model for the new enterprise, supplementing the well-known Singapore Airlines and its premium service regional carrier SilkAir. The task: create a 100%-owned subsidiary yet independently managed LCC to meet the growing demand for inexpensive, no-frills, long-haul travel in Asia.

Wilson set as his first priority the selection of a management team, then a name. ‘Scoot’ was his unorthodox pick, not least “because it is different,” says Wilson, adding, “Scoot is short, sharp, and snappy.

Geographically independent, it can be a verb or a noun and conveys spontaneity, movement, and a touch of quirkiness.”

ScootBiz includes a complimentary meal with beverages, a checked and carry-on baggage allowance, and priority boarding. Overall cabin load factor to date has been 81%. Image: Courtesy of Jeff Krendler

He goes on to extol the carrier’s different attitude: “What we call ‘Scootitude’—a passion for changing the way people travel long distances by air attracted by value airfares approximately 40% less than the full service competitors.” In June 2011, Scoot was launched and Wilson named CEO. By then he had 11 experienced Singapore Airlines managers who were seconded from the parent with the goal of getting Scoot in the air by June 2012, a target which was met with typical Singaporean efficiency.

Airways visited Scoot in its less than plush offices (open-floor layout typical of the breed of frugal LCCs) at Terminal 1 at Singapore-Changi Airport to learn how it was faring after its first six months or so of operations.

Wilson jokes that he learned the art of budget travel when roaming Europe after graduation from the University of Canterbury while he was enjoying his ‘OE’—a New Zealand term for overseas experience, when college graduates take some time to learn about the real world. “I had a budget of ten pounds [equivalent to about $15] per day of which about 9.50 was spent on beer,” laughs the 41-year-old Wilson. Reflecting on his ride to date on the Scooter, he notes, “I don’t know of any start-up airline which has achieved what we have, establishing a totally new long-haul airline with four wide-body aircraft in slightly over a year.”

New strategy for SIA Group

The investment in Scoot represents a new strategy for the parent Singapore Airlines, which has seen its profit plunge in recent quarters. Buffeted by stiff competition from luxury service carriers from the Middle East, namely Emirates Airline, Qatar Airways, and Etihad Airways, whose collective revenues have increased from $8 billion to $28 billion in the last eight years, in addition to softness in European markets because of weak economic conditions, the SIA Group had for the most part avoided entering the LCC fray.

Scoot will receive the 20 Dreamliners ordered by parent Singapore Airlines, which will replace 777-200ERs. While officially the order stands for 787-9s, Scoot is likely to take some Dash 8s. Image: Courtesy of Boeing

In announcing quarterly results in November 2012, SIA CEO Goh Choon Phong said that the lower end of the market is growing the fastest and believed that having a diverse portfolio with multiple segments was the most profitable course for SIA. He noted that this is critical when market conditions are soft in one area while demand is strong in another. Speaking to analysts, Goh explained, “We have deliberately positioned the SIA, SilkAir, and Scoot propositions very distinctly; we made it clear that the SilkAir and SIA brands are premium service while Scoot will stay true to its mission of providing affordable, budget travel. This market positioning is important as we believe that it will lower the risk of cannibalization.”

Budget airlines currently represent about 25% of Asia-Pacific air traffic. Their aggressive pricing has forced legacy airlines such as Singapore Airlines and Cathay Pacific Airways to shift their emphasis to shorter, regional services which do not require the fuel burn of medium-to-long-range flying. The low-cost travel boom has forced established carriers to make radical strategic adjustments in order to compete more effectively. As a symbol of its shifting influence from long-haul luxury travel, Singapore Airlines has decided to drop its two nonstops to Newark and Los Angeles (Airways, January 2009 & October 2004) by the end of 2013.

Some industry observers say that conservative SIA has been late in participating in the low-cost market, with its 32.7% ownership in Tiger Airways Holdings (see page 13) being its only response to the growing budget segment before the creation of Scoot.

Explains Wilson: “We bring incremental value to the SIA Group. Because of our cost structure, we can serve destinations where our other family members cannot profitably serve the same markets.”

While Singapore Airlines has reported a dip in operating margin to 2.7% for the first half of fiscal year 2012/13, SilkAir’s traffic has increased by 23% in the same period.

Last August, SilkAir signed a letter of intent (finalized on November 14) to purchase 54 aircraft from Boeing as the carrier shifts from an all-Airbus fleet to a mix of 23 737-800s and 31 737 MAX 8s. As SIA’s full-service regional wing, SilkAir serves 42 destinations in 12 Asian countries.

Scoot’s latest service, launched on January 11, 2013, is from Singapore to Qingdao via Shenyang. This is the airline’s third 777-200ER (9V-OTD), named Maju Lah. (Majulah, Malay for ‘onward’, is part of the title of Singapore’s national anthem, and ‘lah’ is the signature suffix of ‘Singlish’, Singapore’s unofficial language.) Only two more 777s are likely to join the fleet before 787s arrive. Image: Courtesy of Jerrald Wu

Choice of 777 over A330 Wilson says that time pressure on the Scoot team was one of the reasons why the airline selected the Boeing 777-200ER (although the type’s Rolls-Royce Trent 884 engines have been de-rated to 777-200 standard).

The first four aircraft came from the SIA fleet and averaged around 15 years of service. He reveals that Scoot also looked at the Airbus A330, but because of the immediate availability of the 777s, the decision came down to availability and price. “We could have acquired the A330s in time, but their newer vintage made ownership costs non-competitive with the SIA 777s. We also liked the fact that the aircraft had only one very attentive and careful lady owner since being delivered by Boeing,” he quips with a wide grin.

In addition to lower prices for the aircraft, with advantages in lower depreciation costs, Wilson remarks that Scoot has been able to take advantage of SIA’s experience with the 777, while the availability of spare engines made it an easy choice along with technical assistance and engineering and fuel hedging all paid for at arm’s length. “We can operate our 777 fleet at economies of scale far beyond the small number of units we currently have,” Wilson states.

He says Scoot’s fares are some 40% lower than those of full-service competitors, made possible by the number of seats (402 total) on routes with the right stage length and excellent utilization which tops 15 hours per day. “We stripped out some galleys and outsourced base maintenance and cargo bellies.

Most importantly, we give our guests the choice of selecting what they want. We offer three fare types in economy: ‘Fly’; ‘FlyBag’; ‘FlyBagEat’.”

The 370 economy seats are differentiated as ‘Standard’, ‘Super’, and ‘S-t-r-e-t-c-h’. With a 3-4-3 layout throughout economy, the different sections provide 31in (78cm) pitch in the (royal blue) Standard section; the Super (yellow) section offers 35in (89cm) pitch; while the third option (also yellow) in the front of each economy cabin and by the doors is sold at a slight premium as there are no seats in front of them. In the ‘ScootBiz’ premium cabin there are 32 seats (in black) in 2-4-2 configuration, pitched at 38in (97cm) and 22in (56cm) wide, with 8in (20cm) of seat recline, and a footrest.

Fifty percent of Scoot’s flight attendants are required under Singapore law to have had prior experience in in-flight services. Some of them have come from Singapore Airlines or SilkAir, but Wilson explains that there is good demand for the job and his pool of prospective flight attendants is excellent. With a large reservoir of highly educated, English-speaking in-flight personnel, the airline has been very successful in attracting a diverse, enthusiastic team of cabin crewmembers.

Pilots hail from 20 countries, recruited for their experience on the 777 and quintessential ‘Scootitude’. Explains Scoot’s Chief Pilot Rohan Hari Chandra: “At Scoot, we define ‘Scootitude’ as that single-mindedness for making things work; energetic people who will follow the core values of the company regularly without being asked to do so. All crewmembers are unified by the desire to make Scoot the best, and the notion that this is something completely new. The destiny of the company is in our hands, and that is very unifying.”

LCC growth in Asia

Low-cost penetration of Asian air markets has lagged behind LCC operations in Europe and North America but the gap is rapidly narrowing. Wilson points out that the dramatic increase is due to improved economies and growing middle classes throughout the region, which has stimulated pent-up demand.

In Singapore, the population has grown from three to five million in recent years with most of the immigration coming from China and India.

Airbus and Boeing have recorded their largest single-aisle airplane orders in Asia, the world’s fastest growing air market. Lion Air of Indonesia (Airways, March 2012 & June 2011) is one of Boeing’s best customers, while AirAsia (Airways, March 2011) is on track to grow its fleet to 500 Airbuses.

In Thailand, LCC market share grew to 38% in 2012, and even Japan has responded to the trend by establishing three new carriers in 2012. The start-ups—operating at load factors reaching 90%—are not taking traffic from the established airlines but are rather creating a new market. Japanese domestic traffic has reduced dramatically, dipping from 96 million passengers annually in 2006 to 77 million in 2011.

Trailing, but holding the greatest potential, is China. In 2012, 78 million Chinese travelled abroad, spending in excess of $80 billion. The Chinese domestic low-fare market is almost untouched now, but surely will follow the pattern elsewhere in Asia.

Dreamliner for Scoot

Scoot now flies to eight cities from its hub at Singapore: Sydney and Gold Coast (Coolangatta) in Australia; the Chinese cities of Tianjin, Qingdao, and Shenyang; Taipei in Taiwan; Tokyo (Narita); and Bangkok, a two-hour segment which has been added to take advantage of aircraft availability.

Wilson says Scoot is evaluating the feasibility of linking other points in Australasia, with China and India also high on the wish list. For example, he points out: “We fly to Tianjin, a secondary airport serving Beijing where slots are not limited and costs are lower. India is also very attractive to Scoot but it is more complex due to slot restrictions and bilateral complications.”

Connectivity at Changi’s Terminal 2 with low-cost partner Tiger Airways gives Scoot customers access to another 16 cities in Asia. Interline fares are, at present, restricted to FlyBag, and purchase of ‘Scoot-Thru’ allows travellers to remain in the transit area of T2, avoiding immigration and re-checking baggage.

Thus far, Europe has not been on Scoot’s radar, but options will expand considerably when the airline starts to induct a fleet of 20 Boeing 787-9 Dreamliners.

Originally ordered in 2006 by parent SIA for its own services, Scoot will begin taking delivery of the Dreamliners in 2014 to replace the 777s.

Analysts believe Scoot is likely to struggle to achieve profitability until it can introduce the smaller and more efficient 787 on existing routes and launch new ones which would not be viable with the 777. However, SIA Chairman Goh will not concede that Scoot cannot make money with only the 777.

Wilson says that typical of most LCCs, Scoot supplements its base ticket revenue by gaining an additional 20% from ancillary charges, mainly baggage fees, advance seat selection and upgrades, duty free sales, and onboard meal options. Scoot offers a wide variety of hot meals and sandwiches, snacks, cold and hot drinks, as well as beer and wine. The carrier even serves the popular US ice cream Ben & Jerry’s. A sampling of its vegetarian lasagna dish earned two thumbs up from this writer.

Scoot has also notched up success in the social media field, which is a key marketing tool costing very little. Its website has achieved top ranking in Singapore by average engagement rate, and is ranked second in terms of socially devoted brands. There appears little chance that Scoot will, to use its advertising tagline, ‘Get Outta Here!’. Competent management, an excellent value product, with the ‘halo’ effect and financial backing from a respected parent, coupled with strong demand, all augur well for this entrant. It may have been a late debut, and is still, as CEO Campbell Wilson puts it, a “work in progress,” however, Scoot and its 300 employees are now scooting along, trying to leave competition in their wake. ✈

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Contact the editor at benet.wilson@airwaysnews.com

Slider photo by JDL Multimedia.

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