Saturday, November 28, 2015

Best of Airways: Scoot, Low-Cost / Long-Haul

By: Andreas Spaeth / Published November 27. 2015

Editor's note: This article originally appeared in Airways magazine in its April 2015 issue.

China Airlines Flyaway Photos Jessica Oliver rms276872 cns2014nef

Scoot, owned by Singapore Airlines, is trying to redefine cheap flying on long-haul routes from its home base to Asia and Australia.

There is a long queue inside Gate E3 at Singapore Changi Airport. But it is not made up of people waiting to board Scoot flight TZ 206 to Taipei and Seoul. The air bridge is almost empty. Instead, people line up in front of the only gate-side water fountain, patiently filling empty bottles they brought along with drinking water. A scene seldom seen before in long-haul travel from Changi Airport, dominated by full service carriers like Singapore Airlines (SIA). On board the Boeing 777-200ER, registered 9V-OTE, painted in bright yellow, things are different. Even in the front rows, called "Scoot Biz", offering what other airlines would call premium economy service. There is a pre-take off drinks service – consisting of a single miniature plastic can of drinking water. If a thirsty passenger asks for a second one, the flight attendant in black and yellow uniform regrets: "We just have one serving per passenger, but you can buy drinks after take off." By now, the queue around the water fountain in the terminal begins to make perfect sense. Welcome to Scoot, Singapore Airlines' low-cost long-haul offspring.

It started operations on June 4, 2012, currently operates six Boeing 777-200ERs taken over from SIA and will shortly switch to an all-new Boeing 787 fleet. Since launched, the airline has carried almost 3.5 million passengers until late 2014, the aim is to move around two million customers annually with ticket prices up to 40 percent cheaper than full service airlines. In the industry, Scoot seems to establish itself as a blue print of how to achieve a sustainable business model for low cost long-haul operations, a segment with a checkered history. "Scoot is an interesting concept", says for example Lufthansa's CCO Jens Bischof, setting up his own low cost long-haul offspring called Eurowings, based at Cologne/Bonn. It will start with three leased Airbus A330-200s from October 2015, operating initially to Florida, the Indian Ocean and Southern Africa. "We have thoroughly reviewed what we can learn from Scoot, that's important if you want to start up a carrier based on such a formula", Bischof tells Airways. "But you need to have staying power and lot of money."

The money in Scoot's case comes from Singapore Airlines, the legendary premium carrier facing tougher times to maintain its full service-high fare model in an increasingly price-sensitive marketplace. "It is not that one model replaces the other", insists Mak Swee Wah, EVP Commercial of Singapore Airlines in talking to Airways at the airline's headquarters near Changi Airport. "But the full service model is growing a bit more slowly now. One reason is the emerging new middle class in many Asian countries, being able to afford flying." But Mak insists that Scoot "has to carve it's own niche, they have to run independently of SIA and make their own decisions."  With much denser seating than on the parent airline and a significantly lower product level, he doesn't think cannibalization will be an issue. "Of course we want them to grow", stresses Mak. To facilitate that, SIA has handed over its full initial batch of 20 Boeing 787s on order to Scoot, which was to receive their first 787-9 in late 2014 and the first 787-8 coming in mid-2015. Ultimately, Scoot will operate a fleet of ten 787-8s and ten 787-9s, with all 777-200ERs being retired. "We knew we had to replace the older 777s after we had set up Scoot, but we opted to initiate service with them because we wanted an early start-up", recalls Mak. SIA itself will instead take their own batch of A350s starting by late 2015/early 2016 and then from 2018 onwards also Boeing 787-10s.

The man behind Scoot works hidden in the corner of a no-frills office floor somewhere behind the counters of Terminal 2 at Changi Airport in Singapore, home of Scoot. Campbell Wilson, 42, is an easy-going New Zealander who had worked for SIA since 1996. The office walls at Scoot's headquarters are painted in bright green, and Wilson reveals to Airways that green was a strong contender in choosing a colour scheme for Scoot. "We drew a map of which airline is associated with which colour, red and blue are very common", he realized. Green is not, that's why it was in the race, as was yellow. "We finally chose yellow in a car park from samples", he recalls. And Wilson also claims the copyright to the company's name, although other airline industry insiders doubt his story. "The name was cheap, I came up with it while I was on holiday in New Zealand", says Wilson. "It's short and sharp, memorable and has a connotation of movement, often used in a light-hearted way to talk about moving quickly", explains the CEO, who describes his airline's culture as "fun-friendly, not too serious, typical nature of a start-up". He also tells the story of how the uniforms came into being, a unique creation with yellow only on one side, the remainder being black. "I looked at the washing line at home and saw the scheme of my wife's uniform, she is a travel agent, and that inspired me", he shares. "Our brand has more impact than we thought in the beginning", enthuses Campbell Wilson. Scoot even invented its own term for its attitude, called "Scootitude". Wilson describes that as "being engaging, fuss-free, reliable, contemporary, friendly, different."

Sounds all great in theory, in reality, on flight TZ 206 from Singapore to Taipei, the cabin crew has only very short appearances in the cabin. After take off, they come round and ask passengers in "ScootBiz" what their preferred drink is with their (included and mostly pre-selected) meal. There are four hot dishes to choose from – Creamy Pasta with Sausage, Hearty Beef Stew, Soy Sauce Chicken Rice or Thai Red Curry with brown rice. Bought individually in the back of the cabin each dish costs 12 Singapore Dollars (about US$9). Soft drinks are S$4, beer S$8 and wine S$9. One meal and one drink of any kind plus a bar of Toblerone chocolate is included with the "ScootBiz" fare. All this can also be ordered on board, unlike for example Norwegian Air Shuttle, insisting on their Boeing 787 long-haul flights that passengers pre-order any hot meal. Airways tried the Thai Red Curry with rice. In all honesty, the way the meals are served, covered by an airtight plastic foil hard to remove, is not exactly appetizing.

Scoot3The food quality itself is OK, but not more, just good enough not to fly hungry. Anybody craving a meal roughly equaling what SIA serves its Economy passengers has to pre-order from a "Premium Selection" for S$21.99 (about US$17), giving a choice of five different options, including a salad, ice cream and a drink. On flight TZ 206, apparently hardly anybody had made this choice. Besides serving and removing meals and drinks, the cabin crew is hardly seen in the aisles during the four-hour flight.

Campbell Wilson admits difficulties at first to communicate to so-far spoiled Asian passengers what low-cost flying is all about: "The expectation of us was big in the beginning, people expected free meals and free-flowing drinks, there was a big misunderstanding from the customer side of what low cost offerings means." And the CEO stresses: "We don't pretend to be SIA just 50 percent cheaper, as was originally the expectation of Singaporeans."

Scoot_BIZThe cabin of Scoot's Boeing 777 fleet is equipped with 32 leather seats in "ScootBiz", featuring 22" width and 38" pitch, and 370 economy seats with pitch ranging from 31" to 35". The seats with more legroom are sold for a premium, being called "STRETCH". Their existence is purely due to the cabin architecture of the 777, while in the 787 fleet, there will just be "ScootBiz" and Economy offerings.

Scoot_econTheir total seat count is 335 in the 787-8 and 375 in the 787-9, 35 of which are in the "premium" cabin with dedicated Premium Economy seats by manufacturer Timco. "Our 787-8 will therefore carry more passengers than SIA's 787-10s", reveals Scoot's CEO. "The 15-year-old 777s are very cheap, and they are perfect for some routes", says Campbell Wilson, "but they are too big for developing markets". On the other hand, "it doesn't make sense due to crew efficiency and in order not to duplicate things to keep any 777s beyond March 2016, when we will have an all 787-fleet of initially ten aircraft". The 787s will feature in-seat power outlets and will be WiFi-enabled.

Scoot's first route was Singapore to Sydney, started on June 4, 2012, as were the Gold Coast and Bangkok flights, with just two aircraft initially. "Sydney and also Perth have a large market segment for low cost travel that SIA's product doesn't really cater for", says Campbell Wilson. "Our presence allowed the SIA group to catch more of the market." And what a market – before Scoot took on the route, there was actually an annual decline in passengers of 0.4 percent. "There were seven daily flights before by SIA, British Airways and Qantas, and their loads declined", recalls Wilson. But in the purest low-cost airline manner, all changed when Scoot appeared on the scene. "In the first six months after we started, there was an overall passenger plus to Sydney of 30 percent, we feel we attract new market segments", says the Scoot CEO. And that despite the fact that Scoot's Sydney flights leave Changi at the ungodly hour of 2.45am during the summer schedule, 1.45am in winter. "The rationale behind this is also to send passengers towards SIA, one of many considerations", admits Wilson, calling it a "crap departure time" himself but pointing out the "good arrival time", at 12.45pm or an hour later, respectively.

Currently, Scoot is serving three destinations in Australia (Sydney, Gold Coast and Perth), four in China (Qingdao, Shenyang, Tianjin and Nanjing) as well five Asian regional hubs – Tokyo Narita, Seoul, Hong Kong, Bangkok and Taipei. The latter three already had a strong presence of low cost carriers before Scoot. "On Singapore to Bangkok, there are over 30 flights a day with seven or eight carriers flying, even Ethiopian Airlines", explains Wilson, "90 carriers have fifth freedom rights on the route, SAS used to fly it with traffic rights." Still Scoot offers one daily flight to Bangkok's low cost-dominated Don Mueang airport, again differentiating itself from SIA, which flies to Suvarnabhumi. Taipei serves as an intermediate stop on flights from Singapore to both Tokyo and Seoul, with full traffic rights, also to minimize the commercial risk of these routes and again, differentiate it from SIA's nonstop offerings. "This way we have three countries to fill the flights rather than just two", Wilson points out. "It's a risk to fly beyond where people know your brand, but shorter flights spread the economic risk better", he argues. With such intricate scheduling, Scoot's fleet achieves a utilization of up to a peak 15.5 hours daily, despite not flying routes longer than the eight hours to Sydney.

Overall, Singapore has been proven receptive for low cost flying. "There were just four percent of Changi's passengers traveling low cost in 2004", explains Campbell Wilson. "Today it's over a third, a fertile ground for Scoot, but with just over 30 percent low cost share now, there is still some way to go. The potential must be over 50 percent in Asia as you have to swim between many cities if you don't fly, there is no land infrastructure." For the time being, Wilson wants to focus on destinations within a radius from five to nine flight hours out of Singapore, particularly Korea, China and India. "A potential exists to do truly long-haul because our new aircraft can do it, but the attraction is not necessarily there, as trip costs are much higher.

Such economic considerations make markets closer to home currently more interesting than Europe", states Wilson, "but we never say 'no'". With the 787s coming and a doubling of the current fleet size, the CEO plans to increase existing frequencies by a third, complemented by new destinations. Scoot, currently employing 583 staff for its six aircraft, enjoys an 81 percent load factor on average, which is paramount. "Because being a wide-body low cost carrier is night and day different from being a narrow-body LCC", stresses Wilson, "as wide-bodies have a hell of a lot of seats to sell." Scoot is not profitable yet, admits Campbell Wilson, "it's a long-run business with a high cost of starting up, you need patience and deep pockets."

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The post Best of Airways: Scoot, Low-Cost / Long-Haul appeared first on Airchive.

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