Scooting off to bigger plans

A YEAR and a half ago, Scoot had yet to even launch its inaugural flight.

Since it first took to the skies in June 2012, the Singapore Airlines-owned budget carrier has built its fleet up, from one Boeing 777-200 aircraft to six such planes.

It has also expanded its network to 13 destinations and grown its headcount from a mere 20 employees to about 520 today.

To date, it has carried nearly two million passengers and maintains an average load factor of just over 80 per cent.

Scoot chief executive Campbell Wilson says: "It's been a very dramatic expansion in terms of fleet, in terms of network and in terms of staff strength. As we've developed, we've refined our procedures and processes. The last few months, we operated at a punctuality of over 90 per cent."

A lot of this fine-tuning - whether it is doubling the number of staff at its outsourced call centre in the Philippines or giving passengers a 12-hour window to amend their bookings without charge - has come about through experience.

Mr Wilson, a New Zealander, recalled that he had 12 months and a team of four with which to start up the airline.

"That was probably the biggest challenge - keeping the hundreds of work streams on track and going on despite the lack of bodies, lack of experience, lack of expertise. It was only once we got to six months - started bringing people onboard - that it started to ease off," he says.

The chief executive was to learn next that getting the plane in the air was just the start. When Scoot launched its inaugural flight to Sydney in June last year, the flight was delayed after a warning light for one of the engines came on, prompting maintenance checks. Fortunately, no fault was found.

Then on that flight, the meal service took three hours despite being manned by an experienced cabin crew.

"It's the little things - like what thing is in what cart, what cart gets pushed out first, who stands behind it. All of these things are like a choreographed dance and you don't realise, for a full-service airline like Singapore Airlines (SIA), they've been choreographing that dance for 40 years.

"Until you meet the real world, you don't know where the holes are. Very quickly, you're going back to the drawing board," he says.

He knows firsthand how the airline has had to react, in a short space of time, to shortfalls that come to its attention, such as by doubling the staff strength at its call centre after learning the hard way that it had underestimated the number of customers who would call in.

The airline has since kept track of the answer rate for calls, and monitored the online space, where it gets feedback on its service.

The SIA veteran joined the group back in 1996 after having been general manager for the carrier in Japan, a vice-president in Canada and a network planning analyst in SIA's head office.

In 2011, SIA, which also holds a stake in low-cost airline Tigerair, announced that it would set up a budget carrier within a year - a move widely seen as the group's effort to claw back ground lost over the years to budget carriers such as Jetstar Asia and AirAsia as low-cost travel began to take off as a concept.

From the very start, Scoot made it clear that it would be a completely different animal from SIA, which occupies the premium end of the spectrum. Scoot, with its tongue-in-cheek advertisements, bright yellow planes and unapologetically cheeky attitude - it typically names each of its planes, with a recent one christened Bo-eng ("busy" in Hokkien) Boeing - signalled that it would play by a different set of rules.

Now, a year and a half of learning experiences and fairly aggressive expansion later, it is "reasonably happy" with what it has achieved.

By year-end, Scoot will run flights to 13 destinations including Hong Kong and Perth, both of which were recently announced. It now owns and operates five B777-200s, with a sixth leased recently. The 402-seat aircraft is typically configured with 370 economy seats and 32 ScootBiz seats, the latter being akin to the premium economy seats on a full-service carrier.

Punctuality

Having more than four planes has created the luxury of a buffer in the form of a spare aircraft if any of the other planes is back late, which helps with punctuality. The carrier now schedules its fifth aircraft to leave Singapore in the morning for Nanjing or Seoul, so that it can be back at night as a back-up for departures in the 11pm-to-2am window.

In about a year, the airline will start taking delivery of the first of 20 Boeing 787s that it has on order. About half of those planes will come on-stream by 2015 and 2016, which will then allow the airline to retire its existing B777s in favour of the Dreamliners. The planes will be used to launch new routes as well as bump up frequencies on existing ones.

Mr Wilson says: "Inaugurating Hong Kong and Perth allows us to spread our growth over a longer period because otherwise, we'd have to induct a huge number of new cities in a very short span of time. By starting now, we can get a bit of a headstart on that rapid growth and, hopefully, earn some money in the interim."

Scoot will commence flights five times weekly to Hong Kong from Nov 15, and ramp this up to a daily flight during peak season.

Flights to Perth will start on Dec 12, a week earlier than planned, following strong interest from customers. The west Australian city will be Scoot's third Australian destination after Sydney and the Gold Coast.

Moving from the sizeable B777s to the Dreamliner, which offers lower operating costs and smaller seating capacity, gives Scoot the flexibility to launch new routes or add frequencies which may be unsuitable for a bigger plane.

The 777s, already some 15 years old and with typically a decade more in lifespan, were acquired from SIA and retrofitted to suit Scoot's operations.

"At some point, taking advantage of the latest technology is necessary," says Mr Wilson.

When Scoot has taken delivery of all 20 Dreamliners in the next six years, its staff strength will have grown some more. "By end next year, we'll have more than 1,000 staff. SilkAir has that number of staff now, and it's been around for 20 years," he pointed out.

And when Scoot starts to broaden its network, much of that growth will likely come from what he described as its "economic sweet spot" - destinations that are between five and nine hours away, that is, in countries such as China, India, Australia, South Korea and Japan.

The Dreamliners can go as far as London, but routes further afield make it necessary for the aircraft to carry more fuel and install equipment to fall in line with regulatory requirements, such as bunks for its cabin crew to rest. The higher costs from these could make it harder to eke out a profit on such routes.

Scoot already flies to China, Australia, South Korea and Japan, but has yet to launch flights to India, which remains on the airline's radar. Mr Wilson says that India offers several potential destinations beyond a five-hour radius, particularly in the north-west of the country. Identifying a route that is not already tapped fully, and the entitlements under the air-service agreements between Singapore and India are other factors that could shape the choice of destination in the sub-continent.

The populous nation with a burgeoning passenger market has caught the eye of other airlines too. Malaysia's AirAsia is working on setting up an India-based budget carrier with the Tata Group; SIA has also teamed up with Tata to establish a full-service carrier, and Tigerair already offers services to cities such as Bangalore, Chennai and Hyderabad.

But while AirAsia has also signalled its intention to focus on secondary airports in India, it will likely start out with domestic routes. On the other hand, Scoot will focus on the Singapore-India segment.

Vision for Scoot

Reflecting on his vision for Scoot, Mr Wilson says that the Singapore unit must be "robust and sustainable, (having) attained a level of credibility in terms of its operational integrity, brand awareness and positioning". He adds: "That means it's a healthy, ongoing viable business."

The goal is no doubt made slightly easier by the growing popularity of low-cost carriers, as fast-paced growth in regional economies and an emerging middle class take demand for air travel to new heights.

It is what makes Mr Wilson bullish about the prospects of the low-cost travel industry.

"The budget market has grown dramatically over the past 10 years and is now a sizeable share of the total market," he says. The pace of growth in Singapore may slow down, but there is still plenty of room for further growth, he says.

Last year, low-cost carriers accounted for about 30 per cent of traffic at Changi Airport, up from some 28 per cent in 2011.

And while Scoot's operations in Singapore remain its primary focus, Mr Wilson does not rule out setting up an overseas base down the road, given the limited size of the market here.

"We will not take our eye off the ball with respect to making this continue to work as a business, as an operation, as an employer (and) as a vehicle for promoting traffic to, and facilitating traffic out of, Singapore.

"That will remain the focus, but we need to realise that Singapore is a relatively small place. It is already a well-served place with respect to airlines."

He adds: "Is it forever going to be our only base? That's where the future challenge comes - to continue to induct the aircraft and grow, as we plan to do with the 787s, and at the same time, think of what further opportunities could be available to us."

nishar@sph.com.sg

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