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Scoot is a low-cost long-haul subsidiary airline established by Singapore Airlines in 2011, commencing operations in Jun-2012 to Sydney and Gold Coast. SIA is using Scoot to help it compete with the rising challenge from LCCs in key markets. Scoot has initially used four Boeing 777-200 aircraft in a two-class configuration, with plans to increase to 14 aircraft by 2016, all to be sourced through parent SIA. It has 20 787s on order, with the first 787-9 due for delivery in late-2014. Scoot's expanding network will include a wide range of destinations in North Asia, Southeast Asia, Oceania and South Asia.
Fleet: 4 x B777-200, 14 by 2016
CEO: Campbell Wilson
Location of Scoot main hub (Singapore Changi Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Scoot fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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40 total articles
(updated following 13-Nov-2013 analyst briefing to include additional comments on SIA yields, Scoot and joint venture with Tata)
Singapore Airlines (SIA) has reported higher profits for the three months and fiscal first half ending 30-Sep-2013. But the carrier’s operating margin was once again low, particularly by SIA standards, as it continues to see a drop in yields.
Market conditions for SIA remain unfavourable. Competition in Southeast Asia has been intensifying while the cargo and long-haul passenger markets remain relatively weak. But the group has been trying to position itself for higher growth and profitability over the long term through a series of major strategic changes.
The last of several major strategic initiatives came towards the end of the most recent quarter as SIA unveiled plans to launch a joint venture full-service carrier in India with Tata. The new Indian carrier, which is expected to launch in 2014, follows the 2012 launch of Singapore-based long-haul low-cost carrier Scoot and an acceleration of expansion at regional full-service subsidiary SilkAir. Scoot is not yet profitable and SilkAir has seen its profitability decline in recent months but over the long-run the SIA Group will have a stronger portfolio with a potential for a return of higher profits.
Tigerair & Scoot poised for expansion in under-penetrated Singapore-China market as Jetstar retracts
The Singapore-China market has huge potential for low-cost carriers, which currently only account for 19% of capacity between the two countries. But the market has proven to be challenging for Jetstar, which is cutting two more Singapore-China routes and reducing the LCC group’s capacity share to an insignificant 3% compared to 10% two years ago.
Expansion from Tigerair and Scoot has filled some of the void left by Jetstar. But total LCC capacity and the LCC penetration rate in the Singapore-China market is on the decline, dropping to only 16% in Jan-2014.
Singapore’s overall LCC penetration is now 31% and is continuing to rise. The relatively low penetration in the Singapore-China market is surprising, particularly as the market enjoys open skies. But the long-term potential is there for more LCC services.
Scoot has unveiled plans to launch service to Perth, which will become the Singapore Airlines long-haul low-cost subsidiary’s 12th and final destination to be served as part of its initial six-aircraft 777-200 operation. Scoot has quickly expanded since launching in Jun-2012 but after placing into service its sixth 777 in Nov-2013 will take a one-year hiatus from expanding until its first of 20 787s arrive in late 2014.
In an unusual but logical move, Scoot has decided to lease its sixth 777 from SIA and keep the aircraft in SIA configuration. This enables the carrier to save on retrofit costs but will lead to higher per seat costs until the aircraft is replaced with a 787-8 in 2015.
Scoot has emerged as an important tool to expand SIA’s already leading presence in the key markets of Australia and Greater China. Perth will be Scoot’s third Australian destination while its other previously announced new upcoming destination, Hong Kong, will be Scoot’s sixth destination in Greater China. The carrier also serves Bangkok, Seoul and Tokyo.
Sceptics may think Scoot's addition of a five-weekly Singapore-Hong Kong service on 15-Nov-2013 creates overlap with sister carrier Singapore Airlines and SIA Group affiliate Tigerair, which also serve the Singapore-Hong Kong market. But Scoot's route, which increases to daily in Dec-2013, is being carefully segmented.
The SIA Group, unlike others, has proclaimed low-cost carriers have a future and so the group must have full-service and low-cost brands. While Scoot's schedule partially overlaps with SIA, the product difference between the full service operator and the high density longhaul LCC subsidiary significantly reduces cannibalisation.
SIA also targets long-haul connecting traffic. Meanwhile Scoot's Hong Kong service departs and arrives in the early morning, avoiding overlap with Tigerair's predominantly afternoon and evening schedule. Scoot is particularly bullish on the overnight arrival into Hong Kong allowing for many connections in Singapore with Tigerair, with whom Scoot interlines.
Asia's aviation axis has shifted from Singapore Airlines (SIA) to Cathay Pacific as the region undergoes both cyclical and structural change. SIA is more exposed than Cathay to the weak economies of Europe while Cathay can more effectively serve North America, currently a strong market. Cathay's Hong Kong hub is far better suited to capturing Chinese growth than is Changi, and Hong Kong's more northerly location than Singapore means diversions through the Middle East on Gulf carriers are less of a threat than at SIA.
Cathay's decision to offer premium economy – which SIA is still hesitant to do – is bearing fruit. SIA however has made more significant and bolder change than Cathay, embarking on new partnerships and launching long-haul LCC Scoot. These will take time to mature – Scoot especially.
These factors are unlikely to change in the short term, but the long term contains much greater uncertainty. The possibilities of deep partnerships, acquisition, consolidation, changes in bilaterals or a surge in growth out of India and Indonesia, to name but a few, could potentially re-balance not only SIA and Cathay, but all of Asian – and probably global – aviation. This report looks at where Cathay and SIA compare today and what the future may hold as they pursue different strategies.
The mining resources sector has boosted demand to many regional airports, among them two airport groups in Queensland, Australia which have experienced significant growth in the decade since the start of the mining boom. Queensland Airports and North Queensland Airports operate four ports in the state including strategic gateways of Cairns, Gold Coast and Mackay. The state capital city's Brisbane Airport is separately owned and run.
But high maintenance costs associated with ageing airport infrastructure combined with various government taxes and airport fees often result in high fares and a challenging environment for airlines to generate demand from many regional ports.
However, a pending capacity battle between Tigerair Australia and Jetstar may bring some pricing relief on larger regional routes.
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