Scoot CEO Update

Transcript

Campbell Wilson:So we took the first 787 in January. We now have 9, 6 -9s and 3 -8s. Very happy with the customer reception. It's very well received. All of the attributes of the 787 that are well known have proved true. The economic performance has been very good, 20% saving in fuel, a lot of good operating efficiencies. Reliability has been improving. How is the reliability? Still a little bit to go yet, as the nature of a new aircraft and a new MRO provider, but we're looking good, looking good. Still early days for Melbourne and Hangzhou. Hangzhou, we started on the 25th of October. Melbourne, we started 1st of November. It's now mid-November, so very early to say. Loads have been very good, customer reception has been very good. We have quite high hopes for those routes in the future. Scoot's operations to Hangzhou, Guangzhou, and Jeddah reflect, I guess, a reorganisation of the group deployment strategy. In the case of Hangzhou, we felt that the the 787 was a better match to the market than SilkAir's 737. In Guangzhou, we felt that there were times of the day where a wide-body aircraft would be better suited than Tigerair's narrow-body. And in the case of Jeddah, SIA had operated the route for a long time. It's principally an economy-class route operating at high load factors, but without a lot of corporate traffic. As a consequence, the route was being staged through Dubai, which doesn't make for a great consumer proposition. And so with Scoot's operating economics and principally economy-focused business model, We felt we could operate economically with a better bottom-line return to the group by having Scoot on the route nonstop between Singapore and Jeddah, as opposed to SIA's service via Dubai. Jeddah, China are upcoming routes that we've announced. We are going to enter India in 2016, 2, perhaps 3 points in India. A couple other points in North Asia we're looking at, but that will speak for all of the aircraft we're having in 2016, so India, China, some of North Asia. It's very early days with that relationship. The principal purpose of our current cooperation in terms of them selling us is to prove the technical capability of the systems to talk to each other so that the customer is handled smoothly the whole way. The volume is not big yet, but it wasn't designed to be big. It's really proving the concept. In terms of the customer experience, the SIA customer that buys a ticket from SIA and interlines with us receives as a default baggage check, checked baggage, a meal, through check-in, They receive a comfort kit and disruption assistance just the same as if they were flying a full-service carrier. So we've tried our best to ensure that the experience for the SIA customer travelling on us is more akin to the experience of travelling on SIA, whereas at the same time the Scoot customer is enjoying the LCC benefits that they've chosen to purchase. So when we moved from 777 to 787, some of the suppliers we had on the 777 were not available options on the 787, so we really looked at what was the best option to give customers. Scoot TV was relaunched as soon as it was technically possible to do on the 787. Unfortunately, there was a little bit of hiatus between the 787 arriving and being able to switch on Scoot TV. Uptake is good, very happy with it. The performance of the product, which is supplied by Panasonic, is very good, and in fact an improvement over the previous supplier. Wi-Fi wasn't technically available on the 777, but is on the 787-8. Panasonic is also supplying that, and the performance is good. I've watched live Super Bowl in flight. I have listened to the Rugby World Cup final in flight. It's been a lifesaver, especially in the latter case. But yeah, performance is good and uptake is quite encouraging. Of course, I think for Wi-Fi, the challenge is geographic coverage. For the moment, India and China airspace is not enabled for some Wi-Fi providers. It's a matter of time before that's resolved. Maturity of the business is a large factor. Route maturity, our ability to to increase yields as our brand gets known and our distribution gets stronger. That's been a significant boost. The economies of scale that comes with a larger size, we're now at 10 operating aircraft, so our fixed costs are spread over a larger base. The reduction in fuel price has had an impact, although perhaps not the impact that you'd expect. Only about half of the halving of the spot price has passed through to us because we're still quite heavily hedged. And the 787's efficiency clearly is flowing through, but really that's only come into play in the last quarter because we've only been a predominantly 787 fleet since June, July. So the losses have narrowed considerably. For the first half year, we had a loss of $22 million, which was about the same as our fuel hedging loss. So if you were to strip out the fuel hedging loss, it was nearly a break-even half, and that is the weakest half year from a demand, traffic, and profitability perspective for us So the prognosis for the year is encouraging. The trend of fuel price is very encouraging. Our fuel hedging commitments will wind off, so we'll enjoy the lower spot price over more of our fuel consumption. The aircraft fleet will continue to grow. We'll be 11 aircraft by early next year and 13 by the end. I guess the big challenge for us in the next 12 to 18 months is capacity growth. Our next financial year will see 49% ASK growth year on year, which means quite a bit of capacity to digest and new routes to start and commence the maturation process. But we're pretty happy with the way things are going. Next year will be a challenge, but thereafter it's looking pretty good. What are the key milestones for Scoot in 2016?

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