Posted on: 25 February 2016 by Mark Howells
Singapore Airlines subsidiary Scoot is demonstrating that the success of the short-haul low-fare airline (LFA) model can be replicated in the medium and long-haul market, Scoot head of commercial Steven Greenaway told delegates at the Aviation Festival Asia conference in Singapore.
Scoot has come a long way in a short space of time, he said, adding that if the airline had to start again it wouldn’t fundamentally change a thing. Scoot currently serves 18 destinations in eight countries and has carried more than six million passengers. In the third quarter of financial year 2015/16 it achieved its best result yet with a S$18 million profit, Greenaway reported.
The revolution started in the 1970s with the original long-haul LFA pioneer, Laker Airways, he recalled. While that carrier, and others that followed collapsed, the market today is more conducive to support this type of model, suggested Greenaway.
The challenges facing a long-haul LFA are different from those facing short-haul operators, he explained, pointing to the need for “money, and lots of it”. Aircraft utilisation issues are different, with the ability to get the hours up but not the cycles; long-haul operators are hit harder by fuel costs; issues involving aircraft size – as “you can’t fly a 400-seat aircraft everywhere”; you can’t cancel services as you might only serve a route three times weekly as opposed to three times daily; and there are hidden costs such as longer turnaround times (60-70 minutes with Scoot’s Boeing 787s), catering and crew overnight costs.
You also “need to feed the beast”, in terms of connecting traffic, with Singapore Airlines, Tigerair, SilkAir and Virgin Australia all providing feed traffic to Scoot’s flights.
As long as you don’t slavishly adhere to the low-cost business doctrine and do things slightly differently you can find success, he noted. “It’s all about execution – set it up and run it properly,” he declared. But if you don’t keep costs down – even at times when you are growing rapidly, like Scoot – you are “stuffed”, he warned.
Today’s aircraft types, such as the 787, are “truly built for long-haul low-cost,” Greenaway stated, with Scoot’s new fleet of 787s being a game-changer for the carrier with its “phenomenal” performance.
Medium-haul is where the interesting opportunities are for Scoot, said Greenaway. “Heaps of destinations are four hours from here [Singapore] and it is hard for short-haul, narrowbody types to compete.” And while the 787 can operate to London from Singapore, Scoot has no interest there.
“There’s so much potential in our own backyard, that’s going to be our focus,” he emphasised. Scoot will finalise plans for services to two or three Indian destinations in the next few weeks, while services to Jeddah will come on line in May.
Emma Kelly, Asia-Pacific correspondent, Low-Fare & Regional Airlines/LARAnews.net