It’s a tried and trusted formula isn’t it? Big legacy carrier forms smaller subsidiary to either operate the routes it doesn’t want to serve or offer a cheaper ‘in-house’ alternative for passengers on certain destinations.
Qantas did it back in 2003 with the formation of low-cost carrier (LCC) Jetstar Airways, and one of outh Africa’s most popular airlines, kulula.com, was established by British Airways franchise Comair (South Africa) more than a decade ago.
Indeed, airlines have been dabbling with subsidiaries for years and Scoot’s owner and founder, Singapore Airlines (SIA), is no stranger to the business model, having operated wholly-owned regional carrier SilkAir since 1992 and it co-founded Tiger Airways with a 49% stake in 2003/04.
SilkAir, which has its headquarters on the fifth floor of SIA’s offices at Singapore Changi, currently operates scheduled services to around 40 cities in South East Asia, South Asia, China and Australia.
Its stake in Tiger Airways has since dropped to 32.9%, however, and the feeling that it was failing to fully capitalise on booming demand for low-cost travel in Asia led to the formation of Scoot, which duly joined the fray on June 4 when it launched daily B777 flights between Singapore and Sydney.
SIA’s 100% owned subsidiary has since launched flights to five other destinations (Bangkok, Gold Coast, Taipei, Tianjin and Tokyo) from Singapore using a fleet of four B777-200s acquired from parent company SIA, with a reconfigured seating layout.
These are routes that put it in direct competition with Jetstar and AirAsia in Asia’s fast growing medium- to long-haul LCC market as well as legacy carriers, such as British Airways and Qantas.
So what is Scoot’s target audience and what will make it stand out from the region’s other low-cost carriers?
“We’re targeting the young, the young at heart and value seekers. We want guests who want choices,” says Scoot CEO Campbell Wilson.
“We want people who choose how many meals to eat, whether to watch a movie or just sleep – people who want to determine the level of frills they want, not subsidise the choices of others.
“What will make us stand out from the crowd? That’s easy, our attitude and way of doing things, which is epitomised by Scootitude.”
Wilson mentions the word ‘Scootitude’ in conversation for the first time, and I have a feeling that we will be hearing a lot more about it in the months and possibly years ahead.
On the airline’s website, it says that ‘Scootitude’ is the word the airline uses to describe the fuss-free and fun attitude it hopes to portray.
What does Scootitude mean to Wilson? “It is an attitude that is unique to the Scoot team,” he explains. “It can best be described as daring, an attitude to be positive and uncompromising on safety and efficiency, yet not afraid to do things differently, and see things from another perspective.
“It’s also about not forgetting to be a little quirky, laugh – at ourselves sometimes – and have fun, all at the same time. We’re passionate about what the new airline stands for and how we can change the way people travel long distance. Scootitude will be part of all that we do.”
And it’s an attitude that customers appear to have noticed, because early feedback left by passengers on different websites describes flying with Scoot as “fun” and labels cabin crew as “entertaining” and “perky”.
As you’d expect from a LCC, its aircraft have a distinctive livery – in its case, yellow and white – and bright, clean and functional refurbished interiors.
In terms of what you get, Scoot offers four different fare options (Fly, FlyBag, FlyBagEat and ScootBiz), an onboard seating offering that includes regular blue seats, bigger bright yellow ‘super’ eats (bookable for an extra S$24) and bulkhead s-t-r-e-t-c-h seats, which cost an extra S$79.
Inflight entertainment of the paid-for variety comes in the shape of meals and rentable iPads (for S$17) which come preloaded with a selection of films, TV shows, music and games.
“Our aim is to provide a simple, yet engaging and vibrant service in a fun-loving and upbeat way,” says Wilson, when asked what passengers can expect from the ‘Scoot experience’.
“It’s all about ‘Scootitude’. We ask our staff to be different, honest and to consistently deliver the basics. We cannot, and will not, take the attitude that because our customers have paid a low price, they somehow don’t deserve our courtesy or respect.”
In terms of route development, Wilson says that Scoot is actively looking to add more destinations this year, even going as far as to hint that two new destinations in China are close to being announced.
He remains tight-lipped for now on their exact location, but stresses that the airline’s route development philosophy is based on bringing “incremental business to the SIA group, and not to cannibalise or substitute other members”.
“We will tap new markets, be they altogether new routes or new market segments on routes already plied.
We are independently managed and run, and will not be required to operate any route we don’t feel is right for us,” says Wilson.
“Nonetheless, we are a 100% subsidiary with a mandate to bring incremental traffic to the group, and in this regard we’ll certainly do our share of route development.”
In essence, this means that Scoot has no plans to compete directly against Singapore Airlines on any route, although Wilson says that it will sometimes serve the same destination, such as Sydney, when the route “has a large leisure market segment that can be further developed”.
“A high proportion of our routes will not be served by SIA, so by definition ours will add to, not subtract from, the group,” notes Wilson. “Even on routes where we both operate, our positioning as a no-frills carrier is very distinct from SIA’s premium offering.
“We feel that there’s clear opportunity to grow a new market segment that either doesn’t exist, or to capture those currently travelling on other carriers – legacy and LCC – including those going via other cities due to capacity constraints, or the price, of non-stop services.
“Singapore Airlines has also stated very clearly that it is committed to its own growth, and will continue doing what it does best, offering a premium, elegant service at commensurate prices. Scoot will be cheap, fun and cheerful.”
So does being wholly owned by SIA effectively mean that Scoot is not under any immediate pressure to be profitable?
“We are expected to contribute to the group as soon as we can,” says Wilson. “Establishing a new airline is expensive, however, so it may take some time. We don’t reveal specific metrics or timelines.”
Earlier this year Singapore Changi announced that it would close its Budget Terminal on September 25, 2012, to make way for a bigger and better dedicated 16mppa LCC terminal expected to open in 2017.
When the Budget Terminal closes, its present crop of airlines (Berjaya Air, Cebu Pacific, South East Airlines and Tiger Airways) will join Scoot in Terminal 2. AirAsia and Jetstar currently operate out of Changi’s recently revamped Terminal 1.
Wilson has no strong feelings either way about purpose-built low-cost carrier terminals, preferring instead to look at each route on its merits.
“We have no hard and fast rule when it comes to LCC terminals,” he comments. “We’ll fly wherever there is sufficient demand for our services and business to be had, and to whichever type of terminal best suits our operations, costs and customer profile.”
He also notes that at Changi, operator Changi Airport Group has been supportive in terms of its long-established incentives programme for new routes and/or growth out of Singapore.
Scoot’s CEO is also quick to point out that other airports and “some tourism associations, although not all” have also been very supportive.
“The support is helpful to defray the heavy costs of mounting new service and building new markets, but in the grand scheme of things is quite small,” muses Wilson. “We always wish it was more.”
On its website, Scoot insists that it is “not your usual airline name, not your usual airline”, and lists some of its ‘Scootitude’ attributes as ‘cool’, ‘smart’, ‘cheeky’, ‘quirky’, ‘different’ and ‘memorable’.
It is early days yet, of course, but it certainly appears to be justifying the hype in terms of both its service in the air and the way it communicates with customers via its website and social media.
One such example of its daring to be different is the recent campaign to give away free flights on Scoot for a year if it achieved 188,888 fans on Facebook by midnight on July 13.
However, perhaps the airline’s philosophy is best summed up by the fact that it held a Facebook competition to name its first aircraft, and the winning bid was Goin’ Scootin’.
Sounds pretty fun and laid back, doesn’t it?