Singapore Airline new mid budget Airline - SCOOT

sadshishamo · Jan 12, 2012

students tooing and froing during and after semesters, general public who cant afford full service fares, families travelling to visit relatives during off-peak, retirees : These and some other groups are the target customers.
With the entry of the budget airlines, the full service guys get a smaller portion of the pie. But it is a bigger pie.

Windsor said:
The major customers will be backpackers, salesmen and the like who will not mind the inconveniences and will rough it. To say the least, any one who can save some money will not mind unless the airfare is paid by their company. Even millionaires who travel frequently to Jakarta or KL almost every week will not hesitate to use budget airlines, what more those who are ordinary workers paying out of their pocket.

sadshishamo · Jan 12, 2012

I have been interested in this industry for quite some time and have invested in it. I follow the goings on fairly closely and i must say that you do have good insight.

Windsor said:
SIA is big enough to be able to withstand initial losses. With time on their side, when the economy improves and more people travel SCOOT will prosper. Unlike Tiger Airways, SCOOT is different as SIA has much more control and as such will put in more resources and effort to make it a success.

Windsor · Jan 12, 2012

sadshishamo said:
Local entrepreneur ong beng seng did try to start something about 10 to 15 years back. Cant recall what his business model was. The Govt didnt encourage or discourage his idea asa far as i know.

Lately Jett8 started up with 2 747 aircraft but the oil price spike coupled with the crisis of 2008 were headwinds that Jett 8 could not surmount.

You can see the difficulties here if you dont have deep pockets backing your airline venture.

Ong is a hotelier and perhaps he took on the challenge but failed. Without the blessings of the government and SIA, I doubt anyone can ever succeed.

sadshishamo said:
students tooing and froing during and after semesters, general public who cant afford full service fares, families travelling to visit relatives during off-peak, retirees : These and some other groups are the target customers.
With the entry of the budget airlines, the full service guys get a smaller portion of the pie. But it is a bigger pie.

You got the absolutely right. You know your stuff for sure. :smile:

sadshishamo said:
I have been interested in this industry for quite some time and have invested in it. I follow the goings on fairly closely and i must say that you do have good insight.

Thank you. Having been in the business for 30 years, I do have some knowledge albeit quite rusty since I left some years ago.:(

Cestbon · Jan 12, 2012

Windsor said:
SIA is big enough to be able to withstand initial losses. With time on their side, when the economy improves and more people travel SCOOT will prosper. Unlike Tiger Airways, SCOOT is different as SIA has much more control and as such will put in more resources and effort to make it a success.

How much SIA willing to lost on SCOOT 1st 2 year operation and will start with how many plane?
If salary for pilot and aircrew is lower than SIA that will also be low morale for the employee. So low cost airline also have same operational cost for pilot,aircrew,maintenance, parking, .................
They only can save cost on management.
Low cost strategy is selling at least 4/5(80%) of the seat to break even for the flight operation cost(pilot,air crew,fuel,parking,maintenance)
Where full service only need to sell 2/3(65%) of the seat to cover the operation cost.

Windsor · Jan 12, 2012

Cestbon said:
How much SIA willing to lost on SCOOT 1st 2 year operation and will start with how many plane?
If salary for pilot and aircrew is lower than SIA that will also be low morale for the employee. So low cost airline also have same operational cost for pilot,aircrew,maintenance, parking, .................
They only can save cost on management.
Low cost strategy is selling at least 4/5(80%) of the seat to break even for the flight operation cost(pilot,air crew,fuel,parking,maintenance)
Where full service only need to sell 2/3(65%) of the seat to cover the operation cost.

This was posted elsewhere if you had bothered to search.

Scoot will have its first commercial flight by the middle of next year, initially with four B777-200 aircraft purchased from parent company SIA. It is expected to have 14 planes by 2016, with longer term plans to fly to India, Europe, Africa and the Middle East. Officials said the budget carrier will be managed independently from SIA.

The pilots are sourced from overseas and are actually having a better salary scale and status.

They will further be encouraged to perform well by an open ended promise that good performance could see them being employed by SIA.

Similarly the cabin crew.

Planes will be obtained from SIA very cheaply as all these have been fully depreciated.

red amoeba · Jan 12, 2012

Windsor said:
The major customers will be backpackers, salesmen and the like who will not mind the inconveniences and will rough it. To say the least, any one who can save some money will not mind unless the airfare is paid by their company. Even millionaires who travel frequently to Jakarta or KL almost every week will not hesitate to use budget airlines, what more those who are ordinary workers paying out of their pocket.

SIN-KL, SIN-JKT, SIN-BKK, even SIN-HKG are fine with budget - the flight time is tops 4hr max. You can grab a book, do some work, sleep...no problems. Hell, you can even entertain yourself with your ipad so long its battery last. This business model works for Jetstar, the conventional sense of budget airline.

Stretch to 8 - 13 hr like Airasia X, you will see passengers having to spend on F&B. Upfront, the fares are good, but who can tahan 13 hours without food? Given the seats config, can you really sleep comfortably? Yes, backpackers will rough it and attracted by the upfront low fares. What i am saying is, Scoot will try to cream as much as possible from the F&B and other little things here and there - more legroom? Pay, check in luggage, pay, aisle seat? pay. All these to make up for the low fares.

For short haul flights - max 4hrs, you can pay pilots cheaper, crew cheaper because of the flying time. Flying allowance are not much anyways.

But stretch it to long haul flights - 8 hrs and above, you still got to pay the pilots and crew the same rates like a full-service airline. As well as the flying allowance. You need to mount the min. set of crew as determined by IATA regulations. Hence, in terms of staff costs, savings come from different package - eg; fewer set of uniform entitlement, medical benefits, etc.

Since Scoot is using B772 from SIA, we can assume pilots and crew will probably be seconded from SIA when they transfer these planes to Scoot while SIA take in the new Airbus.

Savings come from : no need to offer inflight amenities, lower pay / welfare package to crew (since they will be under another company Scoot). And opportunity to levy charge on nitty gritty stuff. A consumer if he do the calculation, will realise, maybe its not that cheap.

I am referring to Scoot model not conventional budget airline model (flight time within 4 - 5 hours)>

TracyTan866 · Jan 12, 2012

Windsor said:
This was posted elsewhere if you had bothered to search.

Scoot will have its first commercial flight by the middle of next year, initially with four B777-200 aircraft purchased from parent company SIA. It is expected to have 14 planes by 2016, with longer term plans to fly to India, Europe, Africa and the Middle East. Officials said the budget carrier will be managed independently from SIA.

The pilots are sourced from overseas and are actually having a better salary scale and status.

They will further be encouraged to perform well by an open ended promise that good performance could see them being employed by SIA.

Similarly the cabin crew.

Planes will be obtained from SIA very cheaply as all these have been fully depreciated.

SCOOT starts this yr, not next yr. SCOOT has to fly with old airplanes which are retired from SIA. Will pilot training be as comprehensive as SIA's? Flying SCOOT is totally different from flying SIA

sadshishamo · Jan 12, 2012

you are correct.

It will probably be like SilkAir where the better pilots and cabin staff are absorbed by SIA. The philosophy is;

1. It is a good carrot to encourage performance and aid morale

2. SIA captures good resources.

Although managed independently, Scoot will be like SilkAir and SIA Cargo....very well monitored with lots of back up standing by.

No one can predict the future 100%, but i would think that Scoot will not only survive but thrive.

Windsor said:
This was posted elsewhere if you had bothered to search.

Scoot will have its first commercial flight by the middle of next year, initially with four B777-200 aircraft purchased from parent company SIA. It is expected to have 14 planes by 2016, with longer term plans to fly to India, Europe, Africa and the Middle East. Officials said the budget carrier will be managed independently from SIA.

The pilots are sourced from overseas and are actually having a better salary scale and status.

They will further be encouraged to perform well by an open ended promise that good performance could see them being employed by SIA.

Similarly the cabin crew.

Planes will be obtained from SIA very cheaply as all these have been fully depreciated.

sadshishamo · Jan 12, 2012

no . Only some of the management pilots and a few senior pilots to do training. No secondment otherwise. They have advertised widely which they would not have done if they intended to second.

Windsor · Jan 12, 2012

TracyTan866 said:
SCOOT starts this yr, not next yr. SCOOT has to fly with old airplanes which are retired from SIA. Will pilot training be as comprehensive as SIA's? Flying SCOOT is totally different from flying SIA

Ahh yes, that para was taken from last year's report, my bad.

All aircraft from SIA are relatively new. The B777 are not old aircraft if that is what is your perception. You will be surprised to know that many B747's manufactured in the 1970's are still flying and still reliable.

As for a pilot, all pilots that are qualified and licensed to fly the B777 are not by any means inferior to those from established full-service airlines. Pilots do not have Class A, B or C :biggrin:

license.

Cestbon · Jan 12, 2012

SCOOT start of there are few reason.
1. Try to get a pcs of pie in low cost.
2. Try to sell off old plane but no taker or asking price to high. So lan lan have to find a way to fully use it. That SCOOT
3. Help Changi airport to boost the passenger capacity. Even with some loses Changi can still maintain it ranking. If not later rank not on top 10. LKY no face.
4. In next few year there will be more open sky agreement in Asia. Competition will be very tough. Try use 2 player airline to compete rather than one. Both will suffer because both airline will fight for the budget.

red amoeba · Jan 12, 2012

TracyTan866 said:
SCOOT starts this yr, not next yr. SCOOT has to fly with old airplanes which are retired from SIA. Will pilot training be as comprehensive as SIA's? Flying SCOOT is totally different from flying SIA

pilot training is governed by IATA regulations. Certification is internationally recognised and each pilot must be 're-assessed" after certain flying hours.

Each pilot must also clock certain flying hours before able to renew their license.

red amoeba · Jan 12, 2012

sadshishamo said:
no . Only some of the management pilots and a few senior pilots to do training. No secondment otherwise. They have advertised widely which they would not have done if they intended to second.

on paper....there will definitely be secondment behind the scene.

look at Tiger, initially they insisted it will be run independently, but today? lan lan have to second from SIA.

red amoeba · Jan 12, 2012

sadshishamo said:
you are correct.

It will probably be like SilkAir where the better pilots and cabin staff are absorbed by SIA. The philosophy is;

1. It is a good carrot to encourage performance and aid morale

2. SIA captures good resources.

Although managed independently, Scoot will be like SilkAir and SIA Cargo....very well monitored with lots of back up standing by.

No one can predict the future 100%, but i would think that Scoot will not only survive but thrive.

windsor is right to point out that SIA is cash rich...really, they have nowhere to spend the $$. Hence, giving out rich dividends to shareholders. Starting an airline is a good way to splash some $$ and take advantage of a niche market. Singapore still does not have a budget med / long haul carrier.

Until of cse, Jetstar enters into the foray and when ASEAN open skies (2015?) - Air Asia X muscle its way in.

saratogas · Jan 12, 2012

More opportunity for airline staff to work till they are 62...

Jump from Top brand SIA to the lower range ones as they grow older!

sadshishamo · Jan 12, 2012

yes SIA is cash rich as evidenced from last year's dividend payout. Cash was from profits and also from the bond issue.

Singapore and by extension SIA encourage 'open skies 'and SIA is not really afraid of competition, accepting it as a fact of life and something to embrace rather than fight.

So they are prepared for all comers whether Jetstar , Ait Asia X or any other carrier.

red amoeba said:
windsor is right to point out that SIA is cash rich...really, they have nowhere to spend the $$. Hence, giving out rich dividends to shareholders. Starting an airline is a good way to splash some $$ and take advantage of a niche market. Singapore still does not have a budget med / long haul carrier.

Until of cse, Jetstar enters into the foray and when ASEAN open skies (2015?) - Air Asia X muscle its way in.

Windsor · Jan 12, 2012

red amoeba said:
You can grab a book, do some work, sleep...no problems. Hell, you can even entertain yourself with your ipad so long its battery last.

SCOOT will be the first to have a system whereby passengers can plug in their personal iPad. This was what I recall reading about.

red amoeba said:
Stretch to 8 - 13 hr like Airasia X, you will see passengers having to spend on F&B. Upfront, the fares are good, but who can tahan 13 hours without food? Given the seats config, can you really sleep comfortably? Yes, backpackers will rough it and attracted by the upfront low fares. What i am saying is, Scoot will try to cream as much as possible from the F&B and other little things here and there - more legroom? Pay, check in luggage, pay, aisle seat? pay. All these to make up for the low fares.

SCOOT will have seat 1" wider than other similar airlines.

red amoeba said:
For short haul flights - max 4hrs, you can pay pilots cheaper, crew cheaper because of the flying time. Flying allowance are not much anyways.
But stretch it to long haul flights - 8 hrs and above, you still got to pay the pilots and crew the same rates like a full-service airline. As well as the flying allowance. You need to mount the min. set of crew as determined by IATA regulations. Hence, in terms of staff costs, savings come from different package - eg; fewer set of uniform entitlement, medical benefits, etc.

Since Scoot is using B772 from SIA, we can assume pilots and crew will probably be seconded from SIA when they transfer these planes to Scoot while SIA take in the new Airbus.

Not actually the case that they will be paid as per SIA pilots. SCOOT is a separate entity and thus have different company terms and conditions for employees.

I already mentioned in my earlier post that the pilots will be outsourced and will not be seconded from SIA.

Windsor · Jan 12, 2012

Cestbon said:
SCOOT start of there are few reason.
1. Try to get a pcs of pie in low cost.
2. Try to sell off old plane but no taker or asking price to high. So lan lan have to find a way to fully use it. That SCOOT
3. Help Changi airport to boost the passenger capacity. Even with some loses Changi can still maintain it ranking. If not later rank not on top 10. LKY no face.
4. In next few year there will be more open sky agreement in Asia. Competition will be very tough. Try use 2 player airline to compete rather than one. Both will suffer because both airline will fight for the budget.

What airlines are you referring to? SCOOT Vs SIA or SCOOT Vs Silkair?

sadshishamo · Jan 12, 2012

nope...no secondment of pilots to Tiger ...and there wont be to Scoot either. SilkAir already set the precedent for this.

It is largely a Management / Union thing.

red amoeba said:
sadshishamo said:

no . Only some of the management pilots and a few senior pilots to do training. No secondment otherwise. They have advertised widely which they would not have done if they intended to second.

on paper....there will definitely be secondment behind the scene.

look at Tiger, initially they insisted it will be run independently, but today? lan lan have to second from SIA.

Click to expand...

Cestbon · Jan 12, 2012

Windsor said:
What airlines are you referring to? SCOOT Vs SIA or SCOOT Vs Silkair?

Both SIA and SCOOT will suffer because same board director. They will have hard decision to make with one to cop or bigger benefit or budget.
Silkair will be stuck in between SIA and SCOOT. Now really dont understand how they manage. 1st tier 2nd and 3rd.
Like 1st class, business and economy,

Singapore Airline new mid budget Airline - SCOOT

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