SINGAPORE: Scoot expects growth to pick up in 2020, when more aircraft will be added to its fleet along with the expansion of its route network, said its chief executive officer Lee Lik Hsin.
Speaking to CNA on Monday (Jun 17), he said the global grounding of the Boeing 737 MAX meant that growth this year will not be “to the intended scale”.
Its sister carrier SilkAir had previously planned to transfer 14 of its Boeing 737-800NGs to Scoot, but this has been put on hold as SilkAir was affected by the grounding of its six 737 MAX jets and was short of planes to operate its routes.
READ: ‘We’re not perfect’ – Scoot seeks to regain customer confidence after recent major flight disruptions
This led to SIA announcing in May that it will expand Scoot’s fleet by leasing between 10 and 12 Airbus A320s over the next two financial years.
On top of that, Mr Lee revealed that Scoot has extended the lease of one A320 and held back on the disposals of two other A320s. It will, however, dispose of an older A319.
This will bring its fleet to 47 aircraft.
Scoot will also receive three more planes over the next few months, bringing its fleet size to 50 aircraft by year-end.
The three comprise two new Airbus A320neos and one Boeing 787, which is returning to the fleet after undergoing aircraft inspections.
“That helps, though not to a full extent, for 2019. Because the number of transfers from SilkAir was supposed to be higher.
“So by and large, for 2019, we still have growth though not to the intended scale. We are looking for aircraft, and I think we are fairly confident that we will get the numbers we need. So (in) 2020, I think the growth plan will be back on track,” explained Mr Lee.
EXPANSION INTO CHINA AND INDONESIA
On the network front, Mr Lee said that Scoot will expand its route network in the coming months to include more points in China and Indonesia, though this will not be done organically.
Instead, Scoot will be leveraging the wider SIA Group and continue to take over some of SilkAir’s existing routes in the two countries.
He added that Scoot has already taken the Singapore-Wuhan route and will soon add Changsha, Fuzhou and Kunming to its network.
This comes as SilkAir prepares to merge with SIA after the former undergoes a major cabin upgrade, scheduled to begin in 2020.
In its May 2018 announcement, SIA said that as part of the SilkAir-SIA merger, there will also be transfers of routes and aircraft between the different airlines in the portfolio. It also added that this is "consistent with ongoing efforts to optimise the SIA Group’s network".
Beyond China, Scoot will take on more of SilkAir’s routes to Indonesia cities such as Balikpapan, Lombok, Makassar, Manado, Semarang and Yogyakarta next year.
Despite SIA stating last month that Scoot’s decline in yearly performance for FY2019 was due to a slowdown in the growth of Chinese travellers, Mr Lee is confident of Scoot’s China expansion.
“The China market has had a bit of a slowdown, but it's still a growth market. And so on that basis, we are going to continue with expansion into China, primarily from taking over many SilkAir points. All of them have been announced. So we are going to continue with those plans,” he said.
Scoot was the only SIA Group unit that recorded an operating loss in the last financial year, which came in at S$15 million, as compared to its operating profit of S$78 million the year before.
At the same time, Scoot has closed down several non-performing routes such as those to Lucknow, Kalibo, Quanzhou and Maldives.
IN A BETTER POSITION TO COMPETE
Mr Lee also said that Scoot today is in a better position to compete against its regional rivals.
“Market competition is par for the course, (it is) what we expect. But we clearly much better position to compete today versus a few years ago. When we first merged (with Tigerair), we were at 35 aircraft. And now we are going to be 50 by year-end, and it's a very fast pace of growth that we have undertaken in the last couple of years.
“To compete, you do need some level of scale. That's the part that we've been trying to address. And I think we've addressed that pretty well. You don't have to be the biggest, but you have to have scale, which I think we now have. I always like to use the example of going to Terminal 2 in the morning. And we look at the display board, (it is) mostly Scoot flights.”
On operating long-haul, low-cost flights, Mr Lee describes the business model as a “fairly niche” one, with Scoot having “experimented” and received mixed results.
Scoot has since pulled back its services to Honolulu, but continues to operate long-haul services to Berlin and Athens. Mr Lee said the two European services “are doing decently” and that the carrier will continue to build on them.
He also said Europe would most likely be the continent for long-haul expansion if Scoot were to launch a new long-haul route in the future.
“It’s hard for us to imagine being able to venture to another long-haul continent somewhere else. My colleagues are very curious about the same. I have sort of said it is 99 per cent Europe for future expansion.
“(Long-haul, low-cost services are) something we think is worth experimenting with and some of it has turned out well. But clearly, we are not going to be a major player from Asia to Europe. We find underserved markets like Athens, like Berlin, and go in.”