Lee Lik Hsin, CEO, Scoot
» Interview
01/09/2017

ATN: On the 20th of June Scoot started a flight to Europe. Is that the first long-haul flight and what was the criteria behind your decision to fly to Athens and not to another destination in Europe?

LH: We saw a wonderful opportunity. They were actually no flights prior to our service between Athens and this part of the world, Southeast Asia, and we saw that as a gap in the market.

Greece is a destination full of culture and history as well as natural sites, its islands are world famous and world renown and it is it a little bit difficult to get from this part of the world to Greece, especially with cheap fares Similarly, it is difficult for people from Greece to get to this part of the world. Thus, we thought that with this direct service we would serve that market very well.


ATN: Do you plan to add another destination in Europe in the next year or so?

LH: Well, we have set our plans to expand our long-haul network and obviously more destinations in Europe would be under consideration. We have said that we will fly to two or three destinations within the next 3 or 4 years and I'm sure another destination in Europe would be among one of those.


ATN: Eastern Europe or West Europe?

LH: We haven't made a decision on that yet.


ATN: Regarding your fleet expansion, you will receive a brand new  787,  how many destinations are you going to add to your network with the expanded fleet?

LH: The expansion of the fleet is not just on the 787 side, we are also, over the course  of the  next year, going to expand our 320s fleet. So, the network expansion is on both sides and we are going to announce five new destinations over the course of the next 12 months and one of those  destinations will be a long-haul destination and the other four are going to be regional destinations.

This has been overtaken by events. On 25 July, along with the announcement of the completion of the merger of Scoot and Tigerair under the Scoot brand, we also announced that we would be launching five new destinations: Harbin, Honolulu, Kuantan, Kuching and Palembang.


ATN:  About your new routes, are you planning to focus on the Asian market or also to the Pacific or even to Middle East?

LH: I think the primary focus will be in Asia and of course with some expansion to long -haul which includes Europe. For now those are the key markets.


ATN: The merger between Tigerair and Scoot is completed.  Are you planning to focus also on connectivity to combine long-haul with regional network?

LH: It is the basis of our operation we have now, we believe that we can fly long-haul because we can now provide the connectivity  throughout  Asia. As you know for long haul travel the point-to-point numbers will not be sufficient to feed such a large aircraft.  So connectivity is key.


ATN: The low cost model is a simple model that is not based on connectivity especially in Europe. On the other hand, Ryanair started two months ago  to codeshare  and to cooperate with Air Europa  for long-haul and that's really something new. Considering that,  do you see in the future a possible low-cost carriers cooperation?

LH: Yes, I think that  the crux of the low cost model is being able to achieve low enough unit cost for us to price a very attractive fare to get the customers.  We have explored this in great detail and of course the provision of connectivity increases cost but we have discovered the marginal increasing cost for providing connectivity is not so great such as to make the overall fare product unattractive. So, we believe that we are able to do it and still sell in a very attractive price to the customers.


ATN: Are you already having connecting passengers with Scoot and Tigerair?

LH: Yes, we do already, the numbers are still relatively small, a single-digit percentage,  but we are very confident that these numbers can grow dramatically.Since the merger is now completed, a more suitable context would be connectivity between regional and long-haul destinations within the combined network.


ATN: What is your targeting range?

LH: Well,  certainly  to grow beyond a single-digit percentage so definitely we're not talking about small increases.


ATN: You launched together with other airlines the Value Alliance  in which low-cost carriers started cooperating closer; what are the benefits of being part of this Alliance? And what are the challenges of being part of an alliance especially for carriers that have been based until now on the standalone model?

LH: Obviously connectivity is one of the potential benefits of the alliance but is not just about that. Ultimately, we believe that the alliance provide us  with the brand  presence  that we otherwise would never be able to have  in some of these key markets. So, take for example a customer in the Philippines,  they would normally just think of Cebu Pacific and go to the Cebu Pacific distribution website to see what is available.  If we are able to show our products  on their website it would great  to increase our  spread and reach to the consumers in the Philippines and similarly in reverse for customer sitting in Singapore if they can see the Cebu Pacific flights on our website it would also help increase Cebu Pacific's overall presence here in Singapore.


ATN: What are the challenges of being in an alliance?

LH: The challenge of being in an alliance is getting the technical aspects of the connectivity ready  as most low-cost airlines  have for so many years focus on operating on point- to- point and as a result most of our systems are not equipped for such  type of itineraries so, to be honest, it has  been  a lot of hard work trying to get such  itineraries up and running available for consumers  to buy. And we have made some progress, obviously we  would like to have made more progress but this is an area that we need to put  in a lot of hard work.


ATN: The alliance is still quite young, one year and some months; have you already  seen increasing numbers  resulting from with this partnership/alliance?

LH: As you just said the alliance is still very new and as I have described earlier we have spent quite a lot of time getting some of these basic connectivity going so the numbers are still very small right now but still on the plus side.

Scoot is part of Singapore Airlines, part of an initiative by Singapore  to launch a  new product. Sometimes they say you cannot have both low cost and scheduled flights, we have seen that such efforts in the United States didn't work out; it  was a disaster for the major carriers that they wanted to have their own low-cost branch. How it works with Singapore; are you connecting with Singapore flights?  Do you use the Frequent Flyer Program of Singapore Airlines?  Is there any overlap between the destinations or are they complementary destinations? Can a Singapore Airlines customer buy a Scoot ticket and vice versa?

First of all, let me say, that we are very clear that we, as a low cost airline, are in competition with other low-cost airlines so we have to run our business model  in a very disciplined manner and do things  in the low cost way. So, from that perspective we are managed quite separately from Singapore Airlines and that has helped us to achieve that objective. Secondly,  to your point about network, about overlaps versus complementing character, I think  that  over the years it has been demonstrated  that the Singapore Airlines group doesn't treat this  as  an “either or” question. We have seen cases that are  overlaps  in many of these network points for example,  in Sydney where there are Singapore Airlines and Scoot  flights;  in  Bangkok  where  both Singapore Airlines and Scoot  fly but there are  points which are more developmental in nature where only the  low-cost airline Scoot is flying, many points in China such as Tianjin, Dalian; points in India, for example, Jaipur. So, there is no hard fast rule, we are adaptable and we do what is best overall for the whole group.


ATN: What is more important the Singapore Airlines group or Scoot or taking into consideration Scoot?

LH: Again it's not an either-or question; Scoot  is important because the group cannot afford to have Scoot  to only run poorer routes  and be a loss maker  because then nobody would want to work in Scoot but the group is important because ultimately the group is the  bigger entity  and  Scoop cannot be successful at the  expense of the group.


ATN: The concept of low-cost long haul has been under discussion for many decades and in Europe it started the last few years with Norwegian flying to United States mainly and also to Bangkok.   AirAsia X   tried to start operating in Europe but  it withdrew  from the routes.   But it seems that  in Asia we  have some well established low cost airlines we such and Jetstar.  Do you think that long haul low-cost is the future of  air travel?

LH: I think low-cost in general is definitely here to stay as part of the overall travel portfolio and it is quite natural that it extends beyond the short haul to provide medium and long-haul flights.


ATN: Together with connectivity or stand-alone?

LH: As I said before, long haul in general needs connectivity to make it work because the point-to-point demand is not enough so for certain connectivity will be a key component.


ATN : You are flying to Athens and there are also other low-cost airlines flying to Athens; Ryanair,  easyJet,  Transavia.  Do you plan to speak with the low cost carriers flying to Athens or other points to Europe to find a way to connect for the beyond points although they do not have that model in place at the moment?


LH: We definitely  plan to speak with carriers  flying  into Athens to provide connectivity beyond Athens with the rest of the Europe.  We will speak with the people who can help us reach our objective of connectivity as fast as possible so it may be or may not be a low cost airline.


ATN: Which are the main three challenges for Scoot?

LH: Well, obviously , as I said, the model for a  low-cost airline is about driving cost down so you can keep the fares effective. one of the challenges for us is that Singapore is  a relatively high cost space compared to other parts  of Asia, as our neighbors for example.  So we will have to be very disciplined in managing that aspect to keep our cost down despite all this relatively high cost for the Singapore base. I think the other challenge for us is the competitive environment which much depends on the total supply capacity in the market  while  in the low cost market  over the last two or three years in Asia there has been some level of discipline, people are more rational and expecting and controlling  that routes  but there is a fear always that, especially today with the low fuel price, that some people may become aggressive or become less rational again with such expansion.

Low  fuels  might play a role in  competition.  Gulf carriers face problems due to the of lower price of fuel  they enjoy because one of the important market  for them,  the business passengers is related with all companies.  That might be an opportunity for you do to enter to the Middle East market?

I think the Middle East Market is extremely competitive one as you pointed out with the Gulf carriers and we are in there with our flight to Jeddah. To be quite frankright now such move is not  in our plans.


ATN: What is the strategy of Scoot over the next three years?

LH: We are actually going to be quite aggressive on our growth; Scoot, as you know, is six years old and Tigerair is a little bit older, about 10 to 11 years old but has been in  a state of consolidation over the last few years. So as a combined airline – Scoot – now, we need to scale up quite quickly, especially when we look around us other people  are doing the same and we have to catch up; so that scale is not compromised.  Thus, the biggest challenge will be to be able to implement that high rate of growth in an effective manner.  I mean airplanes you can find, airplanes we already have,  but the challenge is to find the right people to make sure that you can grow, and also the markets; every time that we go in a new market we need  a lot of effort and energy and  resources  in order to make it successful.


ATN: Do you have any last thoughts that you would like to share with ATN readers?

We are a low cost airline but the  low-cost industry is changing and we have shown that we are ready to go up with more partners to more points  to create a win-win situation for everybody so we can be sustainable and successful.

 



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