Will Scoot eat into SIA’s market?

Singapore Airlines (SIA)’s new budget subsidiary Scoot will be flying to Sydney as its first destination when it commences operations in June next year. The daily flight will use a Boeing 777 aircraft, offering 400 seats.

June is an excellent starting time, since it is the peak season for travel not only for Singaporeans but also both ways on the kangaroo route. The sector is already being served directly by full-service airlines Qantas, British Airways and SIA.

It is to be seen how much of new business Scoot will be able to generate – the erstwhile battle-cry of budget carriers – and how much of current business it will be able to attract away from the incumbents.

Scoot chief executive Campbell Wilson said: “We are not designed to cannibalize from anyone, we will fill our aircraft on the target market that we are attracting, so it is new business.”

That should be good news all round; it is airline philosophy that capacity will create demand. Scoot is banking on its being the only low-cost airline serving the Singapore-Sydney leg, and the offer of a new flying experience although it is to be seen how much more it can revolutionize air travel from one point to another.

Mr Wilson said: “It gives Singaporeans a whole new travel option.” And foreigners too, although he did not mention it, connecting through the Singapore hub.

Perhaps, as Mr Wilson hoped, people will travel more frequently between Singapore and Sydney because of the lower fare it offers – said to be 40 per cent less than the full-service fare. So too it is to be expected that the lower fare may lure customers from full-service airlines, and that includes parent SIA although Mr Wilson maintained that Scoot was set up “to bring incremental business to the group.”

By that same token, even if Scoot does eat into the SIA market, better that than an outflow of business to a competitor outside the family. Together parent and offshoot can better protect their turf, if not draw new business from their common competitors, for the product range that they now offer.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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