Singapore Airlines low-cost arm Scoot to focus on South-east Asia, India for more thrust as rivalry causes yields to thin

[SINGAPORE] SIA Group’s low-cost carrier (LCC) Scoot will focus on driving traffic and revenue in “high-potential” areas of South-east Asia and India, with Embraer jets helping it to mitigate delays in Airbus and Boeing deliveries.

The airline aims to maintain its strong performance in passenger numbers over the past two years by expanding and optimising routes, in the face of falling yields caused by competitors adding capacity, Scoot chief executive Leslie Thng said in an interview with Singapore media.

Scoot will also have to manage persistent supply chain issues that have handicapped fleet growth and capacity.

Scoot soared to new highs as a post-Covid first-mover, along with sister full-service carrier Singapore Airlines – but has since levelled off.

When the world was just emerging from the Covid-19 pandemic, high demand and low supply drove airfares up. SIA Group was one of the first regional airline groups to restore capacity and ride this wave.

SIA and Scoot restored 79 per cent of combined capacity in March 2023, compared to its regional competitors’ average of 58 per cent. The group made a then-record S$2.2 billion in net profit that financial year.

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But increased competition and falling ticket prices have since eaten into margins. For the quarter ended December 2024, Scoot’s passenger yields fell to seven Singapore cents per passenger kilometre (c/pkm), from 7.2 c/pkm in the year-ago period.

Scoot’s operating profit plunged 53.8 per cent to S$18.4 million from S$39.8 million for the quarter ended Dec 2024. Over the nine months ended Dec 2024, it was down 74.3 per cent at S$25.2 million.

Many other airlines in the region, including LCCs, have been restoring much of their pre-Covid capacity, said Thng. “So with a greater supply of capacity, definitely there will be some moderation of the yields.”

In 2024, Scoot was 13.8 per cent above its 2019 capacity, while competitor AirAsia was 14.3 per cent under 2019 levels, according to aviation data provider OAG.

On a group level, AirAsia carried more than 63 million passengers that year, compared to SIA Group’s 39 million.

Still, Thng expects Scoot’s yields to remain significantly above pre-Covid levels. Scoot’s yield for the third quarter of its 2018/2019 financial year was 5.9 c/pkm.

Be seated

Scoot’s growth model is the classic LCC approach: Carry more people.

Specifically, it wants to carry those from new markets – “those that we were not able to carry in the past because we were not there… not just coming to Singapore, but also beyond Singapore”, said Thng.

To fuel its expansion, Scoot is expected to take delivery of four Embraer E2 jets, three Boeing 787s and about nine Airbus A320 Neos in 2025.

But the aviation industry’s persistent supply chain issues may yet delay deliveries and ground aircraft.

Scoot has had to extend the leases on six of its older A320s to make up for delays in the delivery of new aircraft.

Nor are the Boeing 787 orders a certainty. Two of the three scheduled for 2025 were supposed to be delivered in 2024, as Boeing continues to face supply chain disruptions. It produced only 51 aircraft in 2024, compared to more than 150 in 2019.

Meanwhile, six Scoot aircraft – up from three in 2024 – are currently grounded due to problems with Airbus A320’s Pratt and Whitney PW1100G engines, which have affected hundreds of planes worldwide.

But Scoot has had a break in the clouds, thanks to Brazilian manufacturer Embraer.

Since May 2024, Scoot has received five Embraer E2s, which have allowed it to expand its South-east Asia operations and mitigate the impact of grounded aircraft.

The E2s have a shorter operating range, making them suitable for short-haul regional flights.

In the past 12 months, Scoot has added seven new destinations in South-east Asia: Kertajati and Padang in Indonesia; Subang, Sibu and Malacca in Malaysia; Phu Quoc in Vietnam; and Koh Samui in Thailand. It will also begin flying to Iloilo in the Philippines from April.

For some of those routes, the frequency will also be increased – such as Koh Samui to 21 times a week from December 2025, and Phu Quoc to six times a week from April 2025.

This expansion was largely made possible by E2s, which serve all the above destinations except for Subang.

Thng sees “a lot of potential” to expand further in South-east Asia with these regional jets, though he declined to mention specific new routes being considered.

Scoot is constantly monitoring and optimising its routes and traffic, he said. It is also increasing the frequency of non-E2 flights in 2025, including to Jakarta, Cebu and Davao.

From here to there

Scoot’s first Embraer E2 regional jet in May 2024 at Terminal 1. PHOTO: DERRYN WONG, BT

India is another market which Scoot is eyeing, as it has “immense outbound potential and is a relatively straightforward opportunity of monitoring the market closely and adjusting routes and frequencies to match”, said Thng.

“We are allocating quite a lot of resources into India, and I think that is where the new opportunities that may be available for us,” he added.

While he did not confirm new routes to India, he noted opportunities with new airports opening in major cities such as Delhi and Mumbai, which Scoot does not currently serve but SIA does.

India’s passenger aviation sector is forecast to grow at 7 per cent in 2024 and 2025. It is expected to become one of the world’s largest passenger aviation markets in the coming years.

But Thng emphasised Scoot’s expansion will rely not just on single destination flights, but also on travellers flying via Singapore into the region.

Scoot’s aim is to create more travel options for customers, who should not only consider Singapore as a final destination, but use the Republic to access Scoot’s regional network.

One example is Scoot’s new European long-haul Singapore-Vienna flight that begins in June.

It will allow travellers from South-east Asia to access Vienna, which is a gateway to Eastern Europe, and allow Austrians to come to Singapore and its surrounding region as well.

“We look at the market in total, comprehensively, to see what would be the demand, not just from Singapore and Vienna, but (to places) surrounding Singapore, which is South-east Asia and also Australia.”

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