A steep learning curve

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bl14_Scoot airlines

Scoot’s six months in the country have been eventful, writes Ashwini Phadnis

When Scoot, the low-cost, medium haul arm of the Singapore Airlines started operations from India six months ago, it surely couldn’t have expected such an action-packed beginning.

The government’s decision to demonetise large currency notes led to Scoot registering a 10-15 per cent drop in bookings from Amritsar and Jaipur, while daily bookings from Chennai remained stable. To make up for this loss the airline is planning to hold its discounted promotional fare sales in December this year instead of next February.

The closure of Amritsar airport between 8 pm and 6 am for runway repairs has been a bigger glitch as this has meant that the airline cannot operate into and out of India at a time preferred by passengers. Hence, Amritsar which started off well for Scoot has seen a steady dip in passengers. In the first month of operations, it had a high 80 per cent passenger load factor, which went down to 70 per cent in July and 60 per cent after that.

But Bharat Mahadevan, Scoot’s Country Head India, a 15-year veteran in the aviation industry is unfazed. “We expected it (Amritsar) to take a year to break-even so that should happen in the next six months or so. Jaipur should also take a year from now to break even. That is the typical gestation period for such flights,” he says. At the moment Scoot flies to Chennai, Amritsar and Jaipur.

Mahadevan is also optimistic about what the airline has learnt during its six months in the Indian market.

“The propensity to spend has gone up much more. People are willing to do a long weekend trip to Singapore. People are willing to spend to go for five days to Singapore. I was with SIA in Chennai in 2008 (and) then I would say that 90 per cent of the traffic we carried was discretionary, that is corporate or labour. Only 10 per cent was leisure. That demand has grown exponentially over the last eight years or so,” he says.

Perhaps he has reason for this optimism as Scoot’s Chennai market is performing as per expectations with the flight reporting a passenger load of 90 per cent during the peak season and about 80 per cent during the off-peak season.

Airline officials add that for the Chennai flight they have been able to create new demand which is primarily coming from the leisure segment and from tier II cities around Chennai like Salem and Erode.

This is in keeping with SIA Group’s strategy of tapping into tier II cities. So internationally it operates to a lot of secondary cities whether it is in China where it does not operate to Beijing, Shanghai or Guanzou or Australia where it operates to the secondary airport in the Gold Coast. And this is what it is doing in India as well.

Scoot is also optimistic because it feels that it has an attractive enough fare structure to suit an expanding market in India. For instance, it costs ₹4,500 one way for a flight between Jaipur and Singapore.

“It is the price point which is attracting flyers. These people did not have the opportunity to fly earlier because the price point was much higher and there was very little capacity and the demand outstripped capacity,” Mahadevan points out.

Six months is too short a timeframe in an airline’s history but Scoot maintains that it can already see a shift in passengers, be it in Chennai or Amritsar. For instance, the airline is noticing that people are flying not only from Jalandhar and Ludhiana but some are also travelling from Delhi to Amritsar and then taking the flight onwards.

“Almost 70 per cent are first-time travellers. Take Amritsar, till now passengers had to come to Delhi to take the flight. They would do it only on a need basis. But now that there is a flight from Amritsar, Jalandhar is only 90 minutes away so it is much easier for people to come from Jalandhar to Amritsar and then fly out. Same with Jaipur which is attracting people from Ahmedabad, Mumbai and Delhi,” Mahadevan says.

Future plans

With the model that it has, it should not come as a surprise that Scoot is looking at flying more people for less to more international destinations. Like flying between Delhi and the Swiss city of Zurich for a one-way fare of ₹8,500 may well become a reality. Mahadevan points out that theoretically it can be at ₹5000 one-way because the Group is selling Singapore-Sydney for ₹5000 one-way. “For baggage and meals add another ₹3500. So technically you can get a ₹8,500 ticket for Singapore-Sydney.”

This is something that the airline wants to try and replicate in India by offering New York one-way at ₹10,000 and London one-way at ₹5,000 from Delhi. The airline is hoping that with the new National Civil Aviation policy which was unveiled by the Modi Government proposing “open sky” or allowing any airline to fly to destinations which are over 5,000 km from India, Scoot might be able to fly to both these cities from Delhi as they are both more than 5,000 km away.

Given that the India-Singapore air services bilateral allows carriers from Singapore to fly to Chennai and then the airline has the option of flying to Amsterdam, Copenhagen, Brussels, Vienna or Athens the option of flying to any of these international destinations from Chennai also becomes a possibility.

“We could apply for it. This (Delhi-Zurich at ₹ 8500 one-way) is in the distant future. Many summers later,” says Mahadevan with a smile.

Scoot can also look forward to adding more destinations from where it flies in India once its integration with the other airline from the SIA Group, the low cost tigerair, is complete next year. Once that happens Scoot will be the only brand that will remain. It will then also be able to operate from Hyderabad and Bengaluru, two cities currently served by tigerair.

Published on December 13, 2016

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