Wednesday, August 2, 2017

Scoot studying options to boost Philippines operations

SINGAPORE—While Scoot, a budget carrier based here, believes in the huge potential of the Philippine market, regulatory and slot constraints hinder it from expanding its operations back home, its chief executive said.
During the launch of the merger of Tigerair Singapore and Scoot, chief executive Lee Lik Hsin said his group finds it hard to increase flight frequencies in the Philippines, citing limited slots at the Ninoy Aquino International Airport (Naia) as one of the causes.
“The Philippines is a big country, but truth be told, there are many constraints in expanding in the Philippines. There are very significant slot constraints in Manila and even in Cebu,” he said. “But we are finding ways to grow.”
Hsin’s group is now studying if it could upgauge its flights to Manila as an option for expansion.
“That might be an option,” he replied, when asked by the BusinessMirror whether the company plans to use bigger planes for its flights to the Philippine capital.  From Singapore, Scoot flies to Manila, Kalibo, Clark and Cebu.
Slot constraints in Manila have limited both foreign and local carriers in expanding their operations out of the Philippine capital.
The Philippine government is trying to address that by marketing Clark International Airport as an alternative, while it pursues the construction of a new airport in the next decade.
‘Merger made perfect sense’
Scoot completed its merger with Tigerair. While it will continue to operate under the air operator’s certificate of Tigerair, Scoot will be the brand to remain.
The merger started out late last year with the aim of combining the strengths of the two airlines, both of which are affiliates of Singapore Airlines under Budget Aviation Holdings. Tigerair operates short- and medium-haul flights, while Scoot focused on medium- and long-haul operations.
Tigerair had a stunted growth path over the course of two years, as it found it difficult to add new destinations to its portfolio. Scoot, on the other hand, enjoyed five years of growth, but hurdled difficulty in filling up seats.
“From that perspective, it made perfect sense for the two to come together, on the network perspective,” Hsin explained.
With the merger, Tigerair planes will be refurbished to sport Scoot’s livery. The airline has also changed its uniforms, concurrent with the conclusion of the merger.  According to think tank Centre for Asia Pacific Aviation, the completion of the merger will “unlock new synergies, but yields are under pressure due to intensifying competition and overcapacity in several markets, potentially wiping out the revenue and cost gains from the merger.“
Scoot, it added, is also inheriting a Tigerair fleet with high lease costs, and an order book that “could prove to be overambitious.”
The merger ceremony earlier this week also saw Scoot launching five new destinations across Asia Pacific, foraying into the US market with its planned flights to Honolulu, Hawaii. The four other destinations are Harbin, China; Kuantan, Malaysia; Kuching, Malaysia; and Palembang, Indonesia.
Scoot is one of the few Asean budget carriers that operate long-haul flights, which analysts have tagged as “expensive and risky” proposition.
The airline plans to double its fleet of 37 aircraft, which currently consists of Airbus A319s, A320s and Boeing 787s.
Hsin said the new planes will be a combination of narrow-body and wide-body planes.
“It will be a mix, but fair enough to say that the proportion to the narrow body A320s,” he said.
Hsin noted that the new planes may be used to expand in the Philippines.  “We have a high growth rate trajectory. Many new planes are coming in so we need to use those,” he said in reply to a Philippine media query.

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