Budget carrier Scoot bleeds $25 million in two years amid crowded skies

Scoot, Singapore Airlines' long-haul budget carrier, has opened its books for the first time and the picture is not pretty. It revealed losses of more than $25 million in less than two years. -- PHOTO: ST FILE
Scoot, Singapore Airlines' long-haul budget carrier, has opened its books for the first time and the picture is not pretty. It revealed losses of more than $25 million in less than two years. -- PHOTO: ST FILE

Scoot, Singapore Airlines' long-haul budget carrier, has opened its books for the first time and the picture is not pretty. It revealed losses of more than $25 million in less than two years.

The red ink comes amid intense competition among Asia- Pacific carriers - both full-service and budget - seeking a slice of a growing market.

"It's been pretty challenging" for carriers that are grappling with overcapacity as a result of airlines adding too many flights, said UOB Kay Hian's aviation analyst K. Ajith.

This has brought yields and margins down and affected Scoot as well, he said.

The airline, which flies from Singapore to 12 places in Australia, North-east Asia and South- east Asia, including Bangkok, has also been affected by Thailand's political instability, which has unnerved some travellers.

A slowdown in the China market could dent its performance further, added Mr Ajith.

The disappearance of Malaysia Airlines Flight MH370 in March, which was carrying mainly Chinese travellers, has hit Singapore because Chinese tourists who visit South-east Asia typically cover Singapore, Malaysia and Thailand.

Scoot, which took to the skies in June 2012, flies to four mainland Chinese cities, as well as Hong Kong and Taipei.

But even as dark clouds are hovering above, the arrival of its new and more fuel-efficient Boeing 787-9 Dreamliners from later this year could prove a game-changer for the carrier, said analysts.

Scoot, which now operates older Boeing 777-200 aircraft inherited from parent company Singapore Airlines, should see at least a 20 per cent improvement in fuel burn, said OAG aviation consultant Mark Carlson.

With the airline's fuel bill accounting for half of its total costs, a Scoot spokesman said: "You can imagine the impact on Scoot's economics."

On the airline's financial health - it reported an after-tax loss of $25.2 million for 2012 and last year to the Accounting and Corporate Regulatory Authority - the spokesman said: "We've consistently maintained that we have been tracking well against our original business plan and I'm pleased to advise we continue to do so."

On average, Scoot manages to fill more than eight out of 10 seats, he said.

karam@sph.com.sg