Robust and ready to go, Scoot has put pieces in place for a digital future
THREE days after rejoining Scoot in 2020, CEO Campbell Wilson was told to go home. Covid had struck.
But being locked down at home during “a difficult time, both from a business and a staff perspective” gave Wilson time to reflect that the past held lessons for the future.
And one of those lessons was that with every major crisis through the years, travel had recovered quicker than expected. Some crises – like the oil crisis and global financial crisis – were mere ‘blips’ and although Covid has been a much bigger ‘blip’, everything Wilson is seeing right now points to a strong recovery.
Scoot has rolled out new revenue management, flight management and rostering, built a new website and automated systems and processes.
“It gives us operational robustness and efficiency, improved revenues – digital (website/mobile) gives us two-thirds of our revenues, improved service with live chat technology. This will all pay off in the longer term.”
While Scoot’s planes might have stood still during the pandemic, the fintech world has been flying along at great speed. One of the fastest schemes being Buy Now, Pay Later, although Wilson calls this, “a new term for an old thing”.
“Pay when you fly has always been a function that’s been available to people. Typically, it’s been reserved for higher airfares, it’s called a ticketing time limit, you pay a higher fee, you pay a couple of days before departure.
“If you want to have a discounted fare, you typically have to pay earlier or pay immediately. So, it’s not a new thing.”
Wilson said the airline industry cashflow model is based on taking payment in advance of travel, and it would be “a difficult ask” to expect people to fly before paying.
When airline business all but stopped last year, the SIA Group was sitting on nearly $2.5 billion of customers’ cash that subsequently had to be refunded – “and we did”, Wilson said.
“This was cash used to fund the business. I can see from a consumer’s perspective buy now, pay later is attractive, and it has some benefits that a credit card doesn’t, but I’ve never seen a commercial proposition that makes sense for us.
“The industry has a 4% to 8% operating margin. Most of the time, the commissions that are asked by the buy-now-pay-later schemes are similar, or more than four times what a credit card costs us.
“And, by law, in many countries, we can’t actually pass that cost through to the consumer. What these buy now, pay later propositions are asking is, essentially, to take the whole margin that the airline is operating at. That’s just not viable.”
Wilson is more enthusiastic about the success of SIA’s “super eco system” which embraces KrisPlus, Pelago and Parcel.
KrisPlus enables frequent flyers to use their Krisflyer points to pay for groceries, gas, restaurants and other things. Pelago has a destination recommendation, information function and Parcel is a logistics, b2b b2c, small package ecommerce delivery mechanism.
“Building these revenue streams that are somewhat independent of the airline is very helpful,” Wilson said.
Wilson won’t go into specifics but says [Krisflyer] revenue has more than doubled, “and doubled from a very significant level”.
“These investments in the digital ecosystem have been very worthwhile, with a much better margin than the airline margin.”
Scoot is back to 28% inflight capacity compared to pre-Covid, and has resumed its westbound long-haul services to Jeddah, Athens and Berlin.
In APAC, Scoot is operating to around 25 cities, and has inaugurated destinations it didn’t serve pre-Covid – Manado, Iloilo City in the Philippines, and Vientiane.
These services maintain Singapore’s connectivity, and support the rest of the SIA Group network, including transfers at the Changi hub.
Wilson said that maintaining morale and “match fitness” has not been easy during the pandemic but sending out ‘Happy Friday’ messages to staff had kept people connected and “reminded ourselves why there’s a reason for hope”.
“We’ve spent a lot of time theorising and scenario planning and building for the future. I am looking forward to a period of consistency, to be able
to control the levers of our business because so much has been out of our control.
“I’ve had quite enough of scenario planning, thank you.”
