Singapore Airlines is hoping to muscle in on Asia's burgeoning no-frills travel market with a new long-haul budget carrier it's calling "Scoot."
The low cost airline will begin operating by June 2012 with four Boeing 777-200 jets flying by the end of that year, its chief executive Campbell Wilson told reporters Tuesday.
Scoot plans to initially focus on destinations that are five to 10 hours from its base at Singapore's Changi International Airport and fly to four or more cities in Australia and China.
"This new market segment is growing fast," Wilson said. "We aim to bring new business to the SIA group."
Singapore Airlines, which is also known as SIA, has long relied on its top-rated in-flight service — epitomized by the iconic Singapore Girl cabin crew — to lead the long-haul first and business class market, especially in popular Asia to Europe routes.
However, Gulf carriers such as Emirates and Etihad and Asian rivals such as Hong Kong's Cathay Pacific and Australia's Qantas have eaten away at SIA's market share in recent years, pushing the Singaporeans to eye the growing low-cost market.
Scoot will face two main competitors in the region's long-haul budget market — Air Asia X, owned by Malaysia's AirAsia, and JetStar, a unit of Qantas. Analysts expect Scoot will likely seek to provide more frills at a slightly higher price that its rivals.
Luxury on a budget
"This new airline is a poor man's excuse to fly SIA," said Shukor Yusof, an aviation analyst with Standard and Poor's in Singapore. "It will be like luxury budget. When you're flying 12 to 13 hours, you need to throw in some of the facilities people are used to on intercontinental flights."
Wilson said Scoot will offer two classes of cabin, with economy tickets up to 40 percent less than full-service carriers. Customers will be able to choose seats, meals and baggage options, he said.
"We'll offer many other options so people can customize their experience," said Wilson, a 40-year-old from New Zealand.
The airline plans to eventually buy several Boeing 777-200ER planes, which can travel up to 13 hours, allowing Scoot to fly to Europe and Africa, he said. Scoot also plans next year to hire about 52 pilots, 250 flight attendants and 40 ground staff with what Wilson called "Scootitude."
Scoot is a wholly owned subsidiary of Singapore Airlines, which invested 283 million Singapore dollars ($227 million) to start the long-haul carrier. SIA already owns SilkAir, which targets popular Asian holiday destinations, and has a one-third stake in Tiger Airways, a short-haul budget carrier.
Growing demand for budget flights has been a bright spot for the airline industry this year as slowing global economic growth and higher fuel costs hurt earnings. The International Air Transport Association forecasts global airline profits will drop to $6.9 billion this year and $4.9 billion in 2012 from $15.8 billion last year.
Asian airline stocks have also taken a hit, with most carriers, including Singapore Airlines, down at least 20 percent this year. Only AirAsia has bucked the trend, jumping 50 percent so far in 2011.
Some analysts expect travel demand in Asia to improve next year. Airline analyst Mark Webb at HSBC forecasts Asian passenger numbers will rise 7 percent this year and 9 percent next year. He upgraded his rating on Singapore Airlines shares to "neutral" from "underweight" last month.
Scoot hopes to ride the low-cost wave that has made budget flights about 25 percent of Changi's traffic this year from almost nothing a decade ago. The best earners among Asian airlines this year have been short-haul budget carriers Indonesia's Lion Air, AirAsia and Cebu Air in the Philippines, S&P's Yusof said.
"Budget airlines are not a fad. They're here to stay," Yusof said. "The market certainly has shifted from legacy carriers to discount carriers."