Why is Scoot abandoning its long-haul only strategy?

Speculations that it might be struggling to pursue original plans rose  as it started flying to Bangkok.

When Scoot, Singapore’s newest low cost carrier, started operation, the management said that the flight carrier will differ from other low-cost carriers like Tiger as it will mainly be a medium- to long- haul carrier.

In a release early this month  however, Scoot, launches its daily flights to Thailand’s capital city, Bangkok. 

Scoot CEO Campbell Wilson was fast to explain that the company is not changing plans and launching flights to Bangkok was plainly to take advantage of the strong demand.

“While our focus remains on medium-to-long haul destinations, Bangkok fills a window when our aircraft would otherwise be on the ground, allowing us to spread overheads across a broader base and keep airfares down across all destinations in our network. Of course, Bangkok is a fantastic destination in its own right, and our service provides some great connections with other routes, so we’re all very excited to be adding it to our network,” he said.

But here's what analysts had to say about the move :

Raymond Kollau, Founder, AirlineTrends

Although Scoot's entrance in the Singapore-Bangkok market means the Singapore Airlines group will have three brands in one market, the route will be appealing to Scoot's Australian passengers who can connect at Singapore. Rival low-cost long-haul carrier AirAsia X also offers a similar option at Kuala Lumpur.

Furthermore, Scoot's decision to launch flights to Bangkok is mainly the result of the airline's early stages of growth. The return flight to Bangkok allows Scoot to improve its aircraft utilization, while the sheer size of the Singapore – Bangkok market makes it easier to fill the aircraft with passengers travelling point to point.

In the long run though, I believe Scoot will eventually work with Tiger Airways to improve the connection between Australia and Thailand, as well as to other regional destinations, and restrict its focus to long-haul low-cost operations.

Paul Yong, analyst, DBS Vickers

Scoot's decision to launch direct flights to Bangkok is more an exception than the rule to its plans to be a medium to long haul carrier.

The flights to Bangkok are part of its flight offerings to Australia, as the Australia to Thailand traffic is amongst the busiest in this region. Additionally, aircraft that Scoot is employing are also more suitable for medium to long haul flights.

If Scoot was eyeing the short haul market, which from parent company SIA's perspective does not make sense since Tiger Airways already is present in that market, they would be using narrow body, short-range aircraft instead.

We believe that Scoot will continue with its original plans to expand, bearing in mind both the short term and long term potential of each route that they add on.

With the strong financial backing of its parent, we expect Scoot to give the medium to long haul low cost segment a real try for some time before assessing if this segment of the market is sustainable.

Start-up carriers typically would need a few years to break-even so we expect SIA to give this project 3-5 years to see if things can work out. The aviation industry is highly cyclical but it's not all doom and gloom, particularly in the low cost segment, which is still a real growth segment in Asia, and the reason why SIA is venturing into this space.