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Scoot completes merger with Tigerair, plans for expansion with newer, bigger fleet

It unveils new destinations - Honolulu, Kuantan, Harbin, Kuching, Palembang

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The new uniforms for cabin crew of the merged entity, to be called Scoot, was unveiled on Tuesday.

Singapore

FRESH from its merger with Tigerair, Scoot will spread its wings by adding 15 per cent of capacity to its network in the current financial year, including a new long-haul destination, Honolulu.

By June 2018, it will add another four Asian destinations to its footprint - Harbin in China, Kuantan in West Malaysia, Kuching in East Malaysia and Palembang in Sumatra, Indonesia.

Two of the four, Kuching and Palembang, are being transferred from SilkAir from Oct 29 and Nov 23 respectively, to optimise the resources of the Singapore Airlines (SIA) group and to better match "capacity to demand".

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The changes come under the SIA group's wide-ranging review of its business aimed at positioning it for long-term growth and reining in costs.

Meanwhile, Scoot is planning to start flying to Honolulu (via Osaka) before the year's end, subject to regulatory approval. This will put it in direct competition with its low-cost long-haul rival, AirAsia X.

Just last month, Scoot launched its service to Athens; a third long-haul route, either to a destination in Europe or the United States, will likely be announced by year-end.

In fact, the budget carrier is set to embark on a fairly aggressive growth path as it takes delivery of new, fuel-efficient aircraft and phases out older aircraft in the coming years.

On an expansion path

Scoot chief Lee Lik Hsin, speaking to reporters at an event on Tuesday to mark the completed merger, said: "In five years, we're looking to almost double the number of our airplanes. We have shown that we are clearly serious about long-haul, starting with flights to Europe and now, to the US. These will continue to expand, but the bulk of the resources will still be concentrated on the region."

Scoot now has a fleet of 14 wide-body Boeing 787s and 23 narrow-body Airbus 320s.

It has six more 787s on order, of which two will arrive this year. It also has an order of 39 A320neos, which Tigerair had placed back in 2014.

In addition, 12 A320s previously leased out to India's IndiGo will come back between 2017 and 2019, starting from the end of this year. One of these will be returned to the lessor.

The operating environment in the region remains challenging; yields are under pressure as other airlines continue to expand in pursuit of growth. Low-cost carrier Norwegian, for example, is set to launch direct flights from Changi Airport to London from September.

With the merger between Scoot and Tigerair, the two brands will operate under the Scoot name.

The new uniform for cabin crew was unveiled on Tuesday in a nod to the new chapter, furthering the integration between SIA's two budget carriers kickstarted in May last year, when the two airlines were placed under the same holding company, Budget Aviation Holdings (BAH).

The current Tigerair fleet will be progressively repainted in Scoot's yellow livery, a task that will be completed by middle of next year.

Meanwhile, Scoot's designator code has been changed to Tigerair's "TR" code.

Previously, Scoot and Tiger Airways each had their own air operator's certificate (AOC); with the merger completed, the combined entity will operate under Tiger's AOC, but using the Scoot brand. Its being a bigger entity will enable it to drive down costs and help boost connecting traffic, Scoot's management said.

Centre for Aviation (CAPA) analyst Brendan Sobie said growth opportunities in the short-term will come from Scoot's existing network and rescheduling of flights to maximise connectivity. "You're going to see increases of frequencies and upgauging (of aircraft) to try to get more 'sixth-freedom' or connecting traffic," he said.

Now that the group operates under a single AOC, they can start the process of changing aircraft type or adding frequency for markets such as China.

"Even some downgauging in some cases is possible on some routes," he added.

Tiger first took to the skies in 2004, backed by shareholders such as SIA and Ryanair's parent company, Irelandia Investments. But as the low-cost carrier sought to expand its Asia-Pacific footprint by setting up units overseas, it found itself buffeted by a capacity overhang at home and loss-making "cubs" abroad.

SIA stepped in to save the bleeding airline, first by raising its stake in it and then later, via a takeover offer in November 2015.

In the financial year ended March 31 this year, BAH earned S$67 million in operating profit - up from S$42 million in the previous fiscal year - and carried more than eight million passengers.

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