the Scoot-Away
Strengths
Affiliation with Singapore Airlines
Scoot’s affiliation with its reputable parent company SIA conveys that it possesses similar standards and quality in-flight services. With strong financial backing from SIA, Scoot’s day-to-day operations are run with great stability, providing further assurance to it consumers.
Premium cabin option
Scoot is the only airline in the low-cost carrier industry to provide a premium cabin option to consumers, boasting wider and more comfortable seats apart from the budget economy seats. This move seeks to change the perception if one wants to travel cheap, they would have to travel uncomfortably. This gives Scoot an edge over budget airlines.
Collaborations for easier transit procedures
In 2012, Scoot collaborated with Tigerair to provide travelers with easier transit procedures. This means that whilst Scoot and Tigerair are different operating companies, travelers who have to make a transit between these two airlines would not need to pass through immigration and collect their belongings before proceeding to check into the second leg of their flight.
Strong social media presence and radical marketing
Scoot has a strong social media presence, actively using platforms such as Youtube channels, a corporate blog and extensive use of Facebook. This is largely part of the airline’s strategy of targeting a younger demographic. The various online campaigns such as the Facebook promotions, slogan contests, virtual flight and jackpot games all help to engage its audiences. Scoot pushes a heavy slew of online campaigns as it strives to become the top-of-the-mind brand for budget airlines.
Apart from its quantity of online campaigns, Scoot also adopts a radical marketing stance through its unique taglines, such as the WTF (Watch the Fare) campaign. This allows the airline to stand out from the competition.
SWOT Analysis
Porter's 5 Forces
Singapore’s airline industry generated a total of revenue of S$7.3 billion in 2010, representing a compound annual growth rate of 5.7% from 2006 to 2010. The local airline industry experienced a strong growth of 27% to reach S$7,321.2 million during 2010 after suffering a steep decline in 2009. The industry is predicted to experience overall strong growth, reaching a value of S$9,959.1 million.
The Porter’s five forces framework is used to analyse the low-cost carrier industry; five aspects are examined: ‘Supplier Power’, ‘Threat of Substitutes’, ‘Buyer Power’, ‘Degree of Rivalry’ and ‘Threat of New Entrants’
Supplier Power
Pressure from suppliers may be high for Scoot as these suppliers have a significant effect in the airline industry. The suppliers involved in the airline industry may include aviation fuel providers and aircraft manufacturers.
There are only 2 major aircraft manufacturers (Boeing and Airbus) for the aviation industry. The lack of alternative aircraft manufacturers raises suppliers’ power and reduces the bargaining power of Scoot.
Likewise, there are also not many companies which provide aviation fuel, which again suggests that the supplier power is high.
Threat of Substitutes
The threat of other substitute products is low due to the fact that other substitute products may not compete with the airline industry in terms of travelling time and opportunity cost.
Other forms of substitute transports to air travel may include rail, road and sea. As the duration of the journey is one of the criteria for selecting the mode of travel. Other forms of substitute transports may be less attractive compared to air travel.
Buyer Power
Pressure from consumers is considered to be high for Scoot as the consumers nowadays have a large amount of bargaining power.
There are other competitors such as AirAsia X, Jetstar and Tigerair competing for the same market share as Scoot. This enables the consumers to have a variety of airlines to accommodate their travel needs or budgets.
There is also very low switching costs for the budget airline industry, which suggests that travelers are may not stay loyal to a certain brand.
Threat of New Entrants
The threat of new entrants is low for Scoot due to various reasons:
This is an industry that requires a huge amount of capital for competitors to enter. The cost of start-ups may include training and hiring of staffs, aircrafts and setting up offices regionally. As the airline industry is a capital-intensive industry, there is a high barrier to entry.
Government legislation is also one of the barriers for competitors to enter into the airline industry. This is due to the fact that there are many regulations within the airline industry and that it is difficult to establish relationships with other countries to obtain flight routes from the respective countries.
Lastly, new entrants may face high difficulties in securing slots or negotiate prime slots at busy airports. This is because airports would give priority to established airlines before new entrants and this will limit the new entrants to fly to limited destination or fly only at off-peak hours.
Degree of Rivalry
The degree of rivalry is considered to be high for the budget airline industry. This is due to the fact that there are many competitors offering similar services at a competitive price. Often, price wars may occur among competitors to encourage consumers to switch brand as consumers has a very low switching cost.
However, if Scoot is able cultivate brand loyalty in their consumers through various promotions such as accommodating better to their consumers’ travel needs, it would attract new customers and a higher level of customer retention.
Back
Weaknesses
Technical issues on the digital front
Despite Scoot’s efforts to catch up with the digital age, it has not been able to keep up with its campaigns. Take for instance, during the running of its Virtual Flight game, which allowed participants to win a sum of money, the server had crashed several times causing frustrations to participants who had spent hours waiting for their turn to participate. Likewise for its fare promotions, the online booking system was unable to handle the large traffic at the airline’s website. This has caused negative publicity for Scoot as netizens begun venting frustrations through social media platforms.
Limited fleet size and destination locales
At the moment, Scoot only has a fleet of 6 aircrafts, causing it to only be able to provide a limited choice of thirteen destinations to consumers compared to its competitors.
Less established brand presence
Having started the brand only in year 2011, Scoot has a relatively weaker brand presence relative to the major players such as Jetstar and AirAsia. This has resulted in more efforts on Scoot’s end to acquire consumers who have tried and tested other airlines.
Opportunities
Increasing demand for budget flights
As the global economy continues to recover, consumers are increasingly more keen on taking budget flights to travel to new vistas, and they also seek to travel more frequently. Scoot is primed to tap on this new market trend.
Increasing importance of social media
With social media becoming more integrated with consumer lifestyles, Scoot’s direction to focus on their Facebook page would give it an edge over the competition in the near future.
Fourth terminal at Changi Airport
With Singapore Changi Airport having plans to build a fourth terminal, it provides an opportunity for Scoot with potentially higher flight frequencies.
Threats
Rising operational costs and inflation
One of the biggest threats faced by Scoot is the increasing operational costs, in particular the rising fuel costs in recent years. With many airlines making substantial losses, Scoot has to be extra careful in the management of its operational costs.
This is aggravated by the rising inflation rates, which cause customers to cut spending on luxury items such as travelling.
With aggressive competition from its competitors, Scoot has to ensure that it is able to fend off such competition especially when its competitors have been in the industry for a longer period of time and have established strong top of the mind awareness amongst consumers.
Additionally, as the market trend move towards lower priced flights, full-service airlines have also been reducing flight prices furiously to retain customers.