Singapore Airlines Introduces "Scoot" Budget Carrier

Singapore Airlines revealed some more details about its planned low-cost subsidiary today. Here is a brief summary:

The airline will be called “Scoot”
Operations will begin in June 2012
Four Boeing 777-200 jets will be used initially
The carrier will focus on destinations that are 5-10 hours from Singapore
Initial markets served will be in Australia and China
Scoot will likely provide more frills at a slightly higher price that its rivals

Why would the carrier that sets the standard for quality and is the epitome of a full-service world-class airline open a budget subsidiary, especially after so many others have failed?

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.

Yet the going will not be easy. Singapore faces battle-hardened rivals like Air Asia X and Jetstar that will likely undercut Singapore to hold on to their market share. If Singapore does offer a middle-way, as some analysts have predicted, with slightly higher prices and more amenities, I fear they will lose out on much of the true low-cost traffic, while simply moving passengers from mainline Singapore flights to Scoot.

But there is certainly money to be made from low-cost carriers:

Scoot hopes to ride the low-cost wave that has made budget flights about 25% 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.

For Star Alliance flyers, there is no indication that Scoot flights will be eligible for mileage accrual, even in SIA’s Kris Flyer program. Like Singapore’s Silk Air subsidiary, I suspect that Star Alliance flyers will not be eligible to earn or redeem points on these flights, though if they are like Singapore’s mainline flights there is never much award inventory available anyway!