INTERVIEW: Campbell Wilson, chief executive, Scoot

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With about 50 full-time staff and a bright yellow decor, the small Scoot office at Changi airport's Terminal 1 feels more like a start-up than a subsidiary of Singapore Airlines and its more dour offices.

There is plenty of excitement in the air as the long-haul, low-cost carrier gears up for its inaugural flight - Singapore to Sydney - in mid-2012.

If chief executive Campbell Wilson is fazed by the prospect, he does not show it. "It is definitely very exciting to do something like this, to go out and create something new for the company," says Wilson, who has been with the SIA Group for more than 15 years, and held positions both in the company's head office and overseas.

Yet the pressure must be there as Scoot is a big bet for SIA. It is venturing into a market in which it has absolutely no experience. This is not at all like the venerable carrier, known more for its risk-averse decisions. Insiders say the move has been on the boil for several years. When it was announced in May 2010, it was the first major strategic decision by new SIA chief executive Goh Choon Phong.

Despite some reservations from senior SIA executives, who are worried that Scoot could cannibalise the premium airline's business and dilute its brand, Goh has given Wilson a large degree of autonomy to make decisions that give the subsidiary a higher possibility of success.

One of those is related to the network, in which there will be some duplication between the two airlines. Flying to Sydney - one of SIA's most profitable destinations - could put Scoot in direct competition with its parent, yet Wilson said that this may not be the case.

"By virtue of the fact that Sydney is our first destination is a clear belief that we are providing incremental business to the group," he says.

"Our position is to grow new traffic for the group, so for routes where we can bring in new market segments we can operate parallel [services]. Otherwise, we'll look at routes the group does not currently serve."

One reason why SIA is willing to give Scoot some latitude is that it has, over the past few years, concentrated on the premium side of the business, moving away from the Singaporean and Southeast Asian leisure and mass market. This allowed other full service carriers in the region - as well as Malaysian long-haul low-cost carrier AirAsia X - to try to fill the gap. Scoot is SIA's attempt to rectify this.

The fact that both SIA and Scoot will fly to Sydney hinges on the thinking that there can be demand from two different market segments on the same route, said Wilson. With this in mind, the airline is studying other points in Australia and China for its first few destinations - it aims to announce three more within the next few months.

"Seven years ago, there were no low-cost carriers in the market. Now, 25% of Changi Airport's throughput per year comes from low-cost carriers. During that time, SIA hasn't shrunk. The pie has grown and the no-frills segment has grown very fast. We see the same dynamics playing in the long-haul market," he said.

Scoot wants to work with both legacy airlines and low-cost carriers to grow this business and tap Changi's traffic, with Wilson saying: "Whether we go into formal interline or co-operative agreements with other airlines, there is already a huge amount of traffic. If we have formal relationships it's even better."

To keep costs down Scoot is starting with four Boeing 777-200s it acquired from SIA. This is expected to grow to a fleet of 14 aircraft by 2016. These will be retrofitted and have a two-class cabin with 32 to 40 premium seats and about 370 economy seats in a 3-4-3 configuration.

Scoot will have independence in most things, including its choice of ground handling, engineering services and in-flight entertainment, but Wilson says that it makes sense to tap on the parent's expertise and economies of scale when it comes to areas such as fuel hedging and aircraft orders.

"We have some degree of autonomy as to the destinations we decide to go, but all the strategic assets and decisions are coordinated at a group level," said Wilson. "When necessary, it makes sense to leverage on their experience and expertise."