Another financial year has come upon us; a time when airlines envision their future, set direction and sail, materialize big decisions, and rationalize their business. Consolidation and internal clean-ups of management, assets, and costs also plays this time around, as will be seen by this week’s news regarding Scoot, Transaero and SkyGreece.
On September 2, 2015, Singapore-based low-cost carrier, Scoot, announced they had officially transitioned to an all Boeing 787 fleet with the retirement of their last 777-200ER. The transition process has gone very quickly for Scoot as it was only seven months ago that they received their first 787 in a fleet of all Boeing 777s. Currently, the airline operates two Boeing 787-8s and five Boeing 787-9s, with orders for eight 787-8s and five 787-9s. CEO, Campbell Wilson said, “Since deploying our first Dreamliner in February of this year, Scoot has transitioned to an all-787 fleet in record time – just seven months. It is therefore appropriate that our latest Dreamliner sports the name ‘Lickity-Split’!”
The seating configuration on their 787-9 and 787-8 is as follows:
- 35 seats in ScootBiz premium cabin on 787-9 (38” Pitch, 8” recline, 19” width, 2-3-2 configuration, Black leather with yellow trim, )Adjustable headrest and legrest)
- 21 ScootBiz seats on the 787-8.
- 340 Economy seats on 787-9 (31” to 34” Pitch, 6” recline, 17.5” width, 3-3-3 configuration, Blue fabric with yellow patterns (Stretch and Super seats), and Adjustable Headrest for Stretch and Super seats
- 314 seats in economy for the 787-8
- All seats have AC power and Inflight internet (purchased in economy).
This allows Scoot to be a true Low-Cost Carrier with lowered costs, which inherently bank on simple common fleet of high-density aircraft. The common advantages of this is:
- In-house or 3rd party maintenance cost reduced
- simple pilot/crew requirements
- Operating costs advantages per trip between 20-30% over the 777-200er (not including lease/repayment costs).
- Overheads cost management
Scoot recently also took delivery of its 787-8 aircraft as a route opening aircraft for thinner routes, having lower total operating costs, higher CASM/CASK, and commonality with the 787-9. There is also possibility that many of SQ’s 787-10 order may be transferred to Scoot (if not all). Scoot’s neighbours mid/long-range LCC competitor Air Asia X, predominantly based at Kuala Lumpur, also operate high density twin-aisle single-type fleet aircraft. The A330-300 of Air Asia X is configured in 12 premium and 365 economy class seats, while also ordering 55 A330-900 aircraft with 95% commonality with the A330ceo family. Cebu Pacific also operate high density A330-300s on Oceania and Middle Eastern services.
On the other hand, another form of consolidation/shrink in business was seen in Transaero (based in VKO). After 25 years in the air its 106-strong fleet (14 types), mainly composed of long-haul Boeing jets, will be grounded after the federal air transport agency Rosaviatsia ruled its precarious financial state. Aeroflot’s board of directors had in September approved the acquisition of a controlling 75-per cent-plus-one-share stake in Transaero for the symbolic sum of 1 rouble in a government-backed deal But the deal foundered on the debt issue and the carrier, hit by three straight years of heavy losses, filed for bankruptcy on October 1 after the civil aviation authority ordered it to stop selling tickets. Privately-owned Transaero, which employs some 10,000 staff, started out by leasing Aeroflot aircraft and serving destinations across Russia as well as parts of Asia and the Caribbean. The total debt of the carrier to different banks is about 250 billion rubles, despite an agreement was reached on the establishment of the Committee for further action to remedy the situation with the carrier. Shares of Transaero dropped the most on record Friday after Russian Transport Minister Maxim Sokolov told reporters late Thursday that creditors hadn’t agreed on a restructuring plan and that the company was unable to meet financial obligations and might not get a bailout. Airbus Group SE also postponed 4 A380 deliveries until further notice, and reviewed the outline deal Transaero signed for A330ceo and A330neo aircraft. Meanwhile Boeing is negotiating deliveries and schedules as the news evolves for the airline.
- Losses were cited by ruble turbulence, economic/political environment unfavourable for tourism and premium traffic, and payouts on foreign-exchange denominated loans.
- Meanwhile Aeroflot cancels 22 787 orders (July), and retirement/lease-terminations of 1 A230, 21 A321, 13 777-300ER and 8 A330-300 (June)
- Implications could be seen for major banks lenders, lessors and affiliated airports (mostly hubs in VKO, DME and LED
Meanwhile the embattled Canadian-owned SkyGreece Airlines has filed for bankruptcy protection for its 1 767-300 aircraft, 1 A330 and 160 employees, according to a document from a Toronto law firm representing the company. In a letter to the Canadian Transportation Authority on Thursday, the law firm Paliare Roland Rosenberg Rothstein LLP indicated SkyGreece had filed a notice of intention to seek bankruptcy protection and begin restructuring proceedings. Ernst & Young Inc., as the trustee for SkyGreece, will be communicating with creditors and customers of SkyGreece and will establish contact points through which creditors can provide and obtain information, according to the document. This follows news SkyGreece abruptly cancelled all of its flights last week, citing technical issues and financial setbacks from the Greek economic crisis. The airline had originally called the move a temporary situation and said its operations were expected to resume soon, a move leaving 1000 passengers stranded and prompted passenger rights advocate Gabor Lukacs to file a complaint with Canadian Transportation Agency and order the airline to rebook its passengers with another airline and put up $8.7 million to cover passenger claims.
The airline began operations by Greek/Canadian entrepreneurs in October 2012, and in 14th of July this year, suffered a loss of cabin pressure on one of its 767-300 aircraft (fortunately or unfortunately the way you look at it, there were 33 passengers of 270 seats available, or 12% seat factor). The airline folded after the Greek Financial Crisis as other international carriers rebounded and grew their services to Greece, pushing the airline to fold. Some growth which tarnished the business included growth in Aegean Airlines destinations, and North American carriers of Air Canada, Air Transat, American, Delta and United from Athens to the US (with 6th freedom and 5th freedom connection capability)
All these demonstrate all forms of consolidation (the good, the bad and the ugly) the airlines faced in the new year, in contrast to the many carriers (majority full service with high-ancillary revenue portfolios and weak fuel hedges) posting record-breaking profits, growth projections and subsidiary development.