[SINGAPORE] Scoot, the budget offshoot of Singapore Airlines (SIA), has been adding routes to its network, including some that were previously served exclusively by Jetstar Asia.
These are Okinawa in Japan and Labuan Bajo in Indonesia – formerly Jetstar Asia’s “monopoly” – as well as Chiang Rai in Thailand, and Da Nang and Nha Trang in Vietnam.
But would the former routes of its now defunct peer be a boon or bane to Scoot? After all, Jetstar Asia had failed to be profitable for years before it exited Changi Airport for good. Would Scoot be able to reap economies of scale from other routes as well?
The viability of budget carriers has been in the spotlight since the announcement of Jetstar Asia’s closure.
To be fair, Scoot is quite different from Jetstar Asia.
First, It has a far larger fleet of 53 planes, as at end-June. By contrast, Jetstar Asia had only a modest fleet of 13 planes when it announced its exit from Singapore in June. As at the end of July, Scoot was serving 73 destinations, while Jetstar Asia had 16 routes.
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Theoretically, Scoot has a home-ground advantage. Though Jetstar Asia was also anchored here, the traffic it was able to tap from its parent Qantas Airways arguably was less than what Scoot enjoys from SIA.
There are also economies of scale for Scoot, by sharing the same base with SIA.
But the airline industry, particularly the budget segment, is infamously competitive. The inflationary environment is also not helping airlines, especially if they operate in a premium airport.
Already, declining airfares – or yields – amid rising supply have taken a toll on Scoot’s operating financials, as shown in SIA’s first-quarter update published on Jul 28. For the quarter ended Jun 30, 2025, Scoot dipped to an operating loss of S$16.5 million from an operating profit of S$2.6 million for the same period a year earlier. This marked the budget carrier’s first quarterly operating loss in 12 quarters.
The last time Scoot reported a quarterly operating loss was in Q1 FY2023, when borders in Asia had not fully reopened. The airline was quick to reverse its operating loss of S$51.9 million for the quarter; just two quarters later, it posted a record-high operating profit of S$134.9 million for Q3 FY2023.
The recent quarter’s performance came on the back of a high passenger load factor – the percentage of available seating capacity filled with paying passengers – which stood at 91.5 per cent.
But a high load factor may not translate into profitability. Scoot had an even higher breakeven load factor – 98.4 per cent.
Yield, which measures the revenue an airline earns per seat taken by a paying passenger, slid 1.8 per cent year on year to S$0.061 per kilometre; this was also the lowest in 12 quarters.
Revenue per available seat-kilometre – the revenue an airline earns for each seat it offers, per kilometre flown – was S$0.056. It was 4.7 per cent lower year on year, and the lowest in 12 quarters since Q2 FY2023.
Scoot had at times incurred losses before the pandemic hit. And it was not alone.
Cathay Pacific’s low-cost carrier HK Express earlier this month posted a loss of HK$524 million (S$86.4 million) before net finance charges and tax for the half-year ended Jun 30, 2025, with the Hong Kong group flagging lower airfares as the industry raises capacity.
Scoot’s chief executive Leslie Thng had told the media shortly after the airline achieved its record-high operating profit in Q3 FY2023 that demand-and-supply dynamics were in its favour.
At the time, Scoot and SIA were able to capture pent-up demand as the group’s flight crew was largely intact, whereas other airlines were not able to restore supply as quickly due to retrenchments during the pandemic.
That advantage has diminished with other airlines adding supply.
There is also a limit to what airlines can cut in terms of cost, and they are constrained in pricing due to competition.
While Jetstar Asia’s departure could be a boon to the budget carriers operating in Changi Airport, the carrier had only about 4 per cent of the traffic at the airport.
Also, Jetstar Asia had one of the most competitively priced fares, and Scoot may not be able to price at such levels. Other carriers might stand to benefit instead from the non-exclusive routes, given their lower fares.
Air India’s losses were a drag on SIA’s recent reported financials, and its Indian associated company’s profitability appears unable to improve soon.
Thus, SIA shareholders might want to watch Scoot’s profitability as they assess the group’s financial prospects – but also take into account the strategic role the budget arm plays.
