These are interesting times at Scoot, the low-cost airline launched by Singapore Airlines Group (SIA Group) back in mid 2012.
Scoot’s still very much the baby of this multibrand family, which also includes Singapore Airlines, SilkAir and Tiger Airways. In the group’s most recent financial quarter (1Q2016), Scoot accounted for just 7% of passengers and reported a loss of S$20 million (US$15 million), although that isn’t unusual for such a young airline.
At the same time, it’s poised for rapid growth, with bold plans to expand its medium and long haul network and almost double its fleet during FY2016, from six to 11 aircraft.
The first of these new aircraft enabled Scoot to add Osaka to its list of 15 destinations in July this year. Melbourne will join the roll call in November, while other new aircraft are expected to serve yet-to-be announced destinations in China.
And over time, you can expect to see Scoot venture even further afield, as chief executive Campbell Wilson hinted to Singapore’s Today newspaper in July:
The West is definitely on our cards. We are exploring some options at the moment. We haven’t finalised our decision on an announcement yet but it is not too far away. Our aircraft can fly non-stop up to London.
Managing Scoot’s rapid takeoff is a challenge, says head of finance Ng Long Jian, but it’s one that’s been made significantly easier by the airline’s use of NetSuite as its core financial management system. As a start-up, he says, Scoot had one eye on costs but the other on flexibility and scalability when it came to IT vendor selection:
We wanted a modern, agile business platform that could scale rapidly while ‘futureproofing’ our company for longterm innovation and growth.
Other ERP systems were considered, not least SAP, since this is used by parent company SIA Group as its core ERP platform.
Of course, there’s an obligation to mirror our parent company as much as possible. In terms of reporting requirements, our financial numbers and management decisions need to be presented in ways that allow total oversight by our holding company.
But having analysed the cost benefits versus potential outlay in an SAP system able to accommodate our requirements and growth plans, we decided we needed to look at other solutions out there in the market.
So far, NetSuite has proved more than capable of handling Scoot’s requirements including, for example, tracking the depreciation of individual aircraft. That’s important, because as well as expanding its fleet, Scoot has been transitioning away from the Boeing 777 aircraft it inherited from Singapore Airlines to newer, more fuel-efficient Boeing 787 planes that should enable it to achieve better economies of scale. The last of its 777 aircraft is due to be phased out in the current quarter. Says Ng:
Aircraft are the largest items on our balance sheet. Twenty aircrafts cost us about S$2 billion and what we do with NetSuite is book each aircraft on delivery and then track it according to our own rules around useful life, residual value and so on throughout its time in service for us.
So, for every individual aircraft, we maintain a complete record of how its value depreciates over time and the performance we get from it in return for our investment.
Large fixed assets aren’t the only items treated to close scrutiny, he adds: fuel, engineering, staffing and advertising costs are all carefully tracked, too. And when it comes to Scoot’s Accounts Payable processes, NetSuite has made it possible for the company to get better value from its BPO [business process outsourcing] contract with Accenture.
Instead of receiving a hefty bill for the costs associated with a team based in the Philippines, manuallyprocessing invoices and payments on Scoot’s behalf, much of the work has now been automated, saving time and effort that’s passed onto Scoot as cost savings. Since more automation was introduced, Accenture’s used 1.5 fewer full-time employees on the Scoot account. And, at the same time, Scoot’s getting its bills paid more promptly, Ng adds:
This too is important because we have a lot of urgent payments to be discharged. If we fail to pay a fuel bill within the credit period, for example, the impact on our operations could be very serious. It helps us a lot.
Finally, Ng credits NetSuite with helping him to keep his own finance team lean and mean.
We’re 16 people in total. One year ago, we were just 12 people but that increment of four additional staff is small compared to the increase in business volume that we’re handling today. Without features like the fixed asset management and automated payments that we’ve now got, I’d probably need at least 20 people.