Below is the transcript of a CNBC Exclusive interview with Campbell Wilson, CEO, Scoot. If you choose to use anything, please attribute to CNBC, Tanvir Gill and Nancy Hungerford.
Tanvir Gill (TG): Campbell Wilson is the CEO of Scoot joining us live from Singapore. Mr. Wilson, it’s great to have you on the show. Thank you very much for your time. Good morning to you. Let’s start off there, because there’s a lot of excitement in it around the announcement of this travel bubble. And I wonder, would Scoot be operating flights under this programme?
Campbell Wilson (CW): Well, I think the bubble will be phased in. Obviously, the authorities want to make sure that the procedures are robust and everyone is comfortable with within working well, clearly, we would like to participate in the bubble. But it might be in a subsequent phase, not just initially launch.
TG: Right. So what are your plans looking like over the course of the next six months? Because like, I pointed out a lot of the fight that you’re operating our cargo-oriented flights right now, how do you look to stabilise your business in this environment where we are seeing a scale back and restrictions.
CW: Well, obviously our focus thus far has been managing the initial onset of the crisis, looking at our fleet, looking at our liquidity, right sizing the organisation from a headcount perspective, but also investing in what it will take to meet this new world and the recovery. So investing a lot in our customer experience, the health and safety elements, the cleaning regimes that touch this environment on the ground and in the year, and really just reassuring people that we’re a trustworthy carrier to fly. We were one of the only carriers to refund people in cash, rather than just credit earlier in the piece. Now we’re offering insurance including COVID cover, and being flexible on changes. So we’re preparing ourselves for the progressive opening borders, slow though it may be.
Nancy Hungerford (NH): Campbell, you must be in consultation with the government on this issue. And I’m just curious if you can elaborate a bit more on your expectations for Hong Kong travel, because a lot of viewers watching this will want to know when they are become eligible to take a trip. And when you say it’s going to be phased in. I mean, can you give us a better idea? Are you expecting that flights will be going from Q1 of next year? I mean, what kind of timetable are you working with?
CW: Well, obviously, this is a matter for the governments to agree amongst themselves. I think at the moment, they’re still ironing out the details between themselves. But we’re hopeful that there’ll be something up and running by the end of the year, if not sooner.
NH: By the end of the year. Okay. And have you been given any indications as to whether similar bubbles will be formed with other destinations?
CW: Well, Singapore has been quite proactive in unilaterally opening its borders to a number of countries where they’ve managed to treat the COVID situation well. There are standing invitations with New Zealand, with most of the states in Australia, with Vietnam, Brunei, and potentially others. And all it will take us for one of those countries to reciprocate. Probably the Hong Kong regime will be the one that is a demonstration model that gives all parties more confidence to step forward. But I think this is the first opening of what will subsequently be many, and hopefully in the not too distant future.
TG: So what can you share with us at this point in time, Mr. Wilson, in terms of the route roadmap, in terms of the routes that you’re looking to restart, I believe you’re likely to resume services to Melbourne and Sydney come November? How do things pan out from here on that front?
CW: Well, really, our resumption of the network depends very much on borders, and therefore the government’s opening those borders at the moment obviously most are closed, either entirely or to non-citizens. And their deployment is very much coordinated with Singapore Airlines. Our focus is firstly connecting Singapore with its key overseas markets. Secondly, in restoring the aviation hub through Singapore for transit passengers, and thirdly, fleshing out the full SIA Group network to support the aviation hub, but also in Singapore’s business hub, which is a key priority for obviously, us, but also the government.
NH: And so in the meanwhile, while you await more clarity on opening the borders, I mean, it seems that you are doing as CEO, everything you can to control things on the cost side. And as part of SIA Group, I mean, the group as a whole had to take some pretty painful job cuts in the thousands. And I just wonder if you feel that that will be sufficient or as time goes on, do you think further layoffs will be on the cards?
CW: Well, who knows what the future holds with respect to recovery, but the right sizing of our business was done with the future in mind. We have managed to increase liquidity quite significantly through a share placement through a bond offer, which we’re very grateful with supported by the shareholders. We are obviously managing the crisis at the moment, but not without a view to the future. We continue to take new aircraft to ensure we offer a good product and modern fleet and efficient fleet and also with a view to sustainability which will continue to be an issue, post this crisis.
TG: How much do you raise from that bond issue and are you planning to raise more in due course?
CW: So there were two components to the bond issue. One was an equity issue of about $8.8 billion. There was about a $6.6 billion mandatory convertible bond issue, both underwritten by a majority shareholder, Temasek. And subsequent to that, there’s also been about $2 billion raised through other means, including some loans against the aircraft. So I think the group is in a good capital position. And we’re waiting to see what the shape of the recovery is.
TG: And I just want to understand how have you managed your operational efficiencies? So part of it comes in from cargo, how much does it offset the overall impact on cost because of operations stalling? As far as passenger travel is concerned?
CW: It’s very little to be honest, to the extent that the loads, passenger and cargo cover variable costs and make some contribution to our fixed costs. They’re very welcome. In total, we’re talking maybe 5% of usual revenues. So it’s good to keep people busy, it’s good to keep aircraft busy, it’s good to make a small contribution to fixed costs, but it really doesn’t move the needle.
NH: And Campbell, you did mention that sustainability will continue to be an issue once normal times resume, hopefully. And what do you mean by that, exactly? I mean, do you think this crisis has brought about an acknowledgment that there needs to be even more priority placed here? I mean, many have pointed to the fact that the grounding of the airlines should be helping with C02 emissions. But as things resume to a normal pace of business, I mean, what are you targeting, specifically on the sustainability side?
CW: I think the industry had made very firm commitments throughout of it, that sustainability was important. And many carriers made commitments. We support the move towards a sustainable industry, I think it’s expected by not just our customers, but also our staff and our investors. And so even in the midst of the crisis, we continue to invest in the modern fleet, we continue to look at ways that we can be more environmentally conscious. And that will clearly continue because consumers and customers and staff expectations will support that.
TG: Right, I know it’s a very difficult environment to forecast and especially the comeback in demand, Mr. Wilson, is very hard to call. But even so, you know, given that SIA’s plant load factor stands at about 17, 18%. Can those numbers change I mean for Scoot, how do you map the recovery in terms of demand for 2021? Not even beyond?
CW: Yeah, well, I think none of us have a crystal ball at the moment. But I think we’re in a good position. Firstly, as a group, by having the full service and low-cost airlines in the group, we can be flexible and agile. And we can not just meet long term differences in market segmentation, but also catch the market segments that recover perhaps faster than others. In that respect, I think the low-cost leisure model that Scoot operates is well placed. We have a low customer price, we have a low operating cost. We are carrying people within a region. And it seems that people’s risk perception magnifies with distance travelled. There are many things that I think are advancing the low-cost model. So I think, you know, as a recovery comes as government’s open borders, we have reason to remain hopeful that there will be a recovery. Hopefully not too far away.
NH: All right, yup. We are all hoping for that, and we wish you the very best and these difficult times. Campbell Wilson, CEO of Scoot, thank you so much for joining us.
END
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