SIA / Scoot

SIA / Scoot: SIA’s new long haul budget carrier unit, Scoot, plans to fly at least 5 cities by the end of the year. Scoot intends to announce destinations in China and Japan; it is due to commence flights in Jun or Jul, and has already said it will fly to Sydney and the Gold Coast in Australia.

Scoot will fly services as long as 9 hrs and offer fares as much as 40% cheaper than full service carriers. Scoot will start operations with 4 Boeing 777-200s purchased from SIA, with the fleet size to increase to 14 by 2015. It will complement SIA by either tapping new customers on existing routes or by adding new destinations that are predominantly leisure markets. This comes as 26% of travelers to Spore are now flying on budget, contributing to waning load factors and declining earnings for SIA.

SIA last traded flat at $10.97, which translates to 1x P/B.