Skip to main content

Advertisement

Advertisement

To stay ahead, SIA must revisit its innovative roots

Singapore Airlines (SIA) last week announced it will be taking “bold radical measures” in a major business transformation plan following a fourth-quarter operating loss of S$41 million by the parent airline.

SIA CEO Goh Choon Phong says the airline needs a transformation to become more competitive.

SIA CEO Goh Choon Phong says the airline needs a transformation to become more competitive.

Follow TODAY on WhatsApp

Singapore Airlines (SIA) last week announced it will be taking “bold radical measures” in a major business transformation plan following a fourth-quarter operating loss of S$41 million by the parent airline.

Chief executive officer Goh Choon Phong said: “The transformation is not just about how we can cut costs but also how we can generate more revenue (and) improve our processes more efficiently, so that we can be a lot more competitive, going forward.”

The key word is “transformation”, which is long overdue. A transformation means this is not merely a stopgap exercise.

SIA may begin by re-examining what worked for it in the past and ask why these may no longer be relevant.

The aviation landscape has changed dramatically over the years such that SIA cannot continue to rely on doing more of the same things that it has done in the past.

SIA cited intense competition as a factor that affected its fortunes. Many airlines that started out emulating SIA have become its fiercest rivals, among them the big three Middle East carriers, Emirates Airlines, Etihad Airways and Qatar Airways, all of which are offering comparable products and services.

Carriers from China also pose new threats as they expand aggressively in the region and beyond. They are offering alternative connections to North America through Shanghai and Beijing, and operate non-stop flights to major cities, thus obviating the need for travel via another foreign airport. Their multi-prong approach includes leveraging on the benefits of airline partnerships and global alliances, and developing new hubs such as plans by China Eastern Airlines to mount services to Clark International Airport in the Philippines.

But competition is a given in the business. We recall how a fledgling airline from a tiny nation leapfrogged its more experienced rivals in its early days to become the world’s best airline and one of the most profitable in the industry. No doubt the competition has intensified, but the salient point here is that it can never be business as usual.

Interestingly, Cathay Pacific — SIA’s closest rival in the region — is facing a similar, if not worse, outlook, reporting a loss of HK$575 million (S$103 million) last year.

Cathay also cited competition — mainly from the same Middle-East and China carriers. The airline is cutting 800 jobs, a measure taken by most airlines when facing economic woes.

While SIA also recognised that some jobs would no longer be relevant and needed to be redesigned, that move alone is not a cure-all to sustaining profitability in the long term.

A lesson may be learnt from the Qantas transformation programme that the Australian flag carrier implemented following hefty losses four years ago.

Besides drastic cost-cutting measures, major changes were made to the corporate structure and processes, including consolidation of support services for cost efficiency and improved productivity, and the split between international and domestic operations for more autonomy and accountability.

The ongoing programme seems to have worked for Qantas, as it bucks the trend by reporting record profits while other airlines such as Cathay are hurting. In the current price-sensitive market, where the budget model of paying for only what a passenger needs is gaining popularity, SIA also faces competition from low-cost carriers (LCCs) in spite of operations by its own budget subsidiaries Scoot and Tigerair.

Come October, Norwegian Air Shuttle will pose new challenges when it commences a budget long-haul service between Singapore and London at much lower fares.

The solution is not for SIA to compete willy-nilly on the turf of LCCs — that is the battle for Scoot and Tigerair to fight.

To do so would only serve to help LCCs narrow the product differentiation, thus allowing price to exert a greater influence in a traveller’s decision to buy an airline ticket.

It may also result in Scoot and Tigerair growing at the expense of the parent airline.

What SIA needs to do is to widen that berth such that there are overriding reasons why there are material differences between flying low-cost and flying full-service, particularly for the long-haul.

SIA needs new revolutionary ideas to stay ahead of the competition. As airlines begin to pay more attention to economy travel, Emirates is opening its premium lounges at Dubai International Airport to economy-class passengers for a fee. Qantas introduces a “Select on Q Eat” facility that allows passengers, including those in economy, to select their inflight meals online ahead of the flight.

Air New Zealand offers Skycouch in economy, where a row of three seats together allow you to stretch out or use the space as a play area for kids.

In this age, when Internet connectivity has become the top most desirable facility for many travellers, some airlines are providing complimentary Wi-Fi on board.

Showers that Emirates has introduced in First Class may seem impractical and incommodious for all classes, but massage treatments may be a more feasible feature. What about pre-flight dining for all classes?

More can be done to promote self-check-in, to improve staff productivity. Brand loyalty could be enhanced through building a larger customer base in tie-ups with hotels, car rentals and retailers, and a more generous Silver Kris rewards programme for all classes of travel.

Club membership accorded with certain privileges such as access to airport lounges and priority boarding could boost loyalty. It is a pity that SIA, once known for its innovative prowess, has become very much a follower.

As an example, it was Cathay Pacific that revitalised the premium economy product as a class of its own, something SIA was slow to embrace at a time when recovery of the business segment was still uncertain after the 2008-09 global financial crisis, while others quickly followed suit.

This gave SIA’s rivals an early advantage in offering an option that sits between business and economy. It is time that SIA regains the honour as an innovative leader in the industry.

 

ABOUT THE AUTHOR:

David Leo is a published author and aviation veteran.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.