Time for Singapore Airlines to bring back the Magic
May 25, 2017
Though it is very useful in balancing its portfolio, diversification alone cannot solve Singapore Airlines’ problems. To contain the threat posed by the budget brigade and the middle-eastern carriers, SIA must rebuild differentiation of its mothership by stepping up brand building efforts.
For some peculiar reason, an otherwise universally liked food fragrance turns me off. It so happened that when I peeled off the cover of a dish served on one of my SQ trips, I was overcome by the fragrance, and involuntarily leaned backwards.
Observing my body language from a distance, an air stewardess approached me and offered an alternative meal. The gesture, one of a number of noteworthy experiences over the years, left me with pleasant memories.
How their staff engage at touch points such as the one I just described makes Singapore Airlines a great way to fly.
Key to how the carrier differentiates is through training employees to deliver quality services. Its mega brands, the Singapore Girl and Singapore Airlines, position the carrier as the purveyor of superior quality offerings served with grace and Asian hospitality.
Service excellence has been the airline’s fundamental strategy. Confronted with a small domestic market that lacked critical mass, Singapore Airlines chose to target corporate customers and business travellers. While the rest of the industry focussed on cost cutting, SIA strengthened its services, and distinguished itself by imparting superior customer experiences.
The strategy paid off making Singapore Airlines one of the most loved airlines in the world.
The Charge of the Budget Brigade
Once upon a time, there was something enchanting and alluring about air travel. (If you are well over 50, you will know what I am talking about).
Today, in the era of online transactions, price is the most tangible, visible and comparable attribute. Not surprisingly, budget airlines are charging ahead.
Because of their growth as also the development of middle-eastern and Chinese carriers, competitive pressures have increased for Singapore Airlines. The airline reported a quarterly loss, of S $138 million in the first three months of 2017 … its first loss in recent years.
As may be gauged from the company’s P&L statement, losses could have been worse, if not for the airline’s diversification strategy. Recent investments into banners such as Tigerair and Scoot allowed the airline to tap into the growth of the budget segment, easing the impact of the changes in the marketplace.
Long-Term Solution
Though it is very useful in balancing the airline’s portfolio, diversification alone cannot solve SIA’s problem.
After all, Singapore Airline is a great, gigantic carrier, a global icon and an enormously valuable brand. In comparison, the subsidiaries are me-toos in a sea of budget carriers.
A long-term solution must address the difficulties faced by the mothership. What can the airline do to reverse the trend?
The crux of the problem is not that budget airlines are shouting low prices; the full service carriers too are singing the same tune.
If that is the refrain in the marketplace, price becomes the top of mind consideration for customers when they book tickets. Enticed by the incessant chatter of discounts and price-cuts, travellers forget some of things that matter.
To win them over, full service carriers need to remind customers what sets them apart as opposed to engaging in a battle that the budget brigade is winning.
At a time when one of the most profitable budget airlines is talking about charging for the use of toilets, there is the need to remind people that the airplane is the start and the end of your journey, irrespective of whether it is a business trip or a Roman holiday.
To bring back the magic, Singapore Airlines must do what it has always been good at doing, and do so more forcefully and efficiently than before. That is apparently what they intend to do as they reshape their business into one that “continues to deliver high-quality products and services, though with a significantly improved cost base and higher levels of efficiency”.
Let us not forget that the mass market has never been Singapore Airlines strategic goal … it is not competing for the title of the carrier with the largest number of passengers.
On the other hand, for business travel, it is consistently rated amongst the top.
What sets it apart in this segment is its brand equity and its service offering. Whereas quality of service, other premium airlines with deep pockets can also provide, it is far more difficult for these competitors to match the equity of the airline’s mega brands.
At a time when profits are under pressure, it may sound counter-intuitive to spend more on advertising.
Yet the magic resides in consumers’ minds through great brands like the Singapore Girl that imbue products with thoughts, feelings, emotions, interest and status.
Much of the allure of Singapore Airlines is manifested in the Singapore Girl. The equity she conjures is beyond compare within the air travel industry, and the ensuing consumer loyalty is what keeps the airline ahead.
At a time when the middle-eastern airlines can match/exceed any aspect of the SIA’s service offering, and the budget brigade can under-cut SIA on prices, the airline should use the weapon no other carrier possesses.
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