The Story

so far …..
• Singapore Airlines (SIA) was started as a Malayan Airways in 1947 by Ocean
Steamship Company of Liverpool, the Straits Steamship Company of Singapore &
Imperial Airways

• Renamed as Malaysian Airways in 1963 & Malaysia-Singapore Airlines (1967)

• In 1972 spilt in to Malaysian Airlines & Singapore Airlines

• Thereafter, It became one of the strongest and well-known brand names in Asia.

• When SIA began its operations, there were not many domestic routes to serve in
Singapore. So the company was compelled to enter international routes. With few
hindrances in the beginning, SIA’s route network now spans over 90 destinations in
over 40 countries. The reason…
 The Story
so far …..
• Singapore Airlines decided on a fully branded product or service differentiation strategy from the
very beginning.
 Innovation, best technology, genuine quality and excellent customer service were to become the major drivers of the
brand

• They have pioneered many in-flight experiential and entertainment innovations, and strived to be
best-in-class
 SIA was the first to introduce hot meals, free alcoholic and non-alcoholic beverage, hot towels with a unique
and patented scent, personal entertainment systems, and video-on-demand in all cabins.

• The company keeps driving innovation as an important part of the brand, and the cabin ambience
and combined experience are key factors of their success. The one major factor was….
 SINGAPORE
GIRL
• The personalization of the Singapore Airlines brand is the mixed male and
female cabin crew, where especially the flight stewardesses commonly referred
to as ‘Singapore Girls’ have become very well-known.

• The ‘Singapore Girl’ wore the traditional “Sarong Kebaya” which was specially
designed by the French Designer Pierre Balmain.

 The ‘Singapore Girl’ represents Asian values and hospitality, and could be described as caring, warm, gentle,
elegant and serene. It is a brilliant personification of SIA's commitment to service and quality excellence.

 The icon has become so strong that Madame Tussaud's Museum in London started to display the Singapore
Girl in 1994 as the first commercial figure ever.
 SINGAPORE
GIRL
• Cathay Pacific-founded in Hong Kong on 24 September
1947 was recording double digit growth on average every
year during 1962-1967

• Japan Airlines founded in Tokyo on August 1, 1951- was

flying to new destinations London, Moscow, New York,
Paris, Pusan. Half of its revenues in 1965 came from
transpacific routes to US

• Malaysian Airlines was flying to 47 overseas destinations

 The Story
so far …..
 Singapore Airlines has carefully built a financial and fixed cost infrastructure which allows
them to continue investing to support the brand while challenging the competition on costs.

 First, the strong cash position allows Singapore Airlines to internally fund purchases of new
equipment and aircraft, and limit interest costs. SIA is not locked into long-term leases, and
can easily accommodate newer, more efficient equipment which minimizes maintenance
costs and avoid aircraft downtime.

 A second benefit of SIA’s infrastructure is the age of their fleet. Maintaining the youngest
generation of aircraft provides SIA with some of the lowest fuel costs in the industry. This is
very significant since 15-20 per cent of an airline’s total costs are on account of aviation fuel.
On top of this, SIA carefully hedges up to 50 per cent of its fuel contracts two years in
advance to avoid cyclical and often large volatility in fuel prices.

 Finally, the financial and cash position has allowed SIA to weather the short-term dips in the
industry better than the competition.
 The
Problem
Ahead
 While other airlines have also pursued high service/quality brand strategies, none has been
able to match SIA in consistency, commitment, and true penetration of the brand in every
facet.

 SIA has been able to maintain their brand advantage by not wavering from their brand
strategy.

 This type of commitment takes dedication from the board, CEO and senior management
team, and strong faith in the brand's ability to pull through bad times.

 The management team and shareholders must maintain a longer term outlook to avoid
making short-term, reactionary decisions which dilute the brand.

 However, low cost carriers in Asia became one of the greatest threats for SIA. The Air Asia
and Virgin Blue have acquired considerable percentage of Asian and domestic Australian
markets and SIA has found itself challenged by the entry of many other low-cost airlines in
its home market.
 The
Question

Will SIA be successful in warding off the competition from

low-cost carriers without any reduction in its price range???
 The
Solution
 SIA has already jumped ahead, launching their own carrier for local and short-haul routes, Tiger
Airways, to stay at the forefront of competition. The aim is to avoid dilution of the core premium brand,
Singapore Airlines.

 SIA shall not lower its cost to fight back these low cost carriers. Instead under a new sub-brand SIA it
will introduce some new flights to those destinations where the low cost carriers are targeting.

 Since SIA has a vast experience in the region their new sub brand will benefit because of this
experience. Where as, new comer low cost carriers will struggle a lot.

 In most industries, there are always segments willing to pay for quality brands. Therefore, the question
is not whether there are customers in the market, but rather the ability for SIA to constantly nurture the
brand promise, keep innovating and capture the overall value of the brand in the minds of the
customers.

 Customers’ perception of the price/value equation, their future buying behaviour (partly to be
influenced by the low-cost carriers) and loyalty among other factors will crucial for the future.
 The Low-Cost
option
 The investment capacity of the company,
 SIA can establish and operate a whole new low-cost carrier service
 It can acquire an existing low-cost carrier
 It can operate through a franchise model of ‘tiger airways ‘ with other low-cost carriers in
nearby countries.

 Avoiding reactionary behavior.

 Charging for on-board services which used to be free in full-service airlines.

 Historically, business travelers are willing to pay a premium for full-service airlines essentially
due to personal image being primary criteria. By abandoning their customer service strategy, even
on restricted flights, the premium US airlines are diluting their brand in search of short-term
profitability.

 This is creating a circular effect where the premium airlines are losing cost-sensitive customers to
low-cost airlines, which causes them to reduce price to retain these customers. This in turn creates
more cost pressure. This cost pressure causes them to start reducing the premium services which
made them distinct from the low-cost airlines in the first place.