Singapore AirlineCustomer Service

Innovation (A)

Group1Hsin-Yi & Mills

Background

• Old national air carrier- Malaysia-Singapore (MSA)• 1972, Singapore airline.• Beginning operation: 10 aircraft, 6000employees,

22 cities, 18 countries.• High fixed costs,• Regulated by IATA• A passive supporter- Gov.• But lower labor costs (16%in SIA comparing 35%

in IATA)

Route Map

Cutting-edge quality Service strategy• A culture of customer service

-3interviews +tea party-positive attitude-functional skills and soft skills

• More cabin staff per seat than other airlines• Free of charge amenities to Economy class passengers• Singapore girl promotion

-a sense of style and sophistication- romance of travel-service-oriented airline

-global marketing icon

• Measuring satisfaction -Service Performance Survey (SPS) -Global Airline Performance (GAP) (under IATA)

-feedback report

• http://www.youtube.com/watch?v=4AGlRoLEyXI

Aircraft Replacement Strategy

•The youngest and modernist fleet in the industry

•Advanced, fuel-efficient version aircraft

-Bargain purchasing price

-lower maintenance costs

-feel good factor

•Modifying depreciation policy

•Replacing new aircraft by every six year

•Sale and leaseback agreements

On-ground Service strategy (OGS)

• New environment-low cost carrier emerged

• -tougher competitors (BA, Qantas, Lufthansa, and Cathay Pacific)

• -SilkAir (90% leisure travelers)• -KrisFlyer (Mileage program)

• In1987, OGS strategy

• Extending the superior in-flight service to include the pre- and post-flight experience.

• In 2000, replaced by “Transforming Customer Service” (TCS)

• SPS surveys -> on-line profiles

• In 2001,SIA group

-revenues: $5.7 billion

-net profit: $913.7 million

- 93% of the Group’s revenues, and 85% its net profits from airline

Rank: #6 largest airline in gross revenue

#3 in net profit

• Hallmark:- withdrew from IATA- located at one of the most modern and effici

ent airport in the world.- quality cabin crew training and in-flight comfo

rt- international campaign: “Singapore Girl”- replacing aircrafts every few years.

Spacebed

In response to British Airline, SIA plans on implementing the “Spacebed”

Challenges

•Ongoing cost of on-broad innovation and investment of $14 billions in new aircraft—resulted the first bank loan in SIA history

•911

•Labor cost kept increasing in 1990s

•High competitive climate•Low-price challengers

How about cutback our service?How about cutback our service?

Spacebed Decision

•Install cost: $100 million USD

•In 45 aircraft

•Reduce seats in Raffles Class

from 58 to 50

Keep it or drop it? Keep it or drop it?

Spacebed DecisionOriginal Spacebed

ProjectPrefect Scenario

Ticket Price 900 1000 1000

Passenger seat factor

75% (45 out of 58seat)

90%(45 out of 50seat)

100%(50seat)

Annual Flight Number 180 180 180

Spacebed Fleet 45 45 45

Sales 328,050,000 364,500,000 405,000,000

Contribution Margin Ratio

48% 50% 50%

Contribution Margin 157,464,000 182,250,000 202,500,000

Margin compared with original

24,786,000 62,532,000

Break-even/Year* 4.23 1.68

•Labor cost might decrease (58-50)•Pricing justification

Exhibit 2;

passenger seat factor

Assumes that every aircraft flies 180 times pre year

900*45*180*45=328,050,000

Assumes that 45 seats sales will

remain

Installation & R&D cost= $105 million

105÷24.786=4.23

Alternatives

•Reduce labor cost via recruit from other countries

Inexpensive and well-educated labor from other countries

•Different route implement different strategyLong distance route: SpacebedShort route: In order to compete in Economic class, SIA can cancel meal on broad, so that it can provide low-price, high quality service in Economic class

• Test market

Implement Spacebed only in competitive routes

•Focus on safety features

Conclusion

Superior customer service is how SIA differentiate itself…Superior customer service is how SIA differentiate itself…Even-rising customer expectationsEven-rising customer expectations

•SIA annual operating profit:

•Installation cost of the Spacebed:

•Projected break-even time:

•Commitment and devotion to customer

service innovation/branding:

……………………$105million

…………………….………21months

………………….………....Priceless…

………..…………………$614million

That’s what I call “SPACEBED!!”