Singapore Air Final

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Singapore Air Final

  1. 1. Singapore Airline Customer Service Innovation (A) Group1 Hsin-Yi & Mills
  2. 2. Background <ul><li>Old national air carrier- Malaysia-Singapore (MSA) </li></ul><ul><li>1972, Singapore airline. </li></ul><ul><li>Beginning operation: 10 aircraft, 6000employees, 22 cities, 18 countries. </li></ul><ul><li>High fixed costs, </li></ul><ul><li>Regulated by IATA </li></ul><ul><li>A passive supporter- Gov. </li></ul><ul><li>But lower labor costs (16%in SIA comparing 35% in IATA) </li></ul>
  3. 3. Route Map
  4. 4. Cutting-edge quality Service strategy <ul><li>A culture of customer service -3interviews +tea party -positive attitude -functional skills and soft skills </li></ul><ul><li>More cabin staff per seat than other airlines </li></ul><ul><li>Free of charge amenities to Economy class passengers </li></ul><ul><li>Singapore girl promotion -a sense of style and sophistication - romance of travel </li></ul><ul><li>-service-oriented airline -global marketing icon </li></ul><ul><li>Measuring satisfaction -Service Performance Survey (SPS) -Global Airline Performance (GAP) (under IATA) -feedback report </li></ul><ul><li>http://www. youtube .com/watch? v=4AGlRoLEyXI </li></ul>
  5. 5. Aircraft Replacement Strategy <ul><li>The youngest and modernist fleet in the industry </li></ul><ul><li>Advanced, fuel-efficient version aircraft </li></ul><ul><li>-Bargain purchasing price </li></ul><ul><li>-lower maintenance costs </li></ul><ul><li>-feel good factor </li></ul><ul><li>Modifying depreciation policy </li></ul><ul><li>Replacing new aircraft by every six year </li></ul><ul><li>Sale and leaseback agreements </li></ul>
  6. 6. On-ground Service strategy (OGS) <ul><li>New environment -low cost carrier emerged </li></ul><ul><li>-tougher competitors ( BA, Qantas, Lufthansa, and Cathay Pacific ) </li></ul><ul><li>-SilkAir (90% leisure travelers) </li></ul><ul><li>-KrisFlyer (Mileage program) </li></ul><ul><li>In1987, OGS strategy </li></ul><ul><li>Extending the superior in-flight service to include the pre- and post-flight experience. </li></ul><ul><li>In 2000, replaced by “Transforming Customer Service” (TCS) </li></ul><ul><li>SPS surveys -> on-line profiles </li></ul>
  7. 7. <ul><li>In 2001,SIA group </li></ul><ul><li>-revenues: $5.7 billion </li></ul><ul><li>-net profit: $913.7 million </li></ul><ul><li>- 93% of the Group’s revenues, and 85% its net profits from airline </li></ul><ul><li>Rank: #6 largest airline in gross revenue </li></ul><ul><li> #3 in net profit </li></ul>
  8. 8. <ul><li>Hallmark: </li></ul><ul><ul><li>withdrew from IATA </li></ul></ul><ul><ul><li>located at one of the most modern and efficient airport in the world. </li></ul></ul><ul><ul><li>quality cabin crew training and in-flight comfort </li></ul></ul><ul><ul><li>international campaign: “Singapore Girl” </li></ul></ul><ul><ul><li>replacing aircrafts every few years. </li></ul></ul>
  9. 9. Spacebed In response to British Airline, SIA plans on implementing the “Spacebed”
  10. 10. Challenges <ul><li>Ongoing cost of on-broad innovation and investment of $14 billions in new aircraft </li></ul><ul><li>— resulted the first bank loan in SIA history </li></ul><ul><li>911 </li></ul><ul><li>Labor cost kept increasing in 1990s </li></ul><ul><li>High competitive climate </li></ul><ul><ul><li>Low-price challengers </li></ul></ul><ul><li>How about cutback our service? </li></ul>
  11. 11. Spacebed Decision <ul><li>Install cost: $100 million USD </li></ul><ul><li>In 45 aircraft </li></ul><ul><li>Reduce seats in Raffles Class </li></ul><ul><li>from 58 to 50 </li></ul>Keep it or drop it?
  12. 12. Spacebed Decision <ul><li>Labor cost might decrease (58-50) </li></ul><ul><li>Pricing justification </li></ul>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 62,532,000 24,786,000 Margin compared with original 1.68 4.23 Break-even/Year* 202,500,000 182,250,000 157,464,000 Contribution Margin 50% 50% 48% Contribution Margin Ratio 405,000,000 364,500,000 328,050,000 Sales 45 45 45 Spacebed Fleet 180 180 180 Annual Flight Number 100% (50seat) 90% (45 out of 50seat) 75% (45 out of 58seat) Passenger seat factor 1000 1000 900 Ticket Price Prefect Scenario Spacebed Project Original
  13. 13. Alternatives <ul><li>Reduce labor cost via recruit from other countries </li></ul><ul><ul><li> Inexpensive and well-educated labor from other countries </li></ul></ul><ul><li>Different route implement different strategy </li></ul><ul><ul><li>Long distance route: Spacebed </li></ul></ul><ul><ul><li>Short 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 </li></ul></ul><ul><li>Test market </li></ul><ul><li> Implement Spacebed only in competitive routes </li></ul><ul><li>Focus on safety features </li></ul>
  14. 14. Conclusion <ul><li>Superior customer service is how SIA differentiate itself… </li></ul><ul><li>Even-rising customer expectations </li></ul><ul><li>SIA annual operating profit: </li></ul><ul><li>Installation cost of the Spacebed: </li></ul><ul><li>Projected break-even time: </li></ul><ul><li>Commitment and devotion to customer </li></ul><ul><li>service innovation/branding: </li></ul>…………………… $105million …………………… .………21months ………………… .………....Priceless… ……… ..…………………$614million
  15. 15. That’s what I call “SPACEBED!!”

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