Singapore Airlines balances high-quality service with low costs through several strategies: 1. It invests heavily in customer-facing areas like new aircraft and training while controlling costs in back-office areas like technology. 2. It fosters both centralized, structured innovation and decentralized, emergent innovation to develop new services cost-effectively. 3. It is an early technology adopter in ways that enhance customer experience but also lags in non-customer areas to control costs. 4. It combines standardized processes with personalized service through cultural training that empowers employees to customize service.

1. Singapore Airlines’
Balancing Act
by Loizos Heracleous and Jochen Wirtz

2. Singapore Airlines
• High quality service
• Premium Experience
• Multiple award winners
16
8 7 8
6
4
0
5
10
15
20
Full
Service
European
Airlines
US
Airlines
Asian
airlines
European
Budget
American
Budget
SIA
ASK
ASK
Should Cost a Lot?
SIA is also one of the industry’s most
cost-effective operators. Its costs per
available seat kilometer (ASK) were just
4.58 cents.

3. HOW?
SIA has combined the supposedly incompatible
strategies of differentiation—which it pursues
through service excellence and continuous
innovation—and cost leadership
Paradoxical but true
SIA manages to achieve this by:
• Providing Service Excellence cost effectively
• Innovating in a both centralised and Decentralised
manner
• Being an Tech leader and a follower
• Achieving standardisation and personalisation in its
processes

4. Achieving Service Excellence Cost-Effectively
SIA manages its two main assets—planes and people—so that its service is better than
rivals’ and its costs are lower. The airline invests heavily in areas of the business that
touch the customer in order to enhance SIA’s premium positioning. Everything behind
the scenes is subject to rigorous cost control.
SIA spends more than its rivals in key areas:
• Buying new aircraft SIA replaces its fleet more
frequently than do competitors.
• Depreciating aircraft It depreciates aircraft over
15 years compared with the industry standard of
25 years.
• Training The airline invests heavily in inducting
and retraining employees.
• Labor costs on flights SIA staffs each flight with
more cabin crew members than do other airlines.
• Innovation It invests in both radical and
incremental innovations.
And it spends less, partly as a consequence,
on:
• Price per aircraft SIA is usually a showcase
customer for aircraft makers, places large orders,
and often pays in cash.
• Fuel, maintenance, and repair SIA’s operating
costs are lower because its fleet is young and
energy efficient.
• Salaries SIA keeps salaries low by offering
employees bonuses of up to 50% depending on
SIA’s profitability; also, the airline’s reputation
attracts younger workers.
• Sales and administration Customer loyalty, a
lean headquarters, and constant cost cutting
keep the airline’s SGA expenses low.
• Back-office technologies SIA chooses to lag
behind rivals in areas that don’t affect the
customer experience.

5. Fostering Both Centralized and Decentralized Innovation
Singapore Airlines follows a 4-3-3 rule of spending: 40% on training, 30% on revising
processes and procedures, and 30% on creating new products and services every
year.
SIA sustains innovation by using a structured, rigorous, and centralized process along
with an emergent, distributed, and local process. The former is the skeleton, the latter
the flesh and blood; together, they provide customers with a body of novel services at a
low cost.
The PID is their Centralized Innovation Hub
The Product Innovation Department (PID) follows a
highly structured process that includes opportunity
identification, concept evaluation, design and
development, and launch
SIA engages frontline employees, customers,
competitors, and the media to create multiple
feedback channels. A small number of executives
rotate in and out of the department every three
years.
SIA uses its distributed innovation approach
for efficiency.
The company fosters the idea that employees—
especially those in customer-facing functions such
as in-flight services, ground services, and loyalty
marketing—must innovate if SIA is to stay ahead.
Every function is responsible for improving its
services, and department heads must implement
new ideas out of their budgets.
Not only is this approach cost-effective, but the
process ensures that innovations are developed in
accordance with operational realities, making it
easy to implement them

6. Being Both a Technology Leader and Follower
If It doesn’t enhance customer experience don’t invest in it
• In 2007 SIA became the first to fly the A380. Introducing the A380 not only strengthened its
image as a pioneer but also gained enormous publicity for the company. People bid for seats
in one of eBay’s biggest auctions, and some paid $100,000 for a seat on the flight from
Singapore to Sydney. (SIA raised $1.3 million for charity in the auction.)
Some more innovations
• 1976 – Slumberettes
• 1991 – Telephone and Fax service on board
• 1998 - Website for booking tickets
In 2004, SIA outsourced many of its IT
functions—such as its data center and end-
user computing support—so it could focus
on its core business.

7. Slumberettes

8. The slumberettes debuted on 1 June 1976 on SQ713A to London, with 101
passengers in Economy and 10 in First Class. Shortly after its 2030 departure, six of
these retired to the upstairs Raffles Lounge for a snooze (only a short one, because
the flight landed in Bangkok at 2210, then again in Bahrain at 0140, Athens at 0625,
Paris at 0935 and finally London at 1040; non-stop flights only started in 1984).

9. The Empire Strikes Back
In December 1976, the Straits Times
reported that Singapore Airlines had
been ordered to cease marketing its
slumberettes by the UK Department of
Trade, citing complaints from “some
airlines” that this constituted “unfair
competition” to British Airways.
“The complaints said SIA had been
taking away many first-class
from other airlines like British Airways
with the provision of such services as
slumberettes in first class cabins”

10. One wonders on whose
authority the Department of
Trade suddenly decided to
curtail the attractions offered
by Singapore and why. Could
it have been: “If Britain
cannot run a profitable
international airline with lots
of happy passengers, we’ll
jolly well ensure that no one
else can?”
Letter to Editor
Times of London – Aug 1976

12. Using Standardization for Personalization
Most of SIA’s service processes are standardized. It leads to efficiency and “OK” service but does
not deliver a “wow” experience.
That’s why SIA combines standardization with personalization to delight customers.
HOW?
The airline institutionalizes personalization by creating a service culture that it
sustains through recruitment, training, and rewards.
• Birthdays and Preferences of customers from its CRM system
• Addressing Frequent Flyers by name
• Spontaneous in nature
Standardization actually enables personalization. Because SIA designs simple
processes and trains people well, following procedures becomes second
nature. Employees know their jobs so well that they have the mental space to
“read” customers and respond to them in creative ways.

13. How-to of Dual Strategies
• Harness the power of your people and culture
• Make good use of technology
• Utilize the power of business ecosystems
• Make investment decisions strategically (not financial
returns)