Commentary: More than S$600 for first class meals? SIA isn't for everyone but that's just fine
Recent initiatives by the airline, such as the Restaurant A380@Changi, remind us how SIA can’t lose sight of the premium market, says Dr Faizal Yahya from the Institute of Policy Studies.
SINGAPORE: The importance of Singapore Airlines' (SIA) premium brand can be seen through the promotional events that it sponsors to attract foreign tourists to Singapore such as the F1 Grand Prix.
This premium brand perception is formed in the minds of SIA’s passengers through the safe track-record of the airline, interior cabin of its aircrafts, the uniforms of its crew, menu selection, meal service, in-flight entertainment, in-flight announcement and the overall quality of service.
The COVID-19 pandemic has unfortunately hampered the opportunities passengers may have to enjoy some SIA’s world-class offerings since air travel has been mostly disrupted and, more recently, limited to business travel.
Against this backdrop, SIA recently attempted to bring selective offerings from the airlines to passengers even though they can’t travel at present.
DINING IN STYLE
Three initiatives it launched in this regard were the opportunity to have lunch on-board an Airbus A-380 jumbo jet (Restaurant A380@Changi), home deliveries of meals from its first class and business class menus as well as a tour of SIA’s training facilities.
Some of these were met with mixed reactions, especially the prices of its on-board and home-delivered meal options.
For example, the airline offered exclusive first class meals for home deliveries at S$498. This was criticised online as being elitist and disconnected with the “realities on the ground”, especially during these hard times where employment and income loss is common.
From SIA’s perspective, these in-flight and delivered meals are a critical component of the airline’s marketing strategy targeted at the premium air travel passenger market. The strategy keeps SIA's image as a premium airline alive in the public mind when the skies are almost out of bounds.
The strategy seemed to work as all of its 900 seats that were available for the Restaurant A380@Changi were sold out within 30 minutes after bookings opened on Monday (Oct 12).
HOLDING PREMIUM TO ITS CORE
This highlights why the premium segment of air travellers is important to full-service airlines like SIA. Efforts to cultivate this market are crucial especially during the pandemic with border closures and flight reductions.
So efforts such as the Restaurant A380@Changi to help brand loyalty and retention are important for SIA as this is a market and identity it cannot lose sight of.
For SIA, even the emergence of low-cost carriers (LCCs) over the years did not compel it to dilute the premium SIA brand to compete with this new competition, such as several other full-service carriers (FSCs) did.
North American FSCs, such as American Airlines, Delta Air Lines and United Airlines, began unbundling ancillary services on their flights to charge segmented fares beyond seat charges as a strategy to compete with LCCs.
This strategy also created ancillary revenue streams generated for items such as baggage fees, extra legroom products as well as food and beverage.
Other FSCs such as British Airways, Air France, KLM, Lufthansa and Alitalia have offered Hand Baggage Only (HBO) fares on their North Atlantic Routes.
Instead, SIA chose to start another brand called Scoot to deal with LCCs while preventing the cannibalisation of SIA's premium branding.
HOLDING ON TO PREMIUM BRANDING
The importance of premium passengers to SIA is further seen during the current recession as employers and companies tighten up on business travel, which is shrinking the premium passenger market for airlines.
“With the proliferation of Zoom meetings and most corporate employees working remotely, business travel in particular has been sharply curtailed in 2020,” a recent report by Investopedia stated, quoting a study by Trondent Development Corporation.
The same report reveals that although business travellers account for 12 per cent of airline passengers they usually provide double the amount of profitability with their contribution to revenues as high as 75 per cent for some flights.
In line with these trends, most FSCs are likely to enhance their business and premium economy classes, perhaps even cutting back on its first class offerings, and enable them to be more widely available to bridge the gap between business and economy travel.
To evolve with changing market demands, SIA has reduced its first class cabins to just one row of seats on its newest Boeing 777-300ERs aircraft and allocated more resources to developing seating capacity for the business class market segment.
AHEAD OF THE PACK
While some airlines chose to compromise on their premium branding, SIA is unlikely to waver from this strategy although it is relatively high-cost and requires significant investment, careful management and detailed implementation of programmes.
Since commencing operations in 1972, SIA has been able to successfully create and project a premium brand identity.
Its strategy has been based on innovation, using cutting-edge technology, genuine quality and excellent customer service as it pioneered services like meal options, free alcoholic and non-alcoholic beverages, complementary headphones, scented hot towels, personal entertainment systems, and video-on-demand in all of its flight cabins.
SIA further differentiates its brand experience through various in-flight perks such as Book the Cook, in which premium passengers can choose their favourite gourmet main course from a selection of dishes prepared by the airline’s International Culinary Panel before their flight.
In addition, SIA’s menus are also specially created to reflect the culinary influences of the regions it flies to. Other premium perks included the availability of certified Air Sommeliers to advise passengers on the art of food and wine pairing.
ALLURE OF PREMIUM TRAVEL
SIA also reinforces its premium branding by a strong frequent flyer component.
The first class market segment has a strong frequent flyer component for some airlines like SIA, and the first class allure is utilised by SIA as an opportunity to upgrade from business class.
As part of its marketing strategy as well as to retain customer loyalty and reduce attrition, SIA leverages on this aspirational aspect of premium travel because its frequent flyers can use the miles to access long-haul premium cabin award seats.
SIA also makes extensive use of a “wait list” where passengers express their interest in an upgrade in travel class and the airline can selectively approve individual passengers’ request, irrespective of the wait list order.
This balances revenue management with a measure of how valuable the passenger. The airline decides who should be rewarded.
It is unlikely that SIA is out of touch or disconnected from its targeted premium market as an airline company. SIA started as a fully-branded product that focused on the premium travel market and continues this business model until today.
A PROFIT-MAKING ENTITY BEFORE ANYTHING
Although many would consider it the national airline because it is majority-owned by Temasek Holdings, its basic premise has to be a self-sustaining and revenue generating entity for its shareholders. The premium segment is where most revenues are derived from.
Its promotion of premium branding may attract criticism as it seems to favour the wealthy.
Despite the criticism, the SIA premium brand needs to be sustained and reinforced because, after COVID-19, the airline will be a vital tool that would aid the recovery of the aviation sector and maintain Singapore’s air connectivity through Changi Airport.
The Singapore aviation hub strategy requires an SIA that is able to not only maintain its premium branding but also to keep intact its core capabilities vital for the recovery of related industries and the economy as a whole.
SIA’s contribution to the nation is much more than how much it retails its in-flight food. It should be measured by how many Singaporeans’ tables it puts food on.
Dr Faizal Yahya is a Senior Research Fellow at the Institute of Policy Studies, Lee Kuan Yew School of Public Policy, National University of Singapore.