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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!!”