An epic battle of the brands is brewing in Asia.
Ostensibly, it is about whether upstart, low-cost airlines can take on well-established giants. But, ultimately, the battle is about whether the best means for building long-term brands is price or whether it is service.
Singapore Airlines (SIA), Malaysia Airlines (MAS), Thai Airways International (TAI) and Cathay Pacific (CP) have fought for years to be the dominant carrier in Southeast Asia. The battle for the lucrative long-distance business traveler has primarily been based on award-winning service.
But, recently, a number of no-frills airlines, based on the Southwest Airlines/Ryanair model, have emerged. Will travelers continue to use the heavyweights for their service, or will they defect to low-cost airlines to save money?
SIA remains a model for anyone creating a service-based brand. Coming from a tiny country where you can hop a taxi from one border to another, SIA's strategy from its beginning in 1972 was to compete internationally on service and the customer experience.
Its deeply ingrained customer service culture begins with three job interviews and a tea party where managers evaluate social poise and confidence. A four-month training program is a cross between finishing school and boot camp. Instruction even covers the proper way to wash uniforms. A $50-million budget pays for an average of 17.2 training days annually. Attendants are even required to get teeth checked and cleaned every six months.
Employee communications that unify a staff from more than 25 countries are superb. SIA publishes a variety of department newsletters and a monthly companywide magazine that includes positive and negative comments from customers. Semiannual meetings discuss hard data related to sales, competition, yields and customer satisfaction.
SIA has also worked consistently to move beyond transportation to a “travel experience.” For special meals, first- and business-class passengers could “book the cook.” It was the first airline to offer even economy passengers free headsets, French wines and a choice of meals. It has long had the most modern airline fleet. It was the first to install lie-flat “spacebeds.” Even its hot towels have a distinctive aroma.
And it combined the service and the experience in one of the world's most enduring brand images, the Singapore girl in a sarong kebaya. Does any other airline have such a singular, pitch-perfect image?
Most important, SIA concentrated on measurement. It closely tracked the compliment/complaint ratio of independently generated comments per 10,000 passengers. Another important measure was customer satisfaction survey concerning 78 key performance indicators, with responses weighted to reflect real traffic data and nationality mix. Finally, an industry association tracked customer preferences across 11 airlines.
The result? High passenger loads despite higher-than-average fares and the stingiest loyalty program in the industry, and year after year of strong profitability, except when external catastrophes like SARS strike. If only other companies defined profits the way SIA does: “Profits are the applause we receive for providing consistent quality and service to our customers.”
However, threats from low-cost airlines are rumbling through the skies of Southeast Asia. SIA is about to start its cut-price offshoot called Tiger Airways, following in the footsteps of One-Two-Go by Thai Airlines. ValuAir, another Singapore startup, is poised for launch. Quantas's Jetstar also follows an if-you-can't-beat-them-join-them strategy. Other regional no-frills carriers include Pacific Blue Airlines, Tasman Express and Freedom Air.
But flying highest in this new category is AirAsia. CEO Tony Fernandez, with a background in the music industry, is a wily entrepreneur who started by mortgaging his house and now refuses to play by old rules. He has personalized his brand with a trademark baseball cap and 2 a.m. interviews with reporters as he cleans planes.
He has generated hundreds of thousands of dollars in free publicity by announcing $1.50 fares for one short hop. He has taken on the government and other powers that be in battles that win him popular support. He launched the world's first SMS ticket reservation service. He is working hard to expand his network with flights to more Asian countries.
He has launched strategic alliances with credit cards that can earn discounts and free flights. He has given flight personnel a stake in good service, with commissions on every drink sold. And he has a cheeky slogan that targets the Singapore girl: “There's a new girl in town, twice the fun and half the price.”
So the trumpets have blown, steeds mounted, lances are at the fore and a classic battle between service and price has begun. Will SIA be able to maintain its admirable service and enviable profits? Which of the no-frills airlines will collapse first? Will a low-cost airline suffer the same fate as ValuJet, which went into a tailspin after an operational error led to a crash?
It is a battle worth watching. Initially, not much will change. The Asian market is so large, and incomes rising so rapidly, that both the major and the upstart brands will enjoy initial success.
But wait till the next economic downturn. While the Singapore girl won't be charging for peanuts, she won't be serving champagne in economy, either. And a premier brand will become yet another me-too airline.