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Transforming an icon
HAVING kicked off a major shake-up of its business model in recent years, Singapore Airlines (SIA) has now entered the next phase of its transformation, which includes a thorough review of its operations to better position the group for the future. And as chief executive Goh Choon Phong put it in a recent message to staff, the group must be prepared for - and even embrace - potentially radical changes in work practices and processes.
In short, there are no sacred cows, even for one of the world's most recognised airlines; from its network to fleet to product and service - these will all be examined in great detail. "We're having a fundamental review of all aspects of our business," said Mr Goh, who was awarded Outstanding Chief Executive of the Year (2016) at this year's Singapore Business Awards (SBA). "That covers revenue generation, organisation structure, business processes and ensuring we have a competitive cost structure for the future."
For starters, a transformation office - which reports to Mr Goh - has been set up to conduct a wide-ranging review across divisions to implement innovative solutions and make the group more nimble. Staff are also encouraged to contribute ideas to management.
To boost revenue on the commercial side, a specialised pricing department has been formed to price fares optimally on a global basis and adjust fares swiftly to match market demand, while a new revenue management system will leverage algorithms to forecast demand.
"We're reviewing the entire way we manage different approvals (and) workflow, with the aim to eliminate any inefficiencies," he said. "Accompanying that is the organisational structure. As you remove some of these, a flatter organisation might be better, and allow for more efficient decision-making. . . These are things we're looking at and we're going to leave no stone unturned."
Since taking the helm in 2011, Mr Goh has made strides in implementing SIA's strategic initiatives to build the foundation the group needs to counter the challenges in today's operating environment. One could also say that he took the hot seat at one of the most trying times in the airline's history with threats coming fast and furious on different fronts; these range from the Gulf carriers on the premium end to rapidly expanding budget carriers that compete with SilkAir, Scoot and Tigerair.
Overcapacity remains a challenge for airlines in South-east Asia, putting intense pressure on yields. In the first half of the group's financial year, yield fell 2.9 per cent in the face of aggressive pricing from competitors and uncertain global conditions.
The new playing field makes the group's transformation necessary and critical. "Any organisation which is big and has existed for as long as we (have), there is a certain inertia," Mr Goh said. "That's the reason we want to get everybody motivated to participate in this."
"Data is something we have been paying a lot of attention to," he went on to say, but added that the group could do even more in this respect. Data is typically used in three areas - revenue generation, customer service and technical data. "All three are things we are concurrently exploring with different people. We're putting a lot of effort into this but it's still at its infancy stage," he added. For instance, where engines are concerned, data can be crunched for predictive maintenance, allowing the airline to forecast when the engines are due for maintenance. The alternative is having to ground planes at the last minute when issues crop up, delaying flights and inconveniencing passengers.
SIA is also poised to roll out further enhancements to its website and mobile app, where it has adopted a "fail fast" mentality, namely introducing new elements and tweaking them along the way. "It's not something that comes naturally to us," he acknowledged, noting that the group is well-known for rigorous analysis before committing to a course of action. (And perhaps no one realises this better than Mr Goh, who has been with the airline since 1990). "We must move away from that," he asserted. "And we are beginning to do so, especially where technology is concerned."
Even with this new review gathering momentum, the airline group has a number of other key strategic initiatives underway concurrently. A portfolio of carriers catering to different travel segments gives it more flexibility to match the right vehicle to the right destination. For instance, Scoot has taken over services to Jeddah and Hangzhou from SIA and SilkAir respectively.
Its short-haul budget carrier Tigerair is being folded under medium/long-haul budget arm Scoot, a process slated for completion in the second half of this year. Efforts are underway to integrate both under one air operator's certificate and a single brand, which will ultimately benefit the group, Mr Goh reckons. "With this integration, Tiger will be able to much more effectively feed, and defeed, from Scoot's operations for long haul," he said. "Much like SilkAir and SIA, which has been a very successful model." Connecting traffic between Scoot and Tigerair is currently under 5 per cent and there is room for this to grow. "For SilkAir (and SIA), it's more like 40 per cent, so there's huge potential to be tapped," he added. Scoot is also launching long-haul flights from June - starting with Athens - at a point where other low-cost carriers (LCCs), such as AirAsia X, are spreading their wings further afield too. "Even the Middle-Eastern carriers are commenting about the threat of long-haul LCCs to them," he noted.
Over in India, the easing of regulations will mean that SIA's joint venture airline, Vistara, will be able to launch international flights, which could take place within the next couple of years. Previously, India's 5/20 rule limited young airlines to domestic operations for five years and required a fleet of 20 aircraft before an airline could fly overseas. With this regulation being eased, it will mean access to lucrative routes out of India and potentially onwards to markets such as Europe.
The SIA group's presence in South-east Asia will also allow it to feed connecting traffic to New Delhi-based Vistara. "India holds huge potential for traffic growth going forward, and we want Vistara to succeed in its own right as an airline based in India," said Mr Goh. "We see there's going to be good synergies between Vistara based in India and us, in Singapore. We believe as Vistara grows bigger, this will establish even greater synergistic commercial value for both parties."
India isn't an easy market to operate in, he acknowledged, but the group is in it for the long haul, as is its joint venture partner, Tata.
Meanwhile, SIA has also been trying to drum up additional revenue streams, through the Airbus Asia Training Centre at Seletar Aerospace Park for instance, which was set up in conjunction with the European planemaker. Today, the centre has over 30 customers as it seeks to ride on the growing demand for pilots.
By the end of this year - a year which marks SIA's 70th Anniversary - the group will launch new cabin products for its Airbus A380 aircraft, a decade after it was the launch customer for the double-decker jumbo jet.
While competitors such as Qatar Airways and Emirates have been rolling out new premium seats of their own, Mr Goh is confident that SIA's new seats will be met with approval from its customers.
SIA has also invested in fuel-efficient aircraft to expand its network with new destinations and to phase out older planes. It has placed sizeable orders for next-generation aircraft such as the Airbus A350 - including the ultra-long range variant to restart direct flights to New York - the Boeing 777-9 and B787-10. A strong network and seamless connectivity is vital to fend off rivals and maintain a competitive edge, Mr Goh believes.
Some of these initiatives may take more time to gain traction, but ultimately, they are aimed at cementing a robust foundation for SIA and developing new engines of growth.
Spearheading these efforts have earned Mr Goh awards such as SBA's Outstanding Chief Executive of the Year (2016) and the Dwight D Eisenhower Global Innovation Award by the US-based Business Council for International Understanding. But he is quick to point to the staunch support of his staff and the SIA board as a factor in helping to set this icon on its new course.
"The SIA that I grew up in has always focused on Singapore, organic growth, on the core business," he said. "As we looked at how the environment has changed, and how we needed to reposition ourselves. . . it was my concern whether our people would be convinced to go along with it and support it." "I have to say, I'm pleasantly surprised (by) how committed our people are in embracing this new vision - that it is necessary for us to position ourselves for the future."
In today's dynamic aviation industry, fraught with intense competition and emerging technologies, a leader has to have bold vision, he noted. "But that's not enough. It can only be successful if the people working in the organisation believe in (the initiatives), are supportive of those initiatives and are willing to put in the effort to make it work."