Thoughts on SIA’s approach to cost cutting

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.

OT:  Regarding back-office technologies- personally, I love flying SIA but would never want to work for them, because of the horror stories I’ve heard from people who have about bad management and an unwillingness to invest in their staff.

I had a friend who worked in SQ administration, and his gripe was that they were still using Office 2003 on their computers (this was in 2013). To me that’s just ridiculous- I think one of the hallmarks of a bad company to work for is that they’re not willing to invest in the productivity of their employees. Try switching to a 10 year old version of Office and tell me how productive you are. Similarly, another friend who worked in SQ public affairs said that to manage their FB account, she had to bring her own laptop to work because SQ’s corporate network blocked all social media sites (presumably to stop employees from goofing off) and she wasn’t able to get approval from IT to get it unblocked. Crazy.

Back on topic: One thing the article didn’t touch on entirely was what SQ does to keep costs low on the customer-facing side.

I thought it would be a good time to highlight several service changes implemented on SQ based on my observations from flying them

On F&B

• SQ’s reduced service supper menu has attracted its share of detractors. The rationale behind this was that passengers want to have a quick meal then sleep. But what about those who don’t? In F on competing airlines like Cathay etc,
• I’ve noticed that stewardesses now serve 1/4 full champagne as the welcome drink, instead of 1/2 full glasses in the past. In a way this does make sense, in that there isn’t a whole lot of time to enjoy that welcome drink and whatever they can’t finish before takeoff gets chucked
• SQ Y downgraded their ice cream from Haagen Daaz 4-5 (?) years ago to Cornetto and Kit Kat Cones today. Some say Magnum is still served on Europe legs, but that’s still a step down from what came before
• Crackers are no longer offered with SQ Y meals. Yes, I noticed
• Jam no longer comes standard with bread, but is available on request
• Evian bottled water used to be available in both the F and J lounges. Now it is only available in the F lounge and the J lounge gets no-brand water

On Amenities

• The SQ-Givenchy partnership seems to be over. The PJs in F and the amenities kits in Y are no longer Givenchy-branded. I am skeptical as to whether this really affects quality, in that the Y amenities kits couldn’t have cost more than a couple of dollars to produce and the F PJs are as comfortable as ever, leading me to believe this was more of a marketing partnership than a genuine case of SQ shelling out more for Givenchy-standard stuff
• Years ago, SQ would have Ferragamo amenities kits, even in the bathroom of the lounge. Then those kits disappeared, and now amenities kits are only available onboard
• SQ stopped offering amenities kits in J a long while ago- which is something I do not understand at all. I don’t think customers choose airlines by their amenities kits (so maybe that’s why they did it) but I always thought they served as good branding tools that the customer takes home even after the flight. And given that most of the products in the kit are co-sponsored by some luxury toiletries brand which wants to market their products to well heeled customers, what’s the harm?

I’m sure this list isn’t comprehensive, and people can point out many other tangible ways in which SQ has tried to trim the fat. Not all of these are complaints per se. Sometimes it makes sense to cut. If feedback shows that customers don’t use the jam,  you stop making it standard issue and have it available on demand to those who want it. And to SQ’s credit, I think they’re responsive enough to bring back certain items if customer response is negative. At one point they announced that they were doing away with physical magazines to cut weight from the plane and that passengers could instead access magazines from the IFE system. Well, a lot of people (myself included) just prefer to read physical magazines, so that program was quietly killed after a while and physical magazines are back.

But the point I’m trying to make is that SQ needs to be aware that the landscape is getting more and more competitive out there and although no one is going to pick an airline based on the single fact the toilet paper is now 2 ply instead of 3, all the small touches add up.  SQ already charges a premium over its competitors, and for that, customers expect premium features. Offering a small supper service on a long haul F flight just feels cheap, especially when the Big 3 Middle East airlines (and even regional competitors like Cathay) go out all the way.

SQ is currently in the process of designing its next generation cabin products. One thing that we definitely won’t be seeing is showers. In a way, this shouldn’t be surprising. Apart from maybe SQ Suites, I struggle to think of a time that SQ has ever launched a truly revolutionary feature, one that made everyone else sit up and say “wow, we need to copy that”. Everything about SQ’s approach reeks of conservatism (compare an SQ lounge to one of Virgin’s Clubhouses and you’ll know what I mean) and pragmatism.

SQ has instead chosen to focus on the little details and small things. Its latest ad campaign- The Lengths We Go To, summarises as much. But if SQ wants to call attention to the small things, it seems somewhat unwise for them to cut back on said small things.  Because people do notice, as the above list shows. The cabin crew feel it too- if you want your cabin crew to have pride in your airline, you need to give them the right tools for that (look at where the US legacy airlines have gone with this and tell me if it’s easy to be proud of your airline when they’re basically a low cost carrier with assigned seating)

Cost minimization is firmly entrenched in SIA’s leadership and that’s unlikely to change. My only hope is that they realise that it’s the small things, sometimes, that passengers notice the most.