Floored by COVID-19, Can SIA Soar Again? Fate of Singapore’s Aviation Hub Rests on It
Just when the rules of commercial air travel were laid out in the dawn of the jet age in the 1970s, Singapore Airlines (SIA) barged its way into the international arena in the rudest of ways.
At a time when the bread thickness and the amount of cheese used in inflight sandwiches were dictated, when the reclining angle and legroom for customers were strictly regulated, SIA gave alcohol and headsets free of charge to its economy class passengers
SIA’s determination to pursue its own rule-breaking path of “innovation” resulted in a temporary falling-out with the International Air Transport Association (IATA), which had set these rules.
And in the 1980s, more than a decade after SIA’s split from the Malaysia-Singapore Airlines in 1972, there were also stories of German police raiding SIA’s offices for offering tickets at prices so low they were allegedly illegal.
SIA called a press conference to condemn the police actions as too “extreme”, after which the raid stopped.
Elsewhere, Amsterdam airport authorities would question SIA passengers about how much they had paid for their tickets, effectively delaying SIA flights at the boarding gate.
SIA went to the Singapore Government to call for something similar to be done to the Dutch flagship carrier KLM here.
The harassment of SIA’s passengers ceased after Changi Airport authorities stopped and checked one flight of KLM passengers.
GrEAt wAy tO fly
To the global commercial flight industry, SIA was the enfant terrible back then.
But to passengers who sensed the truth in its motto “a great way to fly”, Singapore’s flag carrier was a darling that stood out from the pack. To Singaporeans at large, SIA’s fortunes put the country on the world map, and came in tandem with the rise of Changi Airport as an aviation hub.
“You may have never been to Singapore. But you would have heard of SIA, or flown with them before,” said Priveen Raj Naidu, an independent aviation analyst.
But almost overnight, the good times have become a distant memory as the Singapore icon – which had endured the 9/11 terrorist attacks in the United States in 2001 and the severe acute respiratory syndrome (SARS) epidemic in 2003 – faces a storm unlike any other it had encountered before.
COVID-19 had hit SIA like a bolt from the blue, and at a bad time: It was already facing significant challenges to its competitiveness before the virus struck Singapore eight months ago.
The national carrier’s chief executive officer Goh Choon Phong called it “the greatest challenge in the SIA’s Group’s existence” when he wrote to staff in March via an internal memo, announcing a round of costcutting measures which have gotten even more drastic in recent months. As international travel came to a virtual halt due to the pandemic, SIA recorded its first full-year loss of S$212 million (FJ$330m) for the 12 months ending March 31, after staying profitable throughout its 48-year history.
Earlier this month, SIA Group announced it will be cutting around 4,300 positions, affecting around 2,400 staff, including ground staff, pilots and flight crews — on top of other cost-cutting measures.
With COVID-19 now clipping SIA’s wings more severely than its closest rivals and imitators, the airline cannot simply weather the storm by hunkering down, aviation insiders said.
The pandemic has forced all of aviation to change, analysts said.
Long-haul wide-body flights had been the first to be cut when borders were closed, business travellers are finding new ways to work crossborder amid national lockdowns, and packed budget flights may not be possible in a coronavirus-fearing world.
These traditional pillars of SIA’s growth, already under strain previously, are now being sorely tested, said analysts.
An initial runaway successs, but rivals caught up
SIA will have to become a game changer like it was before if it is to fly high again after the worst has passed.Institute of Policy Studies senior research fellow Dr Faizal Yahya said: “The fact is SIA had succeeded (thus far), despite the twin Gordian Knot of the lack of domestic market and oil resources.
“Their competitors have these in abundance, therefore, SIA’s strategy has to evolve beyond the premium passenger segment.”
In response to queries about its post-pandemic outlook, an SIA spokesman said that it is unclear when the COVID-19 outbreak will be brought under control.
“But when it does, our customers can be sure that Singapore Airlines will be there to welcome them back on board and deliver, once again, the exceptional service that they have come to expect and are familiar with,” said the spokesman.
Before COVID-19 struck, SIA was already facing mounting competition from its rivals.
In 2014, Professor of Strategy Loizos Heracleous of Warwick Business School and Professor of Marketing Jochen Wirtz at the National University of Singapore (NUS) undertook a study to understand how SIA was able to achieve consistent profitability and zero annual operating losses within “an unforgiving, hypercompetitive industry environment”.
Citing figures from IATA, the study said the global airline industry between 2001 and 2011 had destroyed shareholder value overall and had not earned a real rate of return on capital, accumulating a staggering US$31.7 billion (FJ$65bnm) in losses in that time.
Yet, SIA was able to become one of the highest performing and respected airlines in the world through its ability to transcend “organisational paradoxes,” said Proffessor Heracleous and Prof Wirtz.
Essentially, SIA was able to provide service excellence and innovation, while being a low-cost leader.
This is a paradox since the former requires significant resource investment, which precludes the latter.