LOVE US, SIA, AS WE LOVE YOU
Tuesday • April 3, 2007
Liang Dingzi in TODAY
SINGAPORE Airlines' plan to carry out an extreme makeover of its premier class membership is raising quite a brouhaha. There is a flurry of comments on the Internet, mainly from customers who now find attaining Priority Passenger Service (PPS) status no more than a dream. The airline may also face a class-action suit by a group of businessmen and professionals over its plan to scrap life membership of its Solitaire PPS Club.
SIA's move should not even come as a surprise, when this follows the announcement early this year that the airline is spending $570 million to create, among other things, a "luxury suite" for first class passengers.
The reasons SIA gives for the changes to PPS qualifications reflect the vicissitudes of the business cycle. Its generous perks, added to its excellent service standards, have led to the overwhelming success of its programmes that are beginning to dilute its premium service. According to the airline, it finds the current PPS Club programme unsustainable in the future if it were to maintain exclusivity of the club.
SIA is facing the challenge that many American airlines have long encountered when generous frequent flyer qualifications lead to reduced yields and an overcrowding of its premium facilities by passengers who pay lower fares. Passengers who pay a premium to enjoy the exclusivity of priority services have reason to feel disconcerted that others who do not pay as much are enjoying the same perks. Some airlines known for indiscriminate passenger upgrading to fill up seats have lost genuine premium flyers who prefer the unsold seats around them to be kept vacant.
But let's not forget how such programmes started — at a time when the airline industry was hit by high fuel prices and an economic downturn. Airlines compete to attract passengers by offering frequent flyer perks that encourages customer loyalty. Many airlines were selling forward, bound by promises which are becoming costly to honour and, in good times as now, an opportunity cost when there's so much more to be gleaned from truly high-yield customers.
The Business Times quoted SIA spokesman Stephen Forshaw as saying: "The terms and conditions of the programme allow SIA to change any of the criteria at our sole discretion … And we've had good support from some PPS members who themselves have expressed concern that the programme has grown too big and it's becoming too easy to become a member, diminishing the benefits for those who are the real valuable customers."
When premium class passengers contribute some 45 per cent of its revenue, it is hard for SIA not to heed their sentiment. It makes economic sense that SIA should respond to market demands.
But Mr Forshaw's choice of words with reference to who the "real valuable customers" are, is rather unfortunate. I'm sure it's not intended to imply that the non-elite masses are not valuable customers, though the reality is that in terms of profitability, they are indeed worth less. Hence, the rationale behind SIA's new value-based PPS programme, replacing the current one based on miles or sectors travelled, and more stringent entry barriers.
Good business sense from the perspective of economics is one thing, but maintaining good business relationships is quite another. Since PPS programmes are rewards for loyalty, SIA would appear to have in good times ignored the support of loyal customers during hard times. What price loyalty then? It is precisely because it is difficult to equate it with a numerical value that economics alone does not constitute adequate business considerations.
Re-branding of one class should not be at the expense of another. For an airline like SIA, whose economy class offers no mean service, the challenge lies in being able to substantially differentiate its classes, while at the same time improving it across the board compared to other airlines.
SIA has been so successful in upgrading its economy class that it is facing an internal problem of blurring the class division and diluting its premium product. It has created new industry standards that in turn generate new customer expectations. Take, for example, its super economy class on its flights between Singapore and Los Angeles and New York. While other airlines are now promoting better perks, it would be a shame if SIA — taking the reverse course — were to lose its competitive lead and fall back to being just another airline.
The writer is a management consultant who is retired from the aviation industry.
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