Wirraway
21st Jun 2003, 13:41
Singapore "Straits Times"
http://straitstimes.asia1.com.sg/commentary/story/0,4386,195679,00.html?
SIA should leave budget airline to the entrepreneurs
By Andy Ho
SINGAPORE Airlines is toying with the idea of setting up a discount 'airline-within-an-airline', but experience elsewhere bodes ill for it.
As Professor Andrew Inkpen, a business professor at the Nanyang Technological University, said in a letter published in this newspaper on Wednesday, big American carriers like United and US Airways have all 'tried and failed to create viable low-cost competitors'.
None could match no-frills leader Southwest Airlines, now in its 30th consecutive year of profitability. The behemoths failed in their 'me too' ventures because their huge bureaucracies and expensive cost structures translated into cumbersome management processes.
These inevitably transferred over into their subsidiaries. In the same way, Prof Inkpen fears, SIA's full-service culture which charges premium prices will seep into its discounter.
How then can it offer the lowest walk-up, on-demand fares, at the same time as the high service that consumers have come to expect?
Successful discount airlines have all been set up by private entrepreneurs who infuse them with distinctive cultures. Southwest, for example, now employs more than 30,000 people who maintain a sense of humour and lots of spirit, something instilled by its legendary chairman and co-founder Herb Kelleher.
In a business judged by customer service, employees at Southwest come first, customers second.
Mr Kelleher despises board meetings and prefers to mix with his employees and customers. The arm-wrestling, chain-smoking, whisky-drinking and salty-tongued man who raps in music videos, and uses humour to run his airline, has spent a lifetime making sure employees believe in him and the business.
The walls at its Dallas headquarters are plastered with framed snapshots of employees at company barbecues and Halloween parties. A lot of time and money is spent on hiring and promoting candidates who fit into the company culture but retain their individualism.
Mr Kelleher has asked pilots to drop their trousers during job interviews to see if they have a sense of humour, and frequently smothers employees - male and female - with hugs and kisses, all without getting complaints in return.
Employees know the company's core values and build everything around those values: Great employees offer great service to customers - and the rest takes care of itself.
If SIA's handling of the current pay dispute with its pilots is any guide, it is as far removed from Southwest culturally as east is from west.
Not that the big carriers will listen: In the United States last month, Delta launched its discounter called Song. This, after an earlier attempt called Delta Express did not exactly succeed.
Song is now going after the routes of upstart discount carrier JetBlue. Southwest's best imitator to date, JetBlue was also set up not by some big carrier but by millionaire David Neeleman.
Last year, the three-year-old discount airline chalked up US$55 million (S$95 million) in profits. After going public a little over a year ago, its market capitalisation has grown to US$1.7 billion, or as large as Delta, United and American combined.
What is so special about the upstart? At the end of every flight, all 'crew members' - the term 'employee' is banned - help prepare the plane for its next trip. Even the pilots help haul rubbish out, vacuum the aisles and clean up the restrooms.
After all, Mr Neeleman, who is worth more than US$215 million and flies on his own planes at least once a week, chips in unabashedly all the time. He can be seen tugging carry-on luggage from overhead bins for aged fliers, running through empty planes to put seats upright, or on all fours retrieving newspapers and magazines strewn underneath.
No mere egalitarian tokenism, this approach allows JetBlue to turn planes around in 35 minutes - or half the time of other airlines - so it can sell more flights.
Using only new, fuel-efficient planes that cost less to maintain, and electronic ticketing and Internet-based purchasing to reduce labour costs, JetBlue flights can be offered cheap, pre-assigned - and with comfort.
There is no down-market feel about its 24 channels of satellite TV and all-you-can-eat potato chips and other inexpensive snacks. Having flown once on a urine-soaked fabric seat, Mr Neeleman has seen to it that only leather upholstery is used for all JetBlue seats, which come only in one class - coach.
Could an SIA man run his discount airline like a Kelleher or a Neeleman? Probably not. SilkAir is no comparison as it is still essentially SIA-regional as opposed to SIA-international.
Market talk has it that at least one individual has expressed interest in running a discount airline, and there might be others who will show their hands later. SIA chairman Koh Boon Hwee said in its internal magazine last year: 'Singapore has built its reputation on an open economy and free trade. If someone were to apply for a licence to operate a new airline in Singapore, it would be very difficult for the Government to say no.'
A discount airline is an idea whose time has come - but not for SIA. Hopefully, it will not try to block such an application in the way Malaysian Airlines tried with the now-profitable AirAsia, South-east Asia's first real discount airline, that has been flying out of neighbouring Kuala Lumpur for about a year now.
The behemoth must get its own house in order - and let the entrepreneurs deal.
=========================================
http://straitstimes.asia1.com.sg/commentary/story/0,4386,195679,00.html?
SIA should leave budget airline to the entrepreneurs
By Andy Ho
SINGAPORE Airlines is toying with the idea of setting up a discount 'airline-within-an-airline', but experience elsewhere bodes ill for it.
As Professor Andrew Inkpen, a business professor at the Nanyang Technological University, said in a letter published in this newspaper on Wednesday, big American carriers like United and US Airways have all 'tried and failed to create viable low-cost competitors'.
None could match no-frills leader Southwest Airlines, now in its 30th consecutive year of profitability. The behemoths failed in their 'me too' ventures because their huge bureaucracies and expensive cost structures translated into cumbersome management processes.
These inevitably transferred over into their subsidiaries. In the same way, Prof Inkpen fears, SIA's full-service culture which charges premium prices will seep into its discounter.
How then can it offer the lowest walk-up, on-demand fares, at the same time as the high service that consumers have come to expect?
Successful discount airlines have all been set up by private entrepreneurs who infuse them with distinctive cultures. Southwest, for example, now employs more than 30,000 people who maintain a sense of humour and lots of spirit, something instilled by its legendary chairman and co-founder Herb Kelleher.
In a business judged by customer service, employees at Southwest come first, customers second.
Mr Kelleher despises board meetings and prefers to mix with his employees and customers. The arm-wrestling, chain-smoking, whisky-drinking and salty-tongued man who raps in music videos, and uses humour to run his airline, has spent a lifetime making sure employees believe in him and the business.
The walls at its Dallas headquarters are plastered with framed snapshots of employees at company barbecues and Halloween parties. A lot of time and money is spent on hiring and promoting candidates who fit into the company culture but retain their individualism.
Mr Kelleher has asked pilots to drop their trousers during job interviews to see if they have a sense of humour, and frequently smothers employees - male and female - with hugs and kisses, all without getting complaints in return.
Employees know the company's core values and build everything around those values: Great employees offer great service to customers - and the rest takes care of itself.
If SIA's handling of the current pay dispute with its pilots is any guide, it is as far removed from Southwest culturally as east is from west.
Not that the big carriers will listen: In the United States last month, Delta launched its discounter called Song. This, after an earlier attempt called Delta Express did not exactly succeed.
Song is now going after the routes of upstart discount carrier JetBlue. Southwest's best imitator to date, JetBlue was also set up not by some big carrier but by millionaire David Neeleman.
Last year, the three-year-old discount airline chalked up US$55 million (S$95 million) in profits. After going public a little over a year ago, its market capitalisation has grown to US$1.7 billion, or as large as Delta, United and American combined.
What is so special about the upstart? At the end of every flight, all 'crew members' - the term 'employee' is banned - help prepare the plane for its next trip. Even the pilots help haul rubbish out, vacuum the aisles and clean up the restrooms.
After all, Mr Neeleman, who is worth more than US$215 million and flies on his own planes at least once a week, chips in unabashedly all the time. He can be seen tugging carry-on luggage from overhead bins for aged fliers, running through empty planes to put seats upright, or on all fours retrieving newspapers and magazines strewn underneath.
No mere egalitarian tokenism, this approach allows JetBlue to turn planes around in 35 minutes - or half the time of other airlines - so it can sell more flights.
Using only new, fuel-efficient planes that cost less to maintain, and electronic ticketing and Internet-based purchasing to reduce labour costs, JetBlue flights can be offered cheap, pre-assigned - and with comfort.
There is no down-market feel about its 24 channels of satellite TV and all-you-can-eat potato chips and other inexpensive snacks. Having flown once on a urine-soaked fabric seat, Mr Neeleman has seen to it that only leather upholstery is used for all JetBlue seats, which come only in one class - coach.
Could an SIA man run his discount airline like a Kelleher or a Neeleman? Probably not. SilkAir is no comparison as it is still essentially SIA-regional as opposed to SIA-international.
Market talk has it that at least one individual has expressed interest in running a discount airline, and there might be others who will show their hands later. SIA chairman Koh Boon Hwee said in its internal magazine last year: 'Singapore has built its reputation on an open economy and free trade. If someone were to apply for a licence to operate a new airline in Singapore, it would be very difficult for the Government to say no.'
A discount airline is an idea whose time has come - but not for SIA. Hopefully, it will not try to block such an application in the way Malaysian Airlines tried with the now-profitable AirAsia, South-east Asia's first real discount airline, that has been flying out of neighbouring Kuala Lumpur for about a year now.
The behemoth must get its own house in order - and let the entrepreneurs deal.
=========================================