The times they are a-changing: Singapore Airlines may reintroduce executive economy

Photo courtesy Singapore Airlines

Photo courtesy Singapore Airlines

THE word goes round that Singapore Airlines (SIA) may be introducing premium economy, or rather reintroducing executive economy, pending the outcome of a secret study. Ever since the Singapore flag carrier did away with the short-lived though allegedly popular executive economy on its non-stop services from Singapore to New York and to Los Angeles when they were converted into exclusive all-business class flights, SIA has been adamant about not going down that road again. The non-stop services to New York and Los Angeles have ceased operating since the end of last year.

However, any turnabout if it happens should not be a surprise. One cannot turn a blind eye to the reality of the changing business landscape, and certainly SIA cannot ignore the apparent success of rival Cathay Pacific’s premium economy. It is quite normal for any business entity, and a visionary one at that, to change course to stay in the competition.

So it was when SIA turned its nose up on the budget travel business, challenged by Singapore’s first budget carrier Valuair which was founded in 2004 by no other than former SIA chairman Lim Chin Beng who together with predecessor J Y Pillay were largely credited for the airline’s astronomical growth in its early days and its reputation as one of the world’s best loved airlines, ranking it amongst the industry’s top earners. Today SIA is a majority stakeholder of Tigerair besides its wholly owned budget subsidiary Scoot. The threat posed by budget carriers has all but broken down the belief that they were different and exclusive markets for legacy and budget operators. SIA could not remain outside the circle when Qantas set up Jetstar Asia based in Singapore itself and as Malaysian carrier AirAsia spread its wings across the region. It could even be said to be a late starter.

When the business class first emerged in Europe, Swissair which was in many ways like SIA having earned the reputation for efficiency and good service, and which some observers might even suggest was an early model that SIA might have tried to emulate, similarly rejected the concept. But it changed its tune when the trend became entrenched. The national carrier of Switzerland ceased operations in 2002, and today’s Swiss International Air Lines is a subsidiary of the Lufthansa Group.

Whether SIA will eventually put premium economy on its flights will depend on how it perceives air travel will trend as befitting its modus operandi and situation of time and place. It would be unfair to suggest that SIA should ape Cathay, in the same way that Cathay cannot be faulted for not jumping on the budget travel bandwagon – at least not for now – although it has expressed dissatisfaction that Qantas and China Eastern Airlines should be given the licence to jointly operate Jetstar Hong Kong in spite of its insistence that Hong Kong cannot sustain budget operations.

Timing has plenty to do with Cathay’s successful implementation of its premium economy. As the global economy continues to wallow in uncertainty but with some signs of recovery, Cathay is catering to hitherto business class travellers who may otherwise downgrade to economy for not wanting to spend as much and to those economy class travellers who may want a better product but are not willing to pay that much more for business class. Yet Cathay is not the only airline that has introduced this sub-class of travel. EVA Air pioneered this in the 1990s on a very limited basis. The difference is that Cathay has made premium economy a different product – and a class of its own – rather than one that is only marginally better more in name than in the actual product that could be nothing more than just slightly wider seats further up front, orange juice served in glasses instead of plastic cups, and on the ground priority check-in and boarding. In a way, Cathay makes the difference visible, something that we can expect SIA to match or do better if it decides to go down that road.

As a leading premium carrier making about 40% or more of its profits from the upper classes of travel, SIA has been banking on the good times returning when the premium economy may well become redundant. The downside is that if premium economy is proven to be too good, it can grow at the expense of the business class and impact the overall yield negatively over the long term. For an airline that wows in the upper classes and provides an adequately impressive economy class service, this may result in dilution and compromises across the classes that will narrow the differentiation so critical in the sale pitch. The question is whether SIA can afford to wait – or has it already waited too long – to see how the landscape pans out while the rest of the industry moves in the direction of premium economy. Historically, the business class has replaced the first class for some airlines and for some routes even for those which generally offer a three-class configuration.

Geographically, there is a place issue. The premium economy is a more likely product for the long-haul routes. It may make sense for an airline like SIA which is largely a long-haul operator although the recent global economic crisis has increased its focus on the mid-range Asian market. With the competition intensifying between Changi Airport and Dubai International Airport for the Europe run, and between Changi Airport and Hong Kong International Airport as an Asian gateway for trans-Pacific traffic, SIA’s modus operandi in this connection may to some extent depend on the fortune of Changi as a hub airport, noting that Changi has in recent years been seeing higher growth presented by budget carriers than by legacy airlines. SIA’s cessation of its non-stop flights to New York and to Los Angeles may be a case in point.

In the end, it all boils down SIA;s vision of the kind of airline it will be in the years ahead against a constantly changing landscape. It seems a superfluous question, but it is a necessary soul-searching exercise. As the airline prepares to announce its full year result ending March 31, with little to celebrate judging by the penultimate quarter performance and the slow take-up in the closing months, SIA may yet excite with announcement of new initiatives moving forward. One of these could be the re-introduction of its executive economy

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

One Response to The times they are a-changing: Singapore Airlines may reintroduce executive economy

  1. Singapore Airlines are expert in this field as they having great experience. One must trust them!

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