What defines a best airline?

What defines a best airline, considering the different surveys that rank them? Conde Nast Travel has just released its readers’ choice of the best in 2017, and it is no surprise the list is made up of Asian, Middle East, European and SW Pacific carriers.

Courtesy Air New Zealand

Of course, it depends on the readership, but recognizing that, it also points to what really makes these airlines stand out. It is clear that the premium class service weighs heavily – the seat comfort and the fine food.

Etihad Airways (ranked #16) offers “the future of first-class comfort: a three-room “residence” with a bedroom, private bath with shower, and lounge.” Emirates (#4) offers “posh perks for premium fliers – cocktail lounges, in-flight showers… part of the reason it scores so high among travellers.” And the suites on Singapore Airlines (#3) offer “a pair of fully flat recliners that can be combined into a double bed.”

Mention is made of the premium economy class in almost all the ranked airlines” KLM (#20), Lufthansa (#19), Japan Airlines (#17), All Nippon Airways (#13), Qantas (#12), Cathay Pacific (#10), Virgin Atlantic (#7), Virgin Australia (#6), Singapore Airlines (#3) and Air New Zealand (#1).

So it may appear to be the voice of the premium travellers that is being heard. Maybe coach travellers aren’t too concerned about the ranking, more driven by price and less frilly factors, although to be fair, the Conde Nast report did mention of at least one airline, i.e. Etihad Airways (#16), not ignoring “those sitting in the back.” While many travellers may resign to the belief that the economy class is about the same across the industry, it is reasonable to assume that an airline that strives to please its customers in the front cabins will most probably carry that culture or at least part of it to the rear.

Although you may draw consensus across many of the surveys, it is best best to treat each one of them in isolation. It is more meaningful to try and draw intra conclusions within the findings of the particular survey.

You will note in the Conde Nast findings, there is an absence of American (including Canadian) carriers, never mind that of African and South American carriers.

Asiana Airlines (#8) is ranked ahead of Korean Air (#11).

All Nippon Airways (#13) is ranked ahead of Japan Airlines (#17). V

Virgin Australia (#6) is ranked ahead of Qantas (#12).

The order of the “Big 3” Gulf carriers is as follows: Qatar Airways (#2), Emirates (#4) and Etihad Airways (#16).

Of European carriers, there is the conspicuous absence of the big names of British Airways (compare Virgin Atlantic #7) and Air France, and the pleasant surprise of Aegean Airlines (#9) while SWISS seems to be regaining its erstwhile status years ago as being the industry standard.

The best belongs to Air New Zealand as the quiet achiever.

Ultimately, the results also depend on the group of respondents whose experiences may be limited to certain airlines.

Other airlines ranked in the top 20 of the Conde Nast survey: Finnair (#14), Turkish Airlines (#15), EVA Air (#18).

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After the merger of Scoot and Tigerair, will it be Singapore Airlines and SilkAir next?

Courtesy Wikimedia Commons

Will Singapore Airlines (SIA) and its subsidiary SilkAir take the merger route of Scoot and Tigerair, now that their finance operations are merged, perhaps as a first step in that direction?

While SIA maintains that such initiatives are part of an ongoing programme to be more competitive, the speculation is only to be expected in the oontext of the company embarking on “a comprehensive review that leaves no stone unturned, cutting across all divisions of the company” as stated by its CEO Goh Choon Phong.

SlkAir started in 1975 as Tradewinds Charters which became Tradewinds Airlines in 1989 when scheduled services were introduced. Three years later, it was renamed SilkAir, shedding its leisure image and is often referenced as SIA’s regional arm.

However, in its long history, SilkAir hardly comes into its own, seen as operating in the shadow of parent SIA. Therefore, consolidating operations – finance, for a start – makes sense since some of the routes operated by SilkAir were previously operated by SIA and in light of SIA re-focussing its operations in the region. Besides, as the competition intensifies, a strong SIA brand across the region is imperative. There is no reason why a regional carrier so-called should be viewed as one providing services one notch below, an unfortunate perception that is difficult to shed.

At the height of the budget travel boom in the region, SIA launched Tigerair in 2003. Then there were already questions asked about the continuing operations of SilkAir which the company reiterated is a regional airline and not a budget carrier. Then Scoot came into being in 2012 as a medium haul budget carrier, differentiated from Tigerair’s short haul operations. It soon became clear the SIA Group was having one too many on its plate, resulting in intra-competition. Tigerair and Scoot finally merged under the Scoot brand this year.

Now that the number has been trimmed from four to three, will it be cut down further to two, typically the structure of most global airlines, between full-service and low-cost operations?

SilkAir may be likened to Cathay Dragonair, which Cathay Pacific has also insisted is not a budget but regional airline. But then, Cathay has never believed in adding a budget carrier under its wings. You might say that place is filled by Dragonair. By comparison, however, SilkAir’s status is somewhat ambiguous depending on how SIA delineates the geography as being regional or international.

Qantas continues to fly high

Courtesy Getty Images

Qantas reported another good year ending June 30, 2017. The Australian flag carrier posted a profit of A$852 million (US$67.4 million) – its second highest in the airline’s 97-year history – although it declined by 17.2 per cent compared to last year’s A$1.03 billion.

The question to ask is how Qantas manages to turn in stellar performances when rivals such as Cathay Pacific and Singapore Airlines (SIA) are dipping into losses? Cathay lost HK$585 million (US$103 million) in 2016, and SIA incurred a loss of S$41 million (US$29 million) in Q4 of FY2016/17. (See Cathay Pacific axes 800 jobs: Is this the answer? May 27, 2017)

Qantas chief executive Alan Joyce points to the success of the Transformation Program introduced three years ago. The program is now complete with all targets met on time, having achieved asignificant improvement in financial performance, record customer advocacy and record employee engagement. Consequently the airline has incorporated a culture of transformation and continuous improvement goin forward.

“We operate in a very competitive environment, so continuous improvement is crucial,” said Mr Joyce.

The star performer is Qantas Domestic, advantaged by the booming domestic market. It earns an operating margin of 11.5 per cent on revenue of A$5.63 billion. With 90 per cent of the market, it is far ahead of its rival Virgin Australia.

Record earnings were also reported by the Jetstar Group with an operating margin of 11.6 per cent on revenue of A$3.60 billion. Outside Australia, these include Jetstar operations based in Singapore, Japan and Vietnam. The failure to set up base in Hong Kong as a consequence of protest from Cathay and Hong Kong Airlines has not stopped the budget carrier from growing.

Qantas International which used to be the bane of the airline’s financial performance has plowed back into the black in spite of the stiff competition it faces. It posted an operating margin of 5.7 per cent on revenue of A$5.70 billion.

Qantas’ Asian strategy that saw increased capacity to key Asian destinations has proven to be well-timed and placed. The airline will be increasing international capacity by 5 per cent in the first half of FY2017/18, mainly to desinations in the the growing Asian market.

Farther down the road, the airline plans to fly non-stop from Sydney to London and New York by 2022 subject to the availability of aircraft that can travel those long distances. In the near term, Qantas will be flying direct from Perth to London next year. This, said Mr Joyce,“is a huge leap forward” for the flying kangaroo.

Indeed, and it is likely to change the game somewhat, affecting not only would-be erstwhile transit points and competing off-shore airlines which must perforce make those stops. All the more so will airlines now find the need to be creative in influencing the traveller’s preference and enhancing brand loyalty in their marketing effort.

Consistency defines Skytrax best airlines

The 2017 Skytrax list of the top ten airlines is as in previous years hardly changed of note. Only two airlines dropped out of the list – Turkish Airlines and Qantas, making way for Garuda which was listed in 2015 and 2014, and Hainan Airlines which in 2014 was commended for clean cabins and amenities in business class.

Courtesy Qatar Airways

year’s champion Emirates Airlines went down to fourth place, followed by Cathay in fifth, making way for All Nippon Airways (ANA) in third.

This speaks of the consistency that makes these airlines the travellers’ perennial favourites. SIA has long been reputed for premium service and emulated by the Middle East carriers making them fierce competitors in the field.

However, it is more interesting to look at the movements into and out of the top ten list. Turkish Airlines which was included in the last three years dropped to 12th position this year, and Qantas moved further down from 9th last year to 15th this year. What is most noticeably absent is Asiana Airlines, which was voted the best in 2010 and continued to be one of the best since then until last year when it dropped to 11th and this year ranks 20th. If the Skytrax ranking is anything to go by, then Asiana should be concerned, perhaps not as much about the quality of its service as being surpassed by the competition.

On a more positive note, Hainan Airlines becomes the first China carrier to be ranked in the top ten, and Garuda re-entered the list boosted by its best cabin crew win.

Not surprisingly, the top ten list is dominated by Asian carriers with the exception of Lufthansa. Just a dash shy of that honour and ranked 11th is Thai Airways International.

No US airline has made it to the top ten, and don’t bother asking if they were really concerned,

Cathay Pacific axes 800 jobs: Is this the answer?

TIMES are hard for legacy airlines, it seems, when major airlines such as Singapore Airlines (SIA) and Cathay Pacific are beset with economic woes.

Courtesy Cathay Pacific

SIA announced a plan to transform the airline after reporting a last quarter loss of $S41 million (US$ 29 million) (see SIA’s transformation is long overdue, 27 May 2017). Cathay, losing HK$585 million (US$103 million) in 2016 – its first annual loss in eight years – is set to cut 800 jobs. Both airlines cited intense competition, mainly from the big three Middle East carriers of Emirates Airlines, Etihad Airways and Qatar Airways, and carriers from China. Cathay additionally suffer substantial fuel hedging losses.

Invariably cost cutting is almost every airline’s clarion call to try to get back into the black. It helps, of course, and such an exercise can eliminate wastage and improve productivity when in good times the airline has lost the discipline. However, more may be needed to be done if the issues are structural and operational. It calls for a deeper review of product, procedures and processes, and marketing strategies against a changing aviation landscape that renders old successes irrelevant and demands new innovative approaches.

Like SIA, Cathay is caught in a price-sensitive market where competitors have been able to provide comparable services at lower fare, and that’s not talking about low-cost carriers (LCCs) alone. Cathay risks losing its position as the gateway airline at the door of the huge China market as more carriers from the mainland commence direct services to destinations beyond China and offer connections out of Shanghai and Beijing. Also, partnerships between China carriers and other airlines are also threaten to cut Cathay out of the game.

Some analysts think Cathay is disadvantaged by the absence of budget arms, unlike SIA which is supported by Scoot and Tigerair. The solution really is not for Cathay to go budget, but to make that difference between flying low-cost and flying full-service in its favour.

SIA’s transformation is long overdue

Courtesy Bloomberg

Singapore Airlines (SIA) announced it will be taking “bold radical measures” in a major business transformation plan after the parent airline incurred a fourth-quarter operating loss of S$41 million (US$30 million). SilkAir and Budget Aviation Holdings (Scoot and Tiger Airways) reported lower profits for the same quarter: the former down 19 per cent to S$27 million and the latter more than 50 per cent to S$22 million.

Full-year operating profit for SIA was S$386 million, a decline of S$99 million or 20 per cent year-on-year. For SilkAir it was a fall of 11 per cent and for Scoot and Tiger a combined drop of 60 per cent.

SIA chief executive officer Goh Choon Phong said: “The transformation is not just about how we can cut cost but also how we can generate more revenue for the group, how we can improve our processes more efficiently, …so that we can be lot more competitive going forward.”

If anyone is surprised at all, it is not because it is happening but that it has taken so long coming. The writing has been on the wall since the global financial crisis when the airline suffered a loss of S$38.6 million in FY 2008/09, and from then onward the margin has averaged less than three per cent compared to seven per cent in the five years leading to it.

SIA cited intense competition that is affecting its fortune. Lower fuel costs that contracted by S$780 million (down 17.2 per cent) didn’t help. Capacity reduction trailed the reduction in passenger carriage, and passenger load factor as a result dipped lower to 79.0 per cent.

While details of the transformation are yet to be announced, it will do SIA well to recognise that the aviation landscape has changed dramatically over the years and will continue to shift. Competition in the business is a given, and we cannot help but recall how the fledgling airline from a tiny nation leapfrogged its more experienced rivals in its early days to become the world’s best airline and one of the most profitable in the industry. No doubt the competition has intensified, but the salient point here is that it can never be business as usual.

What then has changed?

Low-cost carriers are growing at a faster rate than full-service airlines and are now competing in the same market, and while SIA may have answered that threat with setting up its own budget subsidiaries, the parent airline is not guaranteed it is spared. Until the merger of Scoot and Tiger under one umbrella, there had been much intra-competition. And while the subsidiaries compete with other low-cost carriers, the concern should be that they are not growing at the expense of the parent airline. That calls for clearly defined product and route differentiation such that they are not substitutes at lower fares.

Low-cost carriers are also venturing into the long-haul, aided by the current low fuel price and technologically advanced and more fuel-efficient aircraft. The launch of Norwegian Air Shuttle’s service between Singapore and London in October at drastically lower fares poses a challenge to SIA on one of its most lucrative routes.

The market is becoming increasingly more price sensitive since the global financial crisis, and that favours the low-cost model of paying for only what a passenger needs. Dwindling may be the days when one is more willing to pay a higher fare for SIA’s reputable in-flight service as other carriers improve their products and services, often the reason cited for the competition laid on by the big three Middle East airlines of Emirates Airlines, Etihad Airways and Qatar Airways.

These rivals are also offering a slew of connections out of their home bases and reduced layover times which are the forte of the SIA network. The growing importance of airports such as Dubai and Hong Kong as regional gateways may disadvantage not only Changi Airport but also SIA in the competition against airlines such as Emirates and Cathay Pacific. In 2013, Qantas shifted its hub on the Kangaroo Route from Singapore to Dubai, and is now planning to build a hub out of Perth for the same route. SIA will have to heed the geographical shift that may affect the air traveller’s preference for an alternative route.

Along with this is also the increased number of non-stop services between destinations, particularly out of the huge, growing Chinese market. This may eliminate the need for travellers to fly SIA to connect out of Singapore, say from Shanghai to Sydney when there are direct alternatives offered by Qantas and China Eastern Airlines. It has thus become all the more imperative for SIA and Changi to work even closer together.

Well and good that SIA is constantly looking at improving cost efficiency and productivity. But more has to be done. As Mr Goh had said, it calls for a “comprehensive review on whatever we are doing and how we can better position ourselves for growth.”

The key word is “transformation”, in the same way that Qantas chief executive Alan Joyce went about restructuring the Australian flag carrier following the airline’s hefty losses four years ago. Drastic measures were introduced that include the split between international and domestic operations for greater autonomy and accountability, and concrete targets were set over a specific timeline. The continuing programme seems to have worked for Qantas as it bucks the trend reporting record profits while other airlines such as Cathay are hurting.

SIA will have to look beyond its own strengths at the strengths of others. It has thrived on the reputation of its premium product, but that has taken a toll as business travellers downgrade to cheaper options. Although that business segment is slowly recovering, other airlines have moved ahead to introduce innovative options, such as the premium economy which Cathay revitalised as a class of its own and which SIA was slow in embracing, reminiscent of how SIA too did not foresee the increased competition posed by low-cost carriers. It is a pity that SIA, once a leader in innovation, has lost much of that edge.

Timing is everything in this business to cash in on early bird advantages, but this is not made easy by abrupt geopolitical changes and new aviation rules and the long lead time in product innovation and implementation. All said, SIA may begin by looking at what worked for it in the past and ask why it is no longer relevant.

Air New Zealand leads the pack

Courtesy Air New Zealand

Courtesy Air New Zealand

Air New Zealand is the world’s best airline according to AirlineRatings.com based on criteria that include fleet age, safety, profitability and leadership in innovation for passenger comfort. The agency’s Airline Excellence Awards program which lists the winning airlines is endorsed by the International Civil Aviation Organization.

Many travellers would recognize ANZ for its attention-grabbing in-flight safety video that takes them into Middle Earth, the kind of out-of-the-aircraft features that a few other airlines have tried to imitate but fared only poorly. AirlineRatings.com Editor-in-Chief Geoffrey Thomas said: “Air New Zealand came out number one in virtually all of our audit criteria, which is an exceptional performance.” The airline was favoured for its record-breaking financial performance, award-winning in-flight innovations, operational safety, environmental leadership and motivation of its staff.

Skycouch: Picture courtesy Air New Zealand

Skycouch: Picture courtesy Air New Zealand

But, of course, there are surveys and there are surveys that publish their own lists of favourites. Some airlines such as Singapore Airlines (SIA) and Cathay Pacific have a ubiquitous presence, and there also notable absences. This is where it is most telling, bearing in mind that the ranking is dependent on several factors such as the excellence-defining criteria and the population surveyed.

The other nine airlines ranked behind ANZ in the top ten list by AirlineRatings.com are in descending order: Qantas, SIA, Cathay, Virgin Atlantic, British Airways (BA), Etihad, All Nippon Airways, EVA Air and Lufthansa.

It is interesting to note that the top two airlines come from the remote Southwest Pacific. Qantas has in recent years been working on upgrading its product offerings, winning accolades for catering and airport lounges. Not surprisingly, innovation along with good service seem to be the driving winning streak going down the list – SIA and Cathay for their premium economy and revamped business classes, Virgin for its cabin ambience and friendly crew, BA for its leadership in in-flight entertainment, and Etihad for its equally impressive service in front and at the back of the aircraft.

Notable absences in the list are US carriers (no surprise there) and two of the big three Middle-East carriers (Emirates and Qatar).

Many survey rankings are skewed by the weight they place on service in the premium classes. However, Mr Thomas of AirlineRatings.com said: “We are looking for leadership and airlines that innovate to make a real difference to the passenger experience particularly in economy class.” Considering that the majority of travellers are seated in coach, it is time that airlines crowned with the halo of excellence pay more attention at the back of the aircraft, for this may well make the difference as the competition intensifies. And, it is where the differentiation becomes even more challenging. Perhaps too, this could be the reason why Emirates and Qatar, known for their lavish premium service, did not make it to the top ten of the list.