Will Singapore Airlines, competing with United Airlines, have the last laugh?

Courtesy Getty Images

Two years ago, United Airlines stole a march on Singapore Airlines (SIA) when it launched a non-stop service between Singapore and San Francisco four months ahead of its rival.

Then it did it again last year when it started flying non-stop between Singapore and Los Angeles while SIA awaits delivery of an ultra long range jet to ply the route probably by next year. However, this second service, barely a year old, will cease operations at the end of October.

It looks like good news for SIA, but is it really?

It seems United might have sprinted too soon only to lose stamina to sustain the race. Yet it is anyone’s guess as to when the timing is right, and United stood to gain first-mover advantage, benefitting from the early start to build up brand loyalty.

Courtesy Reuters

SIA itself used to fly non-stop to Los Angeles and New York before the flights, introduced in 2004, were suspended in 2013 because of poor yields against the backdrop of a declining world economy and unfavourable fuel prices.

But things have since changed – the global economy has recovered from the 2007/2008 financial meltdown, fuel prices have steadied, and more fuel-efficient aircraft are reviving interest in the ultra-long range.

A big problem faced by airlines though is anticipating the change and making timely adjustment, failing which may mean lost opportunities or sunk costs depending on how the market is trending.

If there is a lesson that United has learnt from operating the non-stop Los Angeles run, it is the constant need to re-strategise. In terminating the service, it is hoping to replace it with a second non-stop San Francisco service, thus upping the ante in competition with SIA.

United said in a media statement that the changes were in response to “customers’ desire for alternative departure and arrival times.”

Travellers will now have a choice of three non-stop flights between Singapore and San Francisco, the number leaning in favour of United which is said to be also offering cheaper fares. While SIA, having earned the reputation as one of the world’s best airlines, will leverage on its superior service, the pressure on fares cannot be ignored.

Clearly, both airlines, which are Star Alliance partners, are not thinking of end-to-end traffic alone. Certainly in the case of SIA, the sole Singapore market will not have the volume to support the operations. Connecting traffic therefore is a key component.

In this respect, United boasts an extensive domestic network in the US and numerous connections to other cities in North and South America. For SIA, Changi Airport is the region’s major hub.

The game plan is explicit in the words of United’s senior vice president Worldwide Sales Dave Hilfman when he said at the launch of the Los Angeles service: “United is making travel to Singapore easier and even more convenient than ever before and customers arriving in Los Angeles will have multiple opportunities to connect to hundreds of United destinations in the US, Canada and Latin America.”

As United wraps up its Los Angeles operations, the main driver for its San Francisco service remains unchanged.

SIA CEO Goh Choon Phong expressed the same sentiment when he announced plans to once again fly non-stop to New York in October ahead of the Los Angeles service. He said that “the flights will help boost connectivity to and through the Singapore hub.”

Rivalry between SIA and United is expected to intensify. The US has been traditionally a strong market for SIA, and United is the leading American carrier in Asia. But it would be a mistake to think that the competition is confined to only these two airlines as many Asia-Pacific carriers are also well connected directly to the US.

When SIA suspended its non-stop New York services in 2013, Cathay Pacific filled that void with connections out of Hong Kong.

With more ultra-long range services connecting major cities directly, airlines thriving on connecting traffic such as SIA will be challenged to make it worth the traveller’s while to fly via their home ports to the final destinations.

Mr Goh said at the recent annual meeting of the International Air Transport Association in Sydney that SIA was looking into more non-stop services to other US destinations. Besides New York, Los Angeles and San Francisco, the airline currently also serves Houston via Manchester in the UK.

This will set the stage for a different ball game altogether if SIA moves increasingly to feed directly into US destinations, chipping away at United’s domestic strength. The question is whether there is enough load to justify more non-stop flights.

In tandem, SIA is said to be reassessing its stopover flights to the US, but it is unlikely it will skip stopovers altogether in favour of non-stop flights. While it is true that some passengers may prefer a break in their long journeys to get off the plane and stretch their legs, SIA is also able to tap into the traffic that originates or ends at stopover airports. It therefore makes economic sense to continue operating some flights via Hong Kong, Taipei, Seoul and Tokyo.

United’s cessation of the Los Angeles-Singapore service will not deter SIA from mounting a similar non-stop flight, although New York takes precedence when the new Airbus A350-900ULR aircraft joins its fleet in September. What SIA has now is lead time to build up demand for the service. On the other hand, if United succeeds in mounting a second non-stop service to San Francisco and it becomes a threat, this may hasten plans for an earlier launch to promote Los Angeles as an alternative gateway to the US.

Where United has failed, SIA may succeed since it had been down that road before. Only then can SIA confidently have the last laugh.

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Airlines dangle the premium economy carrot

IT looks like the traditional economy class may be heading toward a split between premium economy and basic economy, with the in-between normal economy not quite as exciting in terms of perks or costs.

While basic economy as already introduced by American carriers (American Airlines, Delta Air Lines and United Airlines) and Asian rivals such as Cathay Pacific and Singapore Airlines (SIA) in an attempt to stamp a potential loss of the business to low-cost carriers, the premium economy in a way will make up for reduced profit at the very bottom of the scale.

Courtesy Singapore Airlines

United Airlines may be Johnny-come-lately, but it promises to be as good as the slew of airlines that are already in the game. Its version of the class to be known as United Premium Plus will have more spacious seats, and customers according to its spokesperson will “enjoy upgraded dining on china dinnerware, free alcoholic beverages, a Saks Fifth Avenue blanket and pillow, an amenity kit, and more.”

EVA Air may be said to be a pioneer of such seats, but it is Cathay that has created an exclusive class with its own cabin that has propelled the popularity of a product that is better than economy but not quite business class, particularly for long-haul flights.

But airlines, which have been cautious about hopping on the premium economy bandwagon are not going to abandon the old workhorse but will instead make it work harder. A number of them are already making plans to increase more seats at the back of the aircraft,with British Airways announcing recently that economy seats in its new planes will no longer be able to recline.

More space in the forward sections of the plane can mean less legroom at the rear as airlines dangle the premium economy carrot to entice customers to upgrade.

Legacy airlines go the budget way

It’s yet another sign of how legacy airlines are feeling the heat of the competition posed by budget carriers.

Courtesy Getty Images

British Airways (BA) will operate planes for the short haul with seats in economy that cannot recline. The airline said the seats will be “pre-reclined at a comfortable angle”. Affected flights up to four hours include runs from Heathrow to Rome, Madrid and Paris.

BA which already ceased providing complimentary booze and meals for the short haul last year admitted to the pressure. It said the move will allow the airline to “be more competitive” as it will then be able to “offer more low fares”.

Many legacy airlines are already adopting the “pay for what you want” model of budget carriers, charging for extras such as checked luggage and seat selection at booking.

The big three US carriers of American, United and Delta have introduced “basic economy” fares which will board such ticket holders last with seat assignment only at boarding. There may be other restrictions.

Asian rivals Cathay Pacific and Singapore Airlines (SIA) are also moving in the same direction. Cathay’s economy supersaver and SIA’s economy lite do not permit seat selection at booking and do not accrue full mileage perks. SIA is also charging additionally a credit card service fee for tickets purchased out of certain ports. (See Same class, different fare conditions, Jan 5, 2018)

While legacy airlines are finding ways to cut costs to offer lower fares, this can be a double-edged sword that only serves to narrow the gap between them and budget carriers. What price, therefore, the differentiation? But, good news for travellers not too fussy about brands.

Same class, different fare conditions

Legacy airlines, faced with increased competition from no-frills operators, are going the budget way by restructuring their economy fares.

In the United States, the big three carriers of American, Delta and United have introduced basic economy fares, which are quite akin to the budget fare. Conditions include no pre-seat selection at the time of booking, seat assignment only at the gate, last to board and other restrictions that may concern baggage allowance and flight changes.

Courtesy Singapore Airlines

In Asia, rivals Cathay Pacific and Singapore Airlines (SIA) too have revised their fare structures. At the lowest level, Cathay’s economy supersaver and SIA’s economy lite may seem attractive, but travellers should check out the restrictions so as not to be disappointed or surprised by hidden costs. Such fares do not permit pre-seat selection at the time of booking, unless you are prepared to pay a fee for the privilege. Mile accruage has also been reduced – 50% in the case of SIA and 25% in the case of Cathay.

There may be other charges. Earlier in the week, SIA announced that it would levy a 1.3% credit card service fee maxing at S$50 for outgoing flights from Singapore from January 20 only to retract the policy before its implementation, following a public outcry. However, this fee has already been introduced for flights departing Australia since November 2016 and others departing New Zealand, Belgium, the Netherlands and the United Kingdom since April last year. SIA referred the fees to as “costs relating to the acceptance of credit cards” when really it is not a fee imposed directly on the consumer but rather the vendor. It brings to mind how airlines faced with rising fuel costs so adroitly levy additionally a fuel surcharge as if it was something between the fuel companies and the consumers.

True, whatever the costs incurred by the airlines, they are likely to be passed on to the consumer. How much is reasonable will be decided by the competition, given that there is indeed fair and open competition.

Many travellers may not be aware of the different tiers of fare and their conditions, and are consequently unhappy if they had to top up what they had initially thought was an attractive offer. Same class, but different fare conditions. So, as always, caveat emptor.

Benefits come with a price, so British Airways is boarding cheap fares last

Gate boarding procedures vary across the industry, from an open system of “anyone can board at any time” to specific policies that assign the order of who get on first. This only becomes an issue with economy passengers as premium classes as has been their privilege may board on their own time.

Because of limited overhead bin space, economy passengers may compete to board early. Traditionally most airlines board passengers from the rear so as to avoid bottlenecks in the aisle. The idea is to hasten the process that may cause a delay in take-off if it becomes problematic. From the perspective of efficiency, that seems to make a lot of sense.

Courtesy British Airways

That, until some airlines hit on the opportunity to make boarding a benefit to be purchased in a bucket of ancilliary charges. Now British Airways (BA) has announced that it will board passengers who have paid cheaper economy fares last. BA said the new procedures aim to “speed up the process and make it simpler for customers to understand.” Really? That’s a hard pill to swallow.

BA’s defence is that this is already a procedure practised by some other carriers. Yes, US carriers such as the Big Three of American, United and Delta have introduced basic economy fares – their version of budget fare to counter the no-frills competition – which do just that besides other non-entitlements such as no seat assignment until boarding at the gate.

But there is one difference – passengers are made aware of that sub-class before they amke the choice. However, most airlines sell different fares for the same economy seats, designed to help them sell the seats. One wonders if you purchase a ticket during a promotion period and become committed to flying maybe a year later, will you now be penalised for not paying a higher fare that is usually the case closer to the date of the flight? It is only fair that customers know and understand what they are paying for.

Of course, BA’s new procedures have already raised a lot of ire among its customers. Some of them feel that while they may have purchased cheap fares, they do not deserve to be made to feel cheap or to be treated as such. Oh well, as some people may say, you have the choice. Or, take it with a pinch of salt as Banjobob@scottishcringe says: “Nothing quite like a British class system to let you know your place!” Or, punch back with a new challenge, as Martin Lovatt wrote on Twitter: “I wonder if disembarkation will be in the reverse order then?” Now, that will be quite a task managing the process in economy based on fare.

United Airlines moves ahead of Singapore Airlines

Courtesy Getty Images

United Airlines does it again, stealing march on rival Singapore Airlines launching its nonstop flight from Los Angeles to Singapore – now the world’s longest nonstop flight – on Oct 28. The flight covers a distance of 8,700 miles and may take as long as 18 hours.

SIA plans to introduce a similar service next year.

Back in February last year, United started a nonstop from San Francisco to Singapore, ahead of SIA’s introduction which came months later in October.

Demand for United’s Los Angeles flight seems healthy, considering the low launch fares for a round trip as low as US$384 which no doubt boosted the sale. No doubt it is good publicity to raise awareness, and it looks like the competition will benefit travellers when SIA joins the race next year. Meantime, United enjoys the run-in to build loyalty.

In Singapore, United’s Vice President of Atlantic and Pacific Sales Marcel Fuchs said: “United is proud to launch the long-awaited Singapore-Los Angeles route for our customers in Singapore.”

In the bigger picture, United must be looking at the initiative as being “the leading US carrier to Asia” as mentioned by its senior vice president of worldwide sales Dave Hilfman, who added that the new route would consolidate the airline’s position in Asia. Conversely, Mr Fuchs said: “The addition of this new exclusive service gives more options for our customers to conveniently connect to our extensive US network.”

Humanizing the airline business

Never before was there so much publicity given to customers’ complaints about mistreatment by the airlines in North America ever since the David Dao incident when the seated passenger was forcibly removed from an United Airlines flight by security personnel. Stories of being bumped off a flight abound, and added to these other stories that include flight cancellations and misconnections, checking into an incorrect flight that took the passenger half way around the world, and death of a treasured animal in the cargo hold.

The beef is more about the way such a situation was handled by the airlines than the fact that it did occur. Take, for example, the incident of a 15-year old boy, technically classified as a minor, who was travelling from Denver to Thunder Bay via Toronto on Air Canada. He missed his connection when the flight out of Denver was delayed, and Air Canada duly rebooked him to fly to Thunder Bay the following day but did not offer any accommodation or vouchers for food.

Courtesy Air Canada

In an interview with BC News, Derrin Espinola said he felt “trapped… very hungry, very tired, very scared.” No one helped, even as he went from counter to counter to explain his situation. While Air Canada had issued a statement to say it was “truly sorry”, the blame appeared to have been placed on runway construction works at Toronto’s Pearson Airport and “exacerbated in this case by adverse weather”.

Was this really Espinola’s fault for having faith in the airline’s trusted his service? His mother, Karin Patock, who tried in vain to reach the airline by phone, said she chose Air Canada for its policy about flight delays as stated on its website: “Youths travelling alone (ages 12 to 17) will be taken care of by our agents. We will also arrange for accommodations, meals and transportation if needed.”

The spate of stories now made possible by the power of the social media may have caused many travellers to not believe that airlines in pursuing the dollar do really care for all that they boast to be better than their competitors. But they are beginning to listen, or so it seems as each time a nasty incident like this happens, they apologize readily and are said to be reaching out to the affected passengers and even compensating them as some form of amelioration for their distress, however irreparable.

In the case of denied boarding, which will continue to be practised by most of the airlines with the exception of JetBlue Airlines and Southwest Airlines in their stated policy, the major airlines have vowed to reduce overbooking and increased their compensation for volunteers who give up their seats.

Certainly the authorities have also taken note of the frustrations of passengers within the purview of their legislative responsibility to protect the rights of travellers.

Airline advertisements generally paint the romance of caring crew and other personnel to reduce the stress of travelling. Mind you, many of them do live up to their word. Recent incidents could signal a timely re-focus on procedural constraints and methodology in tackling difficult situations. The social media has given voice to travellers, and what is happening is a humanizing of the airline business as a reminder to carriers that they are dealing not with mere business numbers but people who deserve to be treated with dignity.