SIA should review its half-baked game plan now, warns report

Its strategy is incoherent, analysts argue.

Singapore Airlines needs to revise its strategy if it wants to claw back market share from low-cost carriers (LCCs) and Middle Eastern airlines, according to a report by Aspire Aviation.

In particular, the report argues that SIA’s strategy of allowing frequent flyers to earn and redeem Krisflyer miles on budget carriers Tigerair and Scoot over routes both served by SIA and SilkAir leads to cannibalisation and does not help in boosting the parent airline’s bottomline.

“So far Singapore Airlines’ response to the multiple-front threat of the rise of Middle Eastern carriers and low-cost carriers (LCCs) is piecemeal and incoherent. [This strategy] has further blurred the line of differentiation on the product front and lowered the switching cost for its most price-elastic Economy passengers and lowest-tier Krisflyer members,” said the report.

Although it can be argued that SIA’s strategy works by boosting its low-cost subsidiaries’ growth, Aspire Aviation notes that such cannibalisation gives the parent airline less room for growth.

“All in all, this is about maximising the economic value added by each unit without stepping on each other’s toes. Only without such internal cannibalisation could Singapore Airlines realise the full potential of its portfolio strategy. At the namesake SIA brand, eliminating the cannibalisation could give it more leeway to slash costs whilst providing exemplary services,” said the report.

“Or else SIA will be under further squeeze, boxed in between group subsidiaries and relentless external competition. It is time to revisit the half-baked strategy, before it is too late,” Aspire Aviation urged.