Singapore Airlines (SIA) is a prime example of a business that uses dynamic tension to deliver high-end, innovative, differentiated services and still be efficient and cost-effective. SIA has garnered numerous awards for their world-class service in their coach, business, and first class offerings. 1 The rest of the story is that they have one of the lowest cost structures compared with any other airline at just less than 5 cent per kilometer per seat. Here is an overview of how Heracleous and Wirtz describe SIA’s strategy for delivering world-class services and still being a cost leader.
They keep their fleet young and up-to-date. Their planes are much younger than most of the competition. This translates to fewer mechanical failures, more air time, lower fuel costs, reduced maintenance costs, and happy customers. Salaries are linked to SIA’s profitability. SIA provides twice as much training to their 14,500 employees than the industry average. They also recruit top-notch university graduates. SIA realizes that their employees are the critical touch point with their customers. SIA also realizes that their employees can be the first line of defense in cutting costs. SIA holds town hall meetings where senior executives stress the importance of reducing costs in order to remain competitive. SIA also staffs most of their flights with more cabin crew members than the industry standard. SIA encourages their employees to find ways to reduce costs. For example, cabin crew recommended carrying less food for late night flights and they stopped putting jam jars on every breakfast tray because some passengers did not use them. SIA’s back-office costs lag behind that of their competitors and its sales and administration costs are low and lean.
The secret sauce of SIA’s success includes harnessing the power of its employees, using technology effectively and appropriately, and pursuing the dual strategies of creative differentiation and reducing costs. SIA understands that long-term success is a function of balancing the dynamic tension between delivering high-end Midas services with the Hermes cost reductions.