BRAND HEALTH CHECK: Singapore Airlines - Singapore Airlines flies into turbulence

Who would have thought a brand as formidable as SIA would one day fall from its pedestal in its home market, where it is the epitome of the Singapore success story?

In the last few months, SIA has become a case study of what not to do in communications and corporate responsibility.

The airline's woes started with Sars, which was to the Asian carriers what 9/11 was to North American airlines. SIA slashed 358 weekly flights in April and May, at the peak of the virus, and started to slowly reinstate them by late June.

Inevitably, it went into the red for the first time ever, reporting a loss of S$312 million (US$177 million) in the Sars period April to June, compared to a profit of $478 million in the same quarter in 2002. The carrier laid off 182 pilots and flight attendants in July, after retrenching 414 ground staff in June - when travel was clearly recovering.

Observed Michael Pucci, senior brand consultant at Enterprise IG, Singapore: "If they wanted to position themselves as a fairweather brand, this was the best way to do it. They spent years saying 'we are big, strong and profitable' but at their first negative profit, they acted like they were in danger of going out of business."

Cost-cutting also contributed to a perceived decline in service standards; results of the latest consumer poll by Skytrax saw SIA's service rating slipping from third to ninth place.

Through all this, the airline's PR machinery stalled.

The crisis is a turning point for SIA.

Even though it is still a strong name, it has lost its enviable position as a brand that could never go wrong.

It needs to quickly rebuild its reputation, as well as the confidence and trust of passengers, employees, shareholders and the community.

The need is urgent, especially when carriers such as Malaysian Airlines are making strides in service and route network - while charging half the price of SIA - and the threat of low-cost carriers is looming with the imminent entry of ValuAir in Singapore, mooted by former SIA chairman Lim Chin Beng.

VITAL SIGNS
                April - June 03             April - June 02
Net profit       - S$312 million      S$478 million
Revenue          S$1.65 billion       S$2.54 billion
Outlook for the next quarter and the rest of the year: "Uncertain."
Source: SIA

DIAGNOSIS

JOHN O'SHEA, MANAGING DIRECTOR, LEO BURNETT SINGAPORE

There must be worse industries than the airline industry to be working in right now. I just can't think of any.

On top of everyday challenges like keeping a 400 tonne piece of metal in the air, forecasting demand 10 years in advance and dealing with landing rights, airlines now have to contend with war, Sars and competition from budget airlines. And SIA is no exception.

SIA's image has recently taken a tumble. Brand perception has declined as a result of skimping on service and bad handling of layoffs. Management must therefore reframe expectations of staff and customers. Their staff need to be fully aware of the new competitive environment in which they work and how they must offer the right kind of quality service, now more than ever before - service that is fast and friendly, efficient not officious.

SIA should then start communicating with customers; explaining how it will streamline services to better fit what is important in today's world.

The critical addition to this is the offer of more competitive pricing.

People no longer expect champagne service for cider prices, but nor will they accept cider service for champagne prices. A more efficient service for a more realistic price will once again make SIA a great way to fly.

MICHAEL PUCCI, PHD, SENIOR BRAND CONSULTANT, ENTERPRISE IG, SINGAPORE

SIA tends to focus on the customer-facing brand to the exclusion of its equally important employee, partner and investor-facing brand. As a government-linked company, SIA operates in an artificial bubble with regards to its investor brand. The equity of the Government's Temasek group prevents it from feeling the pull (or push) from the investment community. Thus, its behaviour is purely dictated by internal decision-making processes, putting it at high risk of hubris.

SIA sang the same woeful song as everyone else; the result is investors believe it is 'in trouble', when it is actually doing well against its competitor set.

All companies must balance global competitiveness and connection with the local community. One obvious way to redress what is an imbalance for SIA is to spend more energy emphasising the Singapore community.

As for the employee brand, SIA is strong on building in service standards, but weaker on the more intangible aspects of corporate culture. Now, one of the strongest tangible attributes of the SIA employee brand, security, is in jeopardy. Instead of reciprocating a shared responsibility (which SIA demands of its employees as their contribution to the company), it has communicated that the employees will pay for the Sars and Iraq crisis.

TREATMENT

O'SHEA'S PRESCRIPTION

- Decide what level of service can be offered for a more competitive price.

- Work with the staff in reframing their expectations. Ensure that they feel proud of working for the most agile, most forward-looking ariline in the world.

- Develop communications, PR, direct and advertising that outlines the new service and competitive price offer. Let customers see how SIA is concentrating on the important service areas for today's busy traveller.

PUCCI'S REMEDY

- At the first sign of profitability, hire back the same people, plus some. Raise salaries. Start saying, "we're doing well" again. Otherwise, people will perceive Sars and Iraq as convenient excuses to downsize for strategic reasons.

- The service brand of SIA is at very high risk of being perceived as playing the commodities game. Readdress these brand architecture issues, which will become especially important in the context of creating and positioning its budget airline brand.