SINGAPORE AND AIRASIA X HOW AIRLINES CREATE VALUE FOR CUSTOMERS

Albertus Andhika (816960) Frances Guastalegname (698669) Cassandra Tonkin (856101) Lin Qian (901693) Yuhan Shi (816195)

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TABLE OF CONTENTS EXECUTIVE SUMMARY 3 MARKET OVERVIEW 4 AirAsia Overview 4 Airlines Overview 4 MARKET DRIVERS AND FACTORS 6 Market Drivers 6 Key macro-environmental factors 6 MARKET SEGMENTS 8 TARGET SEGMENTS 11 VALUE PROPOSITIONS 14 VALUE DISCIPLINES, TYPES AND SOURCES OF VALUE 15 BUSINESS MODEL PERSPECTIVE 20 AirAsia X – (Cost Leadership Strategy) 20 (Differentiation) 21 Head to Head (AirAsia and Singapore Airlines) 22 CONCLUSION 23 APPENDICES 24 REFERENCES 27

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EXECUTIVE SUMMARY

This report analyses and compares how Singapore Airlines and AirAsia X (as a subsidiary of the AirAsia Group) create value for their customers as part of the -Pacific industry, and whether these organisations actually deliver the value they promise. We begin with an overview of Singapore Airlines, AirAsia X, and the Asia-Pacific airline industry, defining the industry, providing key statistics and key market drivers and factors. We then explore major customer segments in the industry, narrowing to examine how Singapore Airlines and AirAsia segment and target their customers’ needs and value considerations. As both airlines target business travellers, we follow this with an analysis of the types and sources of value offered by each airline, comparing the two airlines’ value propositions for their target customers. Finally, we evaluate and compare Singapore Airlines and AirAsia’s business models and conclude by discussing whether the value offered by each airline is what their end customer receives.

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MARKET OVERVIEW

The Asia-Pacific airline industry is comprised of passenger air transportation through both scheduled and chartered flights, but excluding airfreight travel (MarketLine, 2017b, p.7). It is evident that the industry as a whole has grown substantially in recent years (MarketLine, 2017b, p.7). Profit margins in this industry surged in 2015, making the region the second most profitable airline market, following North America (MarketLine, 2017b, p.7). Possessing total revenues of AUD$212,920.3 million in 2016, the Asia-Pacific airline industry saw a Compound Annual Growth Rate (CAGR) of 9.4% between 2012 and 2016 (MarketLine, 2017b, p.8). Lastly, trend forecasts suggest that performance of the Asia-Pacific airline industry will continue to grow, with an anticipated CAGR of 11.8% between 2016 and 2021 (MarketLine, 2017b, p.8).

AirAsia Overview AirAsia Berhad (AirAsia Group) is one of Asia’s leading Low-Cost Carrier (LCC) airlines, headquartered in , and operating through a network of hubs in , the Philippines, India and (MarketLine, 2017, p. 3). AirAsia Group operates under two brand names – AirAsia, specifically for domestic air transportation service, and AirAsia X for international flights – but there is no difference between them as they both operate as LCCs. As noted by MarketLine in 2017, AirAsia Group possesses a market share of 49% in Malaysia, 22% in Thailand, 8% in Indonesia, 11% in the Philippines and 4% in India (MarketLine, 2017a, p. 23). As of 2017, the AirAsia Group operates flights between 109 destinations across 18 countries (MarketLine, 2017a, p. 5).

Singapore Airlines Overview Singapore Airlines Group operates with a focus on the full-service passenger segment (MarketLine, 2017c, p. 5) where its subsidiary SilkAir serves domestic flights and Singapore Airlines serves international flights. Headquartered in Singapore, Singapore Airlines operates throughout East Asia, South West Pacific, Europe, the Americas, and West Asia and (MarketLine, 2017c, p. 3). The full-service passenger segment is most important to the brand, with this segment generating a total revenue of SGD10,134.2 million in the 2017 financial year (MarketLine, 2017c, p.5).

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Figure 1. Perceptual Map (Singapore Airlines Group and AirAsia Group)

As explained above, the perceptual map shows that Singapore Airlines Group and AirAsia Group are competing in different segments (domestic versus international). Therefore, in this report we will focus on international markets and compare Singapore Airlines with AirAsia X.

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MARKET DRIVERS AND FACTORS

Market Drivers Business travel spending in the Asia-Pacific is anticipated to grow “four times faster than in North America and twice as fast as in Europe” between 2014-2018 (Singapore Tourism Board, 2015, p.2), driving significant demand for air travel in the region.

Key macro-environmental factors The following macro-environmental factors impact the Asia-Pacific airline industry most significantly.

Political and legal Political and legal factors influence whether airlines can operate in certain countries (Yashodha, 2012, p.1). Instead of an Open Skies policy as in Europe, each country has different requirements which can prevent pilots and aircrafts from operating in countries outside their own (Paylor, 2017, p.17). For instance, Indonesia, and the Philippines only permit access to “specific areas and airports", with strictly "off limits" (Driskill 2016, p.54). Such restrictions are particularly damaging for low-cost carriers like AirAsia X if they cannot afford joint ventures and local certifications permitting access.

Economic While 2015’s decline in crude oil prices presented favourable conditions (MarketLine 2017b, p.7), costs are expected to increase in 2018 (Tarrant, 2017, p.5; MarketLine 2017b, p.20). These, along with rising staff costs (MarketLine, 2014, p.16), impact costs for passengers in an industry already “vulnerable” (MarketLine 2017b, p.22) to economic changes such as passenger income levels and fluctuations in exchange rates, inflation and unemployment rates (MarketLine 2017b, p.22; MarketLine 2014, p.15).

Environmental International Air Transport Association (IATA) members, such as Singapore Airlines, are under increased pressure to reduce air travel carbon emissions (IATA, 2017). IAT aims to improve fuel

6 efficiency by a yearly average of 1.5%, to reduce “net aviation carbon emissions by 50% by 2050, relative to 2005 levels”, and to cap net aviation carbon emissions from 2020 onwards (IATA 2017). The pressure is likely to impact passenger costs in the near future as airlines seek more environmentally friendly methods (IATA, 2017).

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MARKET SEGMENTS

According to Royo-Vela and Martinez-Garcia (2010), besides the monetary cost of the travel, several other flight and trip related attributes, such as quality of service, purpose of travel, choice of destination and frequency of travel, can influence air traveller preferences. Based on the study and the demographic, psychographic and behavioural characteristics of the potential customers, the major customer segments of airlines can be divided into four categories as follows:

Table 1. Market Segments of the Asia-Pacific airline industry

Business Traveller

Quality Economic Segment Good deal seeker Premium Business vacationers Business Traveller Traveller

Demographic

Income Below average Average Low to Average Moderate to High

Students, White and blue Professional business people with Occupation manufacturers, self- collar workers, frequent business trips employed families

Psychographics

“I want to get there “My travel as conveniently and allowance is “I place high comfortably as “Price tag is limited. I need to Lifestyle importance on possible. Service everything.” get there on time value-for-money” quality is more and within important than budget.” price.”

Behavioural

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Travel frequency Low (Up to 4 Low (Up to 4 High (approx. 5 Moderate - High times/year times/year times/month (approx. 20 times/ year

Benefit sought Cheapest price Good service, good Price, Luxury, quality of add-on products, convenience, service, less transit reliability convenience, comfort

Purchase occasion Budget holiday, Family holiday Business trips Business trips backpacking, quick getaway

Distance of Domestic International Domestic and Domestic and travel Flights International International Flights Flights

Loyalty status Low Moderate High High

See: O’Connell & Williams (2005) and Singapore Tourism Board (2015).

1. Good deal Seeker (price-sensitive) Passengers in this segment are price-sensitive and, due to their lower trip frequency, they are able to book cheap tickets early. While AirAsia X describes itself as “the best low-cost airline” (AirAsia, 2018a), passengers in this segment tend to perceive little differences between airlines, which means they are less loyal to certain brands, making it hard for the company to achieve long-term value (O’Connell & Williams, 2005, p.17). 2. Quality vacationers (quality service) Quality vacationers are less price sensitive than good deal seekers, but place higher importance on value-for-money. For example, they are more likely to choose the airline that provides better quality service at an affordable price than choosing solely on price (O’Connell & Williams, 2005, p.17). 3. Economic Business Traveller Customers in this segment are middle class consumers who travel frequently for business but are still price sensitive due to limited travel allowances. They seek value in convenience, reliability and affordability (Singapore Tourism Board, 2015, p. 21, 23).

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4. Premium Business Traveller This segment consists of passengers with a high travelling budget. They typically fly several times per month and may outsource the flight ticket booking processes to their assistant. Priorities include high quality service, convenience, comfort and luxury, especially first or which can reflect their high professional status. They are less price-sensitive than other segments (Singapore Tourism Board, 2015, p.21; O’Connell & Williams, 2005, p.17).

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TARGET SEGMENTS

As a recent survey (Alex, 2015) indicates, almost all business travellers across Asia surveyed prioritise convenience of flight times and routes. Both AirAsia X, with many alliances and joint ventures across Asia (AirAsia, 2018f), and Singapore Airlines, with its widespread distribution network (Hitesh, 2018), are able to provide speedy and efficient service for business travellers.

However, differences of the target market can be seen between the two companies mainly due to the different budget of the business customers.

As noted by O’Connell & Williams (2005), male business travellers, who account for 8% of the AirAsia passengers, are more likely to fly frequently with low cost airlines like AirAsia X mainly due to their pereceived value of the budget air ticket and reluctance to pay for full-service fares. Among them, many are self-employed or from small companies with fewer than 100 people, and have tight budgets regulated by a supervisor. Therefore, the ‘Economic Business Traveller’, or the belt tighteners, who account for 17% of all business traveller segment (Alex, 2015, p.21), is the most attractive segment for AirAsia. Based on this, one profile of the chosen target segment is shown below.

Brad, 28 Self-Employed Auditor

Departing from: , Malaysia Travel Destination: , Indonesia Monthly Salary: RM30,000/year (USD$7690/year)

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Amount willing to pay for a flight: RM390 (USD $100) Reason for travelling: one-on-one business meeting Choice of class: Economy Choice of accommodation: Airbnb or hostel Travel frequency: 3-4 times/ month Biggest concern: Price and convenience Buying criteria: ‘I need to get to my destination on budget, conveniently and on time.’

In contrast, those who come from the managerial level of larger enterprises (more than 100 employees), are middle or upper-middle class (Hitesh, 2018; O’Connell & Williams, 2005) and have more freedom to choose their flight service (Alex, 2015), are more likely to travel with Singapore Airlines. They would prefer to pay more for quality service, reliability, comfort and bonuses such as separate beds, leather seats and LCD TVs, which are features in Singapore Airlines’ business class service. Therefore, the ‘Premium Business Traveller’, or service seekers, who account for 34% of all business travellers (Alex, 2015, p.21), is the most attractive segment for Singapore Airlines. Based on this, one profile of the chosen target segment is shown below.

Julie, 42 Auditing Manager from PwC

Departing from: Kuala Lumpur, Malaysia Travel Destination: Jakarta, Indonesia Monthly Salary: RM80,000/year (USD$20508/year) Amount willing to pay for a round-trip flight: RM3900 (USD $1000) Reason for travelling: monitoring the process of one overseas auditing project Choice of class: Business

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Choice of accommodation: four-star hotel Travel frequency: 3-4 times/ month Biggest concern: Service quality, comfort, quietness and productivity Buying criteria: ‘I expect the highest level of service and features.’

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VALUE PROPOSITIONS

Table 2. Value Proposition (AirAsia X and Singapore Airlines)

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VALUE DISCIPLINES, TYPES AND SOURCES OF VALUE

By applying Treacy and Wiersema's (1992) value disciplines, we can compare how AirAsia and Singapore Airlines’ deliver value on scales of customer intimacy, operational excellence and product leadership (Treacy and Wiersema, 1992, p.2). Treacy and Wiersema argue leading organisations have typically narrowed their focus to deliver customer value by excelling in one of these disciplines rather than competing across all three (1992, p.2). These disciplines are explored in detail below.

Operational excellence This discipline focuses on providing “reliable products or services at competitive prices” and with “minimal difficulty or inconvenience” (Treacy and Wiersema, 1992, p.2). Singapore Airlines competes in this discipline with its young fleet (80 month old planes versus the industry average of 148 months), which means fewer maintenance problems and costs, less compensation for flight cancellations or delays, greater fuel efficiency and a “higher utilisation rate” - 13.7 hours of flight time compared to the industry average of 11.3 hours per day (Heracleous and Wirtz, 2014, p.157). Additionally, employees earn modest salaries yet are “highly productive” and motivated by potential bonuses if the company performs well (Heracleous and Wirtz, 2014, p.156, p.159). Singapore Airlines is also conservative behind the scenes, reducing costs for anything unrelated to their passengers such as their modest headquarters (Heracleous and Wirtz, 2014, p.159). Singapore Airlines’ operating costs resemble those of budget carriers (Heracleous and Wirtz 2014, p.156), making it a strong competitor in the operational excellence discipline. However, while this helps provide functional and cost/sacrifice value to premium business travellers by reducing risks and transporting them to their destination smoothly, it is not Singapore Airlines’ core value discipline.

Similarly, AirAsia X is moderately strong in operational excellence, but it is not always punctual and reliable (Smith, 2018). AirAsia X focuses on cost leadership, offering "low-cost, point-to-point service between midsize cities and secondary airports", with its “no frills” culture and a primarily “single-class service with no amenities” (Yashodha 2012, p.11166). While there are some available extras (discussed below), these are optional because AirAsia X’s core offering is “affordable air travel” (Yashodha, 2012, p.11167). The company has a ticketless services to decrease booking costs and complexity, a variety of distribution channels, a “quick turnaround of 25 minutes” and a high

15 flight frequency, and adaptable, flexible employees who perform “various roles” (Yashodha, 2012, p.11166), helping maintain low production costs and operational excellence. However, while cheap, AirAsia X is not always reliable, reducing the functional and cost/sacrifice value it offers its economic business travellers. To ensure low costs, AirAsia X utilises all fleets to full capacity (AirAsia 2018g). However, factors such as weather impact airline punctuality and aircraft condition, and AirAsia X is less punctual than its passengers may like. According to OAG Aviation, AirAsia Philippines and Indonesia are punctual 58% and 56.8% of the time, respectively (Smith 2018), while AirAsia Malaysia’s punctuality rate is 66.9% compared with Singapore Airlines’ 83.5% rate (OAG Aviation Worldwide Limited, 2018). For AirAsia’s core customers – economic business travellers, such as Brad, travelling on a budget for work – punctuality and reliability can be crucial, with delays appearing unprofessional and impacting travel budgets and schedules. As noted by AirAsia itself, passengers are sometimes refunded for cancellations and delays over 3 hours (AirAsia, 2018h, AirAsia 2018c). While refunds can help, such compensation cannot bring back time, which can be critical for business travellers. To excel in functional and cost/sacrifice value through operational excellence, AirAsia X needs to improve its flight punctuality and reliability to reduce passengers’ risk of being late.

Product leadership Product leadership refers to “leading-edge products and services that consistently enhance the customer’s use or application of the product, thereby making rivals’ goods obsolete” (Treacy and Wiersema, 1992, p.3). Singapore Airlines endeavours to “introduce new services to sustain its positioning as the industry leader” (Heracleous and Wirtz, 2014, pp.162-63), and has introduced “high-risk” innovations now accepted as industry norms such as “free alcoholic drinks onboard, free headphones to watch movies, individual video-on-demand for all classes and book-the-cook services” (Heracleous and Wirtz, 2014, p.162). While exciting innovations like ‘book-the-cook’ add hedonic and symbolic value for premium business travellers, these passengers also seek great customer service and reliability, which is not just about product leadership. Singapore Airlines has also implemented a revenue management system used by other airlines to reduce costs and risks (Heracleous and Wirtz, 2014, p.162). As such, this discipline is not their core discipline, but one of moderate strength.

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Although online booking and ticketless innovations have been linked with AirAsia (AirAsia 2018a), AirAsia X focuses primarily on budget fares and low operating costs (Yashodha 2012, p.11166), which is difficult when trying to offer product leadership and innovation (Treacy and Wiersema, 1992, p.3; Heracleous and Wirtz, 2014, p.151). Innovation requires “significant resource investments”, while cost leadership involves “cutting costs wherever possible while maintaining adequate quality" (Heracleous and Wirtz, 2014, p.151). Offering primarily a “single class service”, AirAsia X focuses on low operating costs while transporting passengers “from point A to point B” without “luxuries or frills” like the meals, drinks and inflight entertainment of a full cost carrier (AirAsia 2018g). As such, AirAsia X is competent in this value dimension, focusing on functional and cost/sacrifice value for economic business travellers through budget fares and “lean, simple and efficient” operations (AirAsia 2018a).

Customer intimacy Customer intimacy involves targeted segmentation and “combining detailed customer knowledge with operational flexibility [to] respond quickly to almost any need” (Treacy and Wiersema, 1992, p.2). Singapore Airlines excels in this, segmenting and “tailoring offerings to match the demands of those niches” and responding to individual needs (Treacy and Wiersema, 1992, p.2). While Singapore Airlines has some standardisation, such as cabin crew appearance, they also offer symbolic and experiential value through personalisation, such as greeting high-tiered frequent fliers by name and bringing them their favourite wine without request (Heracleous and Wirtz, 2014, p.164). For premium business travellers who are willing to pay extra for greater comfort, convenience and quality service, this is where Singapore Airlines provides the most value. Staff are trained to anticipate passengers’ needs and “impress” by fulfilling unexpressed requests, such as tending to ill passengers or assisting passengers travelling with children (Heracleous and Wirtz, 2014, p.164). In their personalised treatment of passengers, Singapore Airlines segments them and tailors their service to match their needs accordingly, providing experiential and symbolic value for premium business travellers while simultaneously increasing customer loyalty and reducing customer acquisition costs (Heracleous and Wirtz, 2014, p.157).

While AirAsia X offers semi-personalised, optional extras, these are additions to its basic, economy class “low fare” service (AirAsia 2018d), which can be added for “a small fee” (AirAsia 2018d).

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These extras are available to any passenger willing to pay approximately USD$15-54 extra and include options such as seat selection, a meal, , up to two changes of date or time and express boarding and check-in (AirAsia 2018d). While these extras can be considered responses to different needs within AirAsia X’s segments and can offer experiential and cost/sacrifice value, they are extensions of the basic, functional service on offer, rather than personalised, targeted options designed to “respond quickly to almost any need” (Treacy and Wiersema, 1992, p.2), as with Singapore Airlines. Furthermore, the costs of these extras can be ambiguous, with special terms and conditions (AirAsia 2018e) potentially decreasing their value if their economic business travellers exceed their budget with hidden costs (thereby reducing cost/sacrifice value). Thus, customer intimacy levels at AirAsia X are competent, but not their strong point.

Summary Singapore Airlines seeks differentiation by remaining competitive across operational excellence and product leadership, and excelling in customer intimacy. Its quality service is based on excellent customer intimacy, evident through personalisation and responding to passenger needs. Along with its premium service, Singapore Airlines has strong operations and offers luxuries premium business travellers (such as Julie, the Auditing Manager for PWC) are willing to pay for to make their flight more enjoyable and comfortable (thereby demonstrating some product leadership). As evident in Table 3, Singapore Airlines’ core value discipline is customer intimacy, but value is also evident through operational excellence and product leadership, meaning passengers can gain symbolic, experiential and cost/sacrifice types of value.

Meanwhile, as shown below in Table 3, AirAsia X is not overly strong in any of the disciplines, but its low costs are maintained through its moderate degree of operational excellence. By keeping costs to a minimum, AirAsia X offers affordable flights for its target passengers – economic business travellers, such as Brad the self-employed auditor – because, unlike premium business travellers, factors such as price, convenience and time are more important than service (customer intimacy) and luxuries (product leadership). These customers prioritise travelling to their destination conveniently and cheaply, seeking functional and cost/sacrifice value types. However, AirAsia is not always reliable and punctual, so some of this potential value is reduced (Smith 2018).

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Table 3. Value Disciplines (AirAsia X versus Singapore Airlines)

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BUSINESS MODEL PERSPECTIVE

Singapore Airlines delivers their value proposition to customers by providing high quality air transportation services throughout and beyond the Asia-Pacific region. In order to deliver this kind of service, Singapore Airlines provides value through their value disciplines: excellent customer intimacy and moderately strong operational excellence and product leadership. In comparison, AirAsia’s value proposition is delivering low fare air transportation to their customers with destinations mostly in Asia-Pacific. The different value propositions offered by each airline demonstrate distinct business models.

AirAsia X – (Cost Leadership Strategy)

Figure 2. AirAsia X’s Pricing strategy

As shown in Figure 2 and AirAsia X’s Business Model (See: Appendix 2), AirAsia implements cost-leadership strategies to ensure their low-cost operations, so AirAsia X can sell the cheapest fares to their target customers, economic business travellers. AirAsia X’s low fares create small profit margins so, to gain more profit, AirAsia X charges passengers additional fees for add-on, in-flight services. Further, the low fare strategy also indicates that AirAsia X’s pricing objectives were derived by internal orientation to boost sales volume. In general, there are six key factors that affect AirAsia X’s key resources and cost structures in their business model which are (AirAsia, 2018g): high

20 aircraft utilisation (AirAsia ensures that their aircraft are flying as much as possible during a day), no frills (passengers buy only their seat and other services such as assigned seating, food and drinks are excluded), streamlined operations (AirAsia only has one seating class and a single type of aircraft which helps them to reduce the complexity in managing the aircraft’s operation), secondary airports (which are cheaper than premium airports) and a lean distribution system, where most of the tickets are primarily sold through AirAsia’s website. AirAsia’s website can be seen as an independent sales force since it focuses on selling cheap fares. In order to generate income, AirAsia X receives their income through the sale of add-on, in-flight services, low fare tickets and advertising. In order to maintain its customers, AirAsia X also implemented a frequent flyer program to increase customer loyalty.

Singapore Airlines (Differentiation)

Categorisation Singapore Airlines AirAsia X

Class of Seating Basic Economy

Price US$ 390 US$ 29.30

Facility 35kg baggage allowance, No facility (Add on +US$ 54.72 meals, in-flight entertainment, for 20kg baggage allowance, 1 seat selection meal and seat selection, no in- flight entertainment)

Policy Cancellation and Itinerary Cancellation and Itinerary change is allowed change is not allowed

Figure 3. One Ticket Comparison between Singapore Airlines and AirAsia X)

As evident in Figure 3 and Singapore Airline’s Business Model (See: Appendix 1), Singapore Airlines implements their differentiation strategy through giving a high quality in-flight experience to their customers, who are mainly premium business travellers. Singapore Airlines offers full service to their customers, with fares driven by a skimming price strategy. As evident in their key resources (See: Appendix 1), one of the features provided by Singapore Airlines is the Companion App, which allows customers to review the video and audio content available on board before their flight and to create pre-selected favourites lists (Singapore Airlines, 2017). Singapore Airlines has also

21 committed to acquiring new -900s, Boeing 777-9 and 787-10 aircraft, which have the latest technology in the market (Singapore Airlines, 2017). Singapore Airlines is also collaborating with their subsidiary (see: Appendix 3), which consist of travel companies and aircraft maintenance companies to increase their entry barriers and bargaining position relative to suppliers as well as to ensure the stability of their operational costs and provide more benefits to their customers, such as discounts on five-star hotels (Singapore Airlines, 2017). Singapore Airlines has also acquired other airline companies in other countries to help create joint ventures, therefore increasing connectivity and their available destinations. To strengthen customer relationships, Singapore Airlines offers their frequent flyer program, KrisFlyer, and the PPS Club, for KrisFlyers who spend more than SG$25,000 accumulatively (Singapore Airlines, 2018).

Head to Head (AirAsia and Singapore Airlines) Both airlines target business travellers, yet they offer different benefits to different segments of business travellers. One of AirAsia X’s key activities is flight schedule management, where AirAsia X utilises all of its fleets in full capacity, which results in only a 25-minute turnaround time to increase passenger volume (AirAsia, 2018g). Meanwhile, Singapore Airlines prioritises the comfort of their passengers, with an average 60-minute turnaround time. However, the lower turnaround time may impact airline punctuality. According to OAG Aviation, AirAsia Malaysia’s punctuality rate was 66.9% compared with Singapore Airlines’ 83.5% punctuality rate (OAG Aviation Worldwide Limited, 2018). For business travellers, flight punctuality is particularly important, and by analysing the business models of both airlines, the advantages and disadvantages of the airlines can be easily identified.

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CONCLUSION

For a LCC, AirAsia X offers economic business travellers some value through its low fares and relatively large network. Its quick turnaround time and “no frills” culture enable passengers to travel cheaply, fairly conveniently and quickly throughout the Asia-Pacific. With its cost leadership and moderate operational excellence, AirAsia maintains low fares for its passengers and can provide good quality service for the price paid. However, as AirAsia X is not always punctual and reliable, some of this potential value can be lost through flight cancellations and delays. While a viable option for economic business travellers, AirAsia X could provide greater value. In contrast, Singapore Airlines offers premium business travellers high quality service through its high levels of customer intimacy. Singapore Airlines provides value through personalised service and moderate levels of product leadership and operational excellence. Provided premium business travellers are willing to pay for it, they are likely to find great value in Singapore Airlines’ reliability, flight convenience, luxurious comfort and premium customer service.

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APPENDICES

APPENDIX 1: SINGAPORE AIRLINES BUSINESS MODEL

KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES PROPOSITION RELATIONSHIP SEGMENTS - Food supplier - Flight - Air - Self-service - Premium and Scheduling transportation kiosk check-in Business Entertainment and services with - Automated Bag Traveler Industries maintenance the highest drop - Aircraft - Baggage quality and - Refund for Maintenance management world delay Services - Online destinations - Call Centre Companies ticketing - Automation (Subsidiary of Service Singapore - Frequent Flyer Airlines) Program - Airport (Civil (KrisFlyer and Aviation PPS Club) Authorities) - Ground - Aircraft Services Manufacturer (Airport (Airbus and Lounge - Boeing) SilverKris) - Fuel Supplier KEY CHANNELS - Travel Agent RESOURCES - Online - Multi-Hub ticketing Strategy (Singapore through Airlines acquiring other Website) airlines - Sales Office - Multiple type of - Travel Agent class seating - Premium Airport - Technology (i.e. Companion App) - Lean Human Resources - Singapore Airlines Online Ticketing COST STRUCTURE REVENUE STREAMS - Airport lounge expenses, frequent flyer programme - Multiple type of class seating cost, computer reservation system booking fees, from basic premium, business advertising expenses, reservation system IT cost, and first class. Aircraft maintenance and overhaul costs, Inflight meals and other passenger costs, Airport, and overflying charges.

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APPENDIX 2: AIRASIA X BUSINESS MODEL

KEY KEY VALUE CUSTOMER CUSTOMER PARTNERS ACTIVITIES PROPOSITION RELATIONSHIP SEGMENTS - Airport (Civil - Flight - Low Fare - Low Fares - Economy Aviation Scheduling Flight Marketing Business Authorities) and Campaign Traveler - Aircraft maintenance - Refund for delay Manufacturer - Baggage - Call Centre (Airbus) management - Automation - Fuel Supplier - Online Service (Petronas ticketing - AirAsia Big Dagangan Points and Bhd) Mycorporate - Travel Agent program - Web Hosting (Membership (Akamai) Program) KEY CHANNELS RESOURCES - Online ticketing - Single type of (AirAsia aircraft Website) - Single Class - Few Sales Office Seating - Few Travel - Secondary Agent Airport - Lean Human Resources - AirAsia Online Ticketing COST STRUCTURE REVENUE STREAMS - Low operating cost (high aircraft utilization, streamline - Economies of scales (Large operations, secondary airport, few sales office, low quantities of low fares) training cost, maintenance cost, long-term contract with - Additional in-flight services (food, Web Hosting) drinks, baggage, WIFI, pillow) - Advertising

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APPENDIX 3: SINGAPORE AIRLINES SUBSIDIARIES

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REFERENCES

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