Singapore Airlines: Customer Service Innovation
Essay by Yefei Chen • July 10, 2016 • Case Study • 590 Words (3 Pages) • 3,014 Views
Singapore Airlines: Customer Service Innovation
I recommend that Singapore Airlines (SIA) do launch the spacebed project
The decision should be taken because:
- Superior customer service is how SIA differentiate itself among the competitors. To keep “Even-rising customer expectations”, they need to fulfill their commitment and show their devotion to customer service innovation/branding
- SIA has already invested millions for R&D, they will lose those for nothing if they stop
- SIA will be able to compete against BA with this project implementation and won’t lose more customer to the competitor
- Financial analysis shows reasonable return with alternatives taken into consideration
The factors that have impact on the final decision are as follows:
- Financial status difficulty – background issue, can be mitigated via alternatives.
- Ongoing cost of on-broad innovation and investment of $14 billions in new aircraft, which led to the first bank loan in SIA history
- Labor cost kept increasing in 1990s
- Market uncertainty – industry environment, can be overcome via alternatives
- 911 incident impact on general air transportation industry
- High competitive climate with more low-price challengers
- Spacebed decision (In response to BA’s business class new service) – cost scenario analysis
- Install cost of US$ 100 million
- Apply in 45 aircraft
- Raffle class seats reduced from 58 to 50
- Project already announced
We list all the cost impact out for analysis on different scenario about Spacebed project as follows:
Calculation on total revenue/cost with this 45 aircraft:
Scenario 1: drop the project = no change on current operation
Assume $1000 ticket price, 75% passenger seat factor, annual flight number as 120, 48% margin
Total Revenue for Raffle class will be ~$235M
Contribution margin will be ~$113M
Scenario 2: Keep the project, seat factor is down due to market, ticket price and margin increase
Assume $1100 ticket price, 90% passenger seat factor, annual flight number as 120, 50% margin
Total Revenue for Raffle class will be ~$267M
Contribution margin will be ~$134M
Scenario 3: Keep the project, perfect condition
Assume $1100 ticket price, 100% passenger seat factor, annual flight number as 120, 50% margin
Total Revenue for Raffle class will be ~$297M
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