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SINGAPOREAIRLINESAND

AIRASIAXHOWAIRLINESCREATEVALUEFOR

CUSTOMERS

AlbertusAndhika(816960)FrancesGuastalegname(698669)

CassandraTonkin(856101)LinQian(901693)YuhanShi(816195)

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TABLE OF CONTENTS EXECUTIVE SUMMARY 3MARKET OVERVIEW 4

AirAsia Overview 4Singapore Airlines Overview 4

MARKET DRIVERS AND FACTORS 6Market Drivers 6Key macro-environmental factors 6

MARKET SEGMENTS 8TARGET SEGMENTS 11VALUE PROPOSITIONS 14VALUE DISCIPLINES, TYPES AND SOURCES OF VALUE 15BUSINESS MODEL PERSPECTIVE 20

AirAsia X – (Cost Leadership Strategy) 20Singapore Airlines (Differentiation) 21Head to Head (AirAsia and Singapore Airlines) 22

CONCLUSION 23APPENDICES 24REFERENCES 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 Asia-Pacific airline 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.

4

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 Malaysia, and operating through a network of hubs in Thailand, the Philippines,

India and Indonesia (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 Africa

(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.

6

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, Laos and the Philippines only permit access to “specific areas and

airports", with Manila 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

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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

Segment Good deal seeker Quality vacationers

Business Traveller

Economic Business Traveller

Premium Business Traveller

Demographi c

Income Below average Average Low to Average Moderate to High

Occupat ion Students,

manufacturers, self-employed

White and blue collar workers,

families

Professional business people with frequent business trips

Psy chographi c s

Lifes ty l e “Price tag is everything.”

“I place high importance on

value-for-money”

“My travel allowance is

limited. I need to get there on time

and within budget.”

“I want to get there as conveniently and

comfortably as possible. Service quality is more important than

price.”

Behavioura l

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Trave l f r equency Low (Up to 4 times/year�

Low (Up to 4 times/year�

High (approx. 5 times/month�

Moderate - High (approx. 20 times/

year�

Bene f i t sought Cheapest price Good service, good add-on products,

less transit

Price, convenience,

reliability

Luxury, quality of service,

convenience, comfort

Purchase o c cas ion Budget holiday, backpacking, quick

getaway

Family holiday Business trips Business trips

Distance o f t rave l

Domestic International Flights

Domestic and International

Flights

Domestic and International Flights

Loyal ty s ta tus 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

business class 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: Kuala Lumpur, Malaysia

Travel Destination: Jakarta, 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

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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, checked baggage, 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

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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)

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

Categorisation Singapore Airlines AirAsia X

Class of Seating Basic Economy

Price US$ 390 US$ 29.30

Facility 35kg baggage allowance, meals, in-flight entertainment, seat selection

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

Policy Cancellation and Itinerary change is allowed

Cancellation and Itinerary change is not allowed

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committed to acquiring new Airbus A350-900s, 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.

23

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.

24

APPENDICES

APPENDIX 1: SINGAPORE AIRLINES BUSINESS MODEL

KEY PARTNERS - Food supplier

and Entertainment Industries

- Aircraft Maintenance Services Companies (Subsidiary of Singapore Airlines)

- Airport (Civil Aviation Authorities)

- Aircraft Manufacturer (Airbus and Boeing)

- Fuel Supplier - Travel Agent

KEY ACTIVITIES - Flight

Scheduling and maintenance

- Baggage management

- Online ticketing

VALUE PROPOSITION - Air

transportation services with the highest quality and world destinations

CUSTOMER RELATIONSHIP - Self-service

kiosk check-in - Automated Bag

drop - Refund for

delay - Call Centre - Automation

Service - Frequent Flyer

Program (KrisFlyer and PPS Club)

- Ground Services (Airport Lounge - SilverKris)

CUSTOMER SEGMENTS - Premium

Business Traveler

KEY RESOURCES - Multi-Hub

Strategy through acquiring other airlines

- Multiple type of class seating

- Premium Airport

- Technology (i.e. Companion App)

- Lean Human Resources

- Singapore Airlines Online Ticketing

CHANNELS - Online

ticketing (Singapore Airlines Website)

- Sales Office - Travel Agent

COST STRUCTURE - Airport lounge expenses, frequent flyer programme

cost, computer reservation system booking fees, advertising expenses, reservation system IT cost, Aircraft maintenance and overhaul costs, Inflight meals and other passenger costs, Airport, and overflying charges.

REVENUE STREAMS - Multiple type of class seating

from basic premium, business and first class.

25

APPENDIX 2: AIRASIA X BUSINESS MODEL

KEY PARTNERS - Airport (Civil

Aviation Authorities)

- Aircraft Manufacturer (Airbus)

- Fuel Supplier (Petronas Dagangan Bhd)

- Travel Agent - Web Hosting

(Akamai)

KEY ACTIVITIES - Flight

Scheduling and maintenance

- Baggage management

- Online ticketing

VALUE PROPOSITION - Low Fare

Flight

CUSTOMER RELATIONSHIP - Low Fares

Marketing Campaign

- Refund for delay - Call Centre - Automation

Service - AirAsia Big

Points and Mycorporate program (Membership Program)

CUSTOMER SEGMENTS - Economy

Business Traveler

KEY RESOURCES - Single type of

aircraft - Single Class

Seating - Secondary

Airport - Lean Human

Resources - AirAsia

Online Ticketing

CHANNELS - Online ticketing

(AirAsia Website)

- Few Sales Office - Few Travel

Agent

COST STRUCTURE - Low operating cost (high aircraft utilization, streamline

operations, secondary airport, few sales office, low training cost, maintenance cost, long-term contract with Web Hosting)

REVENUE STREAMS - Economies of scales (Large

quantities of low fares) - Additional in-flight services (food,

drinks, baggage, WIFI, pillow) - Advertising

26

APPENDIX 3: SINGAPORE AIRLINES SUBSIDIARIES

27

REFERENCES

28

29