FINALPROJECT
MGMTE6020
MAY10,2010
ThedocumentcomparesandcontrastsBritishAirways,SouthwestAirlinesandSingapore
InternationalAirlines;focusingontheirpositioning,brandidentity,segmentationand
performance.
ValuePropositionandPositioning
Initssimplestform,avaluepropositionisthesummationofthebrandsfunctional,emotional
andselfexpressivebenefitsthatbringvaluetothecustomer.1
SouthwestAirlinesvaluepropositionissimplytogetpassengerstotheirdestinationsontime,
atthelowestpossiblecost,andtohavefunwhiledoingit.Thisvaluepropositionissummarized
ontheSouthwestwebsite(www.southwest.com)inthefirstparagraphofthesection,The
SouthwestDifferenceHistoryasfollows:Morethan38yearsago,RollinKingandHerb
Kellehergottogetheranddecidedtostartadifferentkindofairline.Theybeganwithone
simplenotion:Ifyougetyourpassengerstotheirdestinationswhentheywanttogetthere,on
time,atthelowestpossiblefares,andmakedarnsuretheyhaveagoodtimedoingit,people
willflyyourairline.Southwestclearlyarticulatesitsvalueonitswebsiteandothermarketing
andtradematerials.Itsadvertisementsclearlyemphasizecheapflights,areusuallycolorfuland
fun.(Exhibit)FormerChiefExecutiveOfficer,HerbKelleher,waswellknownforhavingfun
anddoingthingsthathispeersmightregardasoutrageous.Anexampleofanoutrageous
incidentwasan arm-wrestling match he had with the Chairman of Stevens Aviation, Kurt
Herwald, in 1992 in the Malice in Dallas, for the rights to use the slogan, Just Plane Smart.
Although Kelleher lost the match, the event generated so much publicity and good will that
Kurt Herwald allows Southwest to continue using the slogan.2
BritishAirways(BA)andSingaporeInternationalAirlines(SIA)ontheotherhanddonothavea
valuepropositionthatemphasizeshavingfun.TheBAvaluepropositionistoprovideits
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customerswithafullfrillsserviceatcompetitiveprices,throughanextensiveroutenetwork.
UnlikeSIA,BAdoesnotproposeavalueofsuperiorservice.BAcapturesthisvalueproposition
ontheAboutBAsectionofitswebsite(www.britishairways.com);BritishAirwaysisafull
serviceglobalairline,offeringyearroundlowfareswithanextensiveglobalroutenetwork
flyingtoandfromcentrallylocatedairports.BAclearlyarticulatesitsvaluebyofferingflights
toatrulyglobalnetworkoflocations.ItservesmoredestinationsthanSIAandSouthwestdo.
Itslowfaresarenotverywellarticulated,asSIAwithitssuperiorservicemanagestooffer
lowerfaresforeachclassforflightsbetweenNewYorkandSingaporeasdetailedinthe
customersegmentationsection.
SIAsvaluepropositionistoofferitscustomerssuperiorserviceatpricesthatcouldrarelybe
matchedbyitscompetitorsprovidingsimilarlevelsofservice.Thevaluepropositionincludes
flyingpassengersinsomeofthesafest,youngestandmostadvancedaircraftfleetsinthe
world.SIAclearlyarticulatesitsvaluethroughthesuperiorservicesthatitprovidestoits
customers.Forexample,SIAmadeapromisetodeliverapassengersbaggagewithinten
minutesuponarrivalinChangiandconsistentlydeliveredonthatpromise.(Ramaswamy,
Modi,pg6)SouthwestandBAdonothavesucharemarkablepromise.SIAdisplayedits
superiorcustomerservicebytryingtomaketheserviceencounterpainless,enjoyable,easy
andrewarding.Forexample,SIAwasoneofthepioneersofelectronicticketingthroughits
website.Tomakeiteasyonthepassengers,thecompanyhadintroducedautomatedcheckin
systemsoncertainflightsthattendedtoattractalargenumberofpassengers.(Ramaswamy,
Modi,pg6)Southwestjustrecentlyintroducedtheearlybirdcheckin,wherepassengersare
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automaticallycheckedinfora$10feeperoneway.SIAleveragedtechnologytoprovideeasier
andmoreconvenientwaysofcheckinginforflights.Passengerscouldalsocheckinby
telephone,fax,SMSandemailinadditiontothetraditioninpersoncheckin.BAand
Southwestdonothavetelephone,fax,SMS,andemailcheckinoptions.
Southwestpositionsitselfinthecompetitivelandscapebypursuingabusinessmodelthatis
contrarytothestatusquo.Southwestavoidsmajorairportswheneverpossibletoprevent
directcompetitionwithotherwellestablishedairlines,hasalowcostbusinessmodelthat
excludesservingfoodandprovidinganyformsofcomfortonboarditsaircrafts.Italsooperates
onlyonetypeofaircraft,theBoeing737,toreducethecostoftrainingandmaintenance,as
pilots,engineersandcabincrewonlyhavetobetrainedonthesameaircraft.(Seemapsbelow)
AccordingtoBA,Weareoneoftheworldsleadingscheduledpremiuminternationalairlines.
OurprincipalplaceofbusinessisHeathrow,oneoftheworldspremierairportlocations,which
servesalargegeographicalareawithacomparativelyhighproportionofpointtopoint
business.3BAspositioningisdistinctfromSWsasitpositionsitselfasapremium
internationalairline,whichSWdoesnotdo;BAalsodoesnothavealowcostmodel,operates
differenttypesofaircraftandservesanassortmentoffoodanddrinksonitsflights.However,
thepointtopointbusinessalsoappliestoSW.(Seepositioningmapsbelow)
SIApositionsitselfastheworldsbestserviceintheairandontheground,committedto
serviceandproductinnovation.AccordingtoSIAChairman,StephenLee,Weareabsolutely
committedtocontinuingourquesttodeliveryoutheworldsbestserviceintheair,andonthe
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ground.AsyouwillhaveseenwiththeintroductionoftheA330,anditsnewmediumhaul
cabinproductsthisyear,ourcommitmenttoproductandserviceinnovationwillnotdiminish
asaconsequenceofthedifficulttimes.4BAandSWdonotpositionthemselvesastheworlds
bestservice,andarenotfocusedoncommitmenttoproductandserviceinnovation.SIAonthe
otherhanddoesnotpositionitselfasalowcostairlinelikeSWandoperatesdifferenttypesof
aircraft,includingtheverymodernA380providingevenmorecomfortandluxuryforits
passengers.LikeBA,SIAalsoservesavarietyoffoodanddrinksonboarditsflights.(Seemaps)
Positioningmap#1:
Positioningmap#2:
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BrandIdentity
ThebrandidentitybeingconveyedbySouthwestisthatofalowfareandfunairline.SW
encouragesitsstafftohavefunwhileservingcustomers.Anexampleisaflightattendantwho
singstheinflightinstructionstopassengers.SuchbehaviorisuniquetoSWasBritishAirways
SingaporeAirlinesandotherairlinesdonotencouragesuchanticsfromtheircabincrew.
However,suchbehaviorcreatesanatmosphereoffunandlightheartednessforpassengersand
couldhelppromotecustomerretention.SWsbrandidentityoflowfaresandfunissuccessfully
displayedonitswebsite,advertisementsandbrochuresbyusingbrightcolours,funnyphrases,
suchasding,exclusivelimitedtimediscountsandadvertsrelatingtodiscountsandlowfares.
TheBritishAirwaysnameelicitsreliabilityandreassurance;anamecustomerscantrust.Asa
nationalflagcarrier,traditionalBritishvaluesalsoaccountforafundamentalpartoftheBA
brandidentity.Itsreliabilityisreflectedinthescaleofoperationsandpresenceinthemarket
placethattheBritishAirwaysinfrastructureallows.Thechoiceofdestinationsandsizeofthe
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fleetmeancustomersvalueBritishAirwaysschedulesaswellastrustingtheairlinetohave
enoughplanestokeepaservicerunning.Reassuranceisunderpinnedbysafetyandsecurity,
frombaggagehandlingtopunctuality,cleanlinessandschedules,throughtoproductsand
services.Theairlinesheritage,qualitystandardsandattentiontodetailalsosupportsthis.5BA
successfullyintegratesitsBritishheritagebyusingthecoloursoftheBritishflag(theUnion
Jack)blue,redandwhiteonitswebsite,advertisements,brochures,planes,airportterminals,
officesandothercustomertouchpoints.Thewidechoiceofdestinationsandsizeoffleetare
displayedclearlyontheBAwebsite,advertisementsandbrochures.
ThebrandidentityofSingaporeAirlinesisoneofluxuryandsuperiorservice.Accordingto
HarvardBusinessSchoolprofessor,RohitDeshpande,"They'vecreatedaluxurytravel
experienceandretainedtheglamouroflongdistancetravel.It'salmostretro,"saysDeshpande,
whoauthoredandteachesaHarvardBusinessSchoolcaseontheairline.Ofcoursecustomers
havetopaymoreforthisexperience,butDeshpandesaysmostdon'tmind.Flyinghasbecome
sostressful,they'rewillingtopayalittlemoreforabetterexperience.6SIAintegratesthis
luxurybrandthroughitswebsite,advertisementsandbrochuresthathaveluxurious
photographsofpalatialbuildings,welldressedstewardessesandnicesceneries.
TypesofCustomersTargetedandCustomerSegmentation
SouthwestAirlinestargetsabroadgroupofcustomerswhowantcheapnofrillsflights.This
groupincludescustomerstravellingforbusinessorpleasure.Theairlinefocusesparticularlyon
businesstravelerswhotakeseveralshorthaulflightsbetweendestinationsthatSouthwest
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serves.ThesefrequentfliersarecrucialtothesuccessofSouthwestsstrategyastheairline
reliesonoperatingseveralshorthaulflightsadaybetweenlocations.Also,Southwestdoes
notattempttosegregateitscustomersintodifferentgroupslikeBritishAirwaysandSingapore
InternationalAirlinesdo.Itsaircraftsarenotsegregatedinanyway;passengerscanchooseany
freeseatswhentheyboardaSouthwestaircraft.ThisabilitythatSouthwestcustomershaveto
chooseanyfreeseatsdifferentiatesSouthwestfromBritishAirwaysandSingaporeAirlines.
Thelattertwoairlinesdonothavethispolicy.
BritishAirways(BA)andSingaporeAirlinesontheotherhandtargetabroadergroupof
customersincludingstudentsonatightbudget,businesstravelers,leisuretravelersandvery
wealthytravelers.Inaddition,theybothhavecargoservices.BAalsotargetscustomers
interestedindomesticflightswithintheUnitedKingdom,shorthaulflightswithinEurope,and
longhaulflightstointernationaldestinations.SingaporeAirlinesontheotherhandmainly
targetscustomersinterestedinbothshorthaulandlonghaulinternationalflights.Thechoice
wasactuallypredeterminedforSIAsinceSingaporewasaverysmallcitystatewitha
geographicareaofonly240squaremiles,smallerthanNewYorkCity!(Ramaswamy,Modi,pg
5)Theseairlinescaterforthedifferentgroupsbysegmentingtheircustomersintotravel
classes.SingaporeAirlinesfurthersegmentsitseconomyclassticketsintoSuperDeals,Sweet
Deals,FlexiSaverandFlexi,whileBAsegregatesallitsticketsintolowestpriceandflexible
conditions.Thesedifferenttickettypesconfervaryinglevelsofflexibilitytothetickets.
BritishAirwaystransatlanticandotherlonghaulflightsaresegregatedintodistinctclasses:
First,Business/Club,PremiumEconomyandEconomy.ItsdomesticandEuropean
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flightsaresegregatedintoonlytwoclasses:Business/ClubandEconomy.Thefirstclass
ticketsarethemostexpensive,followedbytheBusiness/Clubtickets,premiumeconomyand
Economyticketsarethecheapestofthefourclasses.Forexample,thelowestfarefromNew
YorkJohnFKennedyAirporttoSingaporeChangiAirportinMay2010forafirstclassticketis
$19,011.28,forabusiness/clubclassticket$11,105.28,forapremiumeconomyticket
$3,118.28andforaneconomyticket$1,781.28.Atypicaleconomyfareis9.4%ofatypicalfirst
classfare.Thepercentagedropsto4.5%foratripfromNewYorktoLondon.
SIAattemptstosegmentitsowncustomersbydividingthecabinsonitsaircraftsintothe
followingclasses:Suites,First,BusinessandEconomy.SuitesareexclusivetotheSIA
AirbusA380fleet.Forexample,thefarefromNewYorkJohnFKennedyAirporttoSingapore
ChangiAirportinMay2010forafirstclassticketis$12,281.18,forabusinessclassticket
$7,137.18andforaflexisavereconomyticket$1,547.18.Thecostoftheeconomyticketinthis
caseis12.6%ofthecostofthefirstclassticket.Thedifferenceinfaresbetweenafirstclass
ticketandaneconomyticketisnarrowerforSingaporeAirlinesthanforBritishAirways.
However,thewidedisparityinthefaresforthedifferentclassesforbothairlinesisaneffective
wayofsegmentingcustomersbasedonwhatcustomerscanafford,whatcustomersarewilling
topay,andthelevelofluxurycustomerswantwhileflying.
FinancialPerformance
SouthwestwastheonlyairlineintheUnitedStatestomakeaprofitduringtherecent
downturn.ForthethreemonthsendedMarch312010,Southwestsnetincomewas$11
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millionanditsnetincomepersharewas$0.01.ForthethreemonthsendedDecember312009
SingaporeAirlineshadaprofitof$415.4millionwithabasicearningspershareof$0.34.British
Airwaysontheotherhandhadanoperatinglossof111million(approximately$171million)
fortheninemonthsendedSeptember302009.
Inanindustrynotoriousforlossmakingentities,thethreeairlineshavebeenquitesuccessful.
Forthefinancialyearsendedin2007,2008and2009onlyBApostedalossin2009.
SingaporeAirlinesNetIncome(NI)decreasedby3%between2007and2008,whiletheNIfor
BAincreasedby138.8%andtheNIforSouthwestdecreasedby72.4%.From2008to2009SAs
NIdecreasedafurther46.4%,whiletheNIforBAdecreased149.3%andthatforSWdecreased
afurther44.4%.BAwastheonlyoneamongthethreeairlinesthathadanincreaseinnet
incomebetween2007and2008,whilethedecreaseexperiencedbySWwasseveraltimesthat
experiencedbySingaporeAirlines.Thedecreasesufferedbyallthreeairlinesbetween2008
and2009wasmainlyduetothedownturnintheglobaleconomy.ThehugelosspostedbyBA
in2009wasexacerbatedbythelargeinvestmentthatBAmadeintheHeathrowTerminal5.
TotaloperatingexpensesforSIAincreasedby5.1%between2007and2008,whilethatforBA
decreasedby0.7%andthatforSWincreasedby16.6%.For2008to2009theoperating
expensesforSIAincreasedbyafurther9%,whilethatforBAincreasedby16.9%andthatfor
SWdecreasedby4.6%.Theincreasesanddecreasesinexpensesmaybepartlyrelatedto
increasesanddecreasesinrevenuefortheairlines,howevertheincreasesinexpensesare
greaterthantheincreasesinexpensesinmostcasesresultingindecreasesinnetincome.
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LiquidityRatio:Shorttermcreditorspreferthecurrentratiotobegreaterthan1asarelatively
highvalueindicatesthatthefirmisliquid.TheBAratiodecreasedfrom0.9in2008to0.6in
2007,indicatingthatcurrentliabilitiesaregreaterthancurrentassets.BAwillnotbeableto
payallshorttermliabilitiesfromcurrentassets.SWandSIAareinmuchbetterpositions.The
SIAratioisconsistentlygreaterthan1,indicatingthatitisquiteliquid.
Profitability/PerformanceRatios:Theprofitandoperatingmarginsforthethreeairlines
decreasedfrom2007to2009reflectingtheglobaldownturn.SIAhashealthiermarginsthan
SWandBA.ThenarrowSWmarginsmightbedrivenbyitslowcostbrandimage.TheSIAluxury
brandmaycontributetoitsbettermargins,whiletheBApremiumbrandingmightcontributeto
itsmargins.SIAhasReturnonAssets(ROA)ofbetween9%and5%from2007to2009,while
SWhasROAof3.8%to0.7%andBAhasROAof2.7%and3.4%.Areturnof5%andhigheris
regardedasgood.ForthesameperiodSIAhasaReturnonEquity(ROE)ofbetween14.2%and
7.9%,whileSWhas9.3%to1.8%,andBA12.6%to19.4%.Aratioof10%andhigheris
regardedasgood.
Leverage:Allthreeairlineshavereasonabledebtratios,withSIAbeingthemostconservative.
SIAcaneasilytakeonmoredebtwithoutbecomingtoorisky.
EffectivePracticesandRecommendations
PhysicalEnvironment:SingaporeInternationalAirlines(SIA)highclassphysicalenvironments
foritscustomers.Whilewaitingfortheirflights,firstandbusinessclasscustomerscanrelaxin
theluxuriousairportlounge.TheSilverKrisLoungethatSIAoffereditsFirstandRafflesclass
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(businessclass)passengerscouldbebestdescribedasanoasisofpeaceandquietamidstthe
hustleandbustleoftheairport.Itfeaturedanenvironmentwithplusharmchairs,deeppile
carpeting,aquariums,tropicalgardens,andadcorthatincludedoriginalpaintingsby
Singaporeartists.Topofthelinebusinessequipmentssuchascomputers,faxservices,anda
stocktickerwerestandardamenities.Itwasoneofthelargestandmostluxuriousairport
loungesintheworld.(Ramaswamy,Modi,pg6)PPSClubmembersarealsoeligibletousethe
SilverKrisLoungesaroundtheworld.Anotherlounge,theKrisFlyerGoldLounge,catersfor
KrisFlyerEliteGoldmembers. WiththeseloungesSIAprovideseligiblecustomerswiththe
sameexceptionalserviceonthegroundastheywillgetintheair.SIAalsomaintainsthefeeling
ofluxurywiththequalityofdcorandfacilitiesinitsaircrafts;particularlyinthesuites,first
classandbusinessclasscabins.Southwestairlines(SW),doesnothaveairportloungesforits
customersassuchfacilitiesarenotpartofSWspositioningandbrandidentity.BritishAirways
likeSIAhasairportloungesforitsFirstandBusinessClasscustomers.SilverandGoldmembers
oftheBritishAirwaysExecutiveClubarealsoallowedtousethelounges.HowevertheSIA
loungesareregardedassomeofthemostluxuriousintheworld.
People: Southwestspeoplecouldbeseenasacompetitiveedgefortheairline.SWbelieves
thatitsemployeesareitskeypriority;thatifyoutreatyouremployeeswell,theywilldeliver
excellentcustomerservice.SWemployeesworkasacoherentteaminprovidingexcellent
customerservice.Ifthereisaproblememployeestrytoresolveitbeforeitescalates.
SouthwestisconsistentlyamongtheleastcomplainedaboutcarriersintheUnitedStates.If
somethinggoeswrong,theairlinesemployeesusuallyfixitbeforeyouhaveachancetopick
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upthephoneorwritealetter.ItsallpartofSouthwestslegendarycorporateculture,which
competitorshavetried(butsofar,failed)tocopy.7SingaporeAirlinesemployeesalsoprovide
excellentcustomerservicebutatamuchhigherprice.BritishAirwaysemployeeshavenotbeen
notedforprovidingexcellentcustomerservice.
ProductElements:BothBritishAirwaysandSingaporeAirlinessuccessfullybuildonthecore
product,flyingineconomy(coach),tovalueaddedoptions,suchaspremiumeconomy,
businessclassandfirstclass.Theseotherclassesprovideadditionalbenefitsforcustomerswho
arewillingtopayforthebenefits.SouthwestAirlinesonlyprovidesthecoreservice;itdoesnot
provideanyadditionalservices.
FeedbackChannels
SouthwestAirlineslistenstocustomersbyprovidingvariousfeedbackchannelsincluding,
facebook,twitter,YouTube,Flickr,andalsobycontactingSWcustomerbytelephone,email
andtraditionalmail.Theplethoraoffeedbackchannelsmakeitveryeasyforcustomersto
providepositiveornegativefeedback.Southwestalsohasablog,NutsaboutSouthwest
whereitexchangesideaswithcustomers.Itusesthisblogtogetcustomeropinionsregarding
certainthingsitsthinkingaboutdoing.Thiscouldbeaneffectivewayofsamplingcustomer
opinionssothattheairlinedoesnotimplementanyhugelyunpopulardecisions.However,the
effectivenesswilldependonhowmanySouthwestcustomersactuallyactivelyfollowtheblog.
Withmorethan56groupsonFacebookalone,withthelargestboastingarecord45,000
members,Southwesthasprovedthatthedisciplineofinteractionwiththecustomerhas
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evolvedsubstantiallyinrecentyears.AstheOnlineMarketingTeampostsvideosanddiscussion
threadsonnewSouthwestfeatures,servicesandprocedures,thegroupisalsobeingusedto
fostercustomerrelationships.8SuchfactsindicatethatSouthwesteffectivelyusessocialmedia
asafeedbackchannelforlisteningtocustomers.Thevariouswaysthoughwhichcustomerscan
communicatewithSWaredisplayedontheSouthwestwebsite.
BritishAirwayscustomerscanfollowtheairlineontwitter;thereisalsoacontactusoptionon
theBAwebsitewhichallowscustomerstomakecontactbyemailortelephone.Inaddition
thereisagiveusfeedbackoptiononthewebsite.However,thisoptionrestrictscustomersto
specificquestionnairepreparedbyBA.TheBAfeedbackoptionsarenotasrobustasthose
providedbySouthwest.BritishAirway'scustomerrelationsdepartmentcannowclaimtobea
truechampionofthecustomer.Theretentionrateamongthosewhocomplaintocustomer
relationshasmorethandoubled,whilethedepartment'sreturnoninvestment(thevalueof
businesssavedplusincreasedloyaltyandnewbusinessfromreferralsrelativetothe
department'stotalcosts)hasrisen200percent.9TheprecedingquotesuggeststhatBAis
doingagoodjoblisteningtocustomers.
SingaporeAirlinesfeedbackchannelsarenotasrobustasthoseprovidedbyeitherSouthwest
orBritishAirways.SIAhasafeedback/enquiryformonitswebsite;customerscanalsocontact
theairlinebyemailortelephone.ThereisnoevidencethatSIAusessocialmediatolistento
customersorreceivefeedback.
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Endnotes
1. ValueProposition.PositioningStatement.AreTheyReallyDifferent?2005Qtr2.8May
2010<http://www.mbjournal.com/archives/2005/200505.shtml>
2. ExecutivesHerbKelleher.7May2010
<http://www.pbs.org/kcet/chasingthesun/innovators/hkelleher.html>
3. BritishAirways2008/09AnnualReportandAccounts
4. SingaporeInternationalAirlinesAnnualReport2008/09
5. Superbrandscasestudies:BritishAirways.31Oct.2003.8May2010.
<http://www.brandrepublic.com/Industry/Travel/News/194091/Superbrandscasestudies
BritishAirways/>
6. Berinato,Scott.SingaporeAirlines'WinningStrategy.19Aug.2008.8May2010.
<http://blogs.hbr.org/cs/2008/08/singapore_airlines_winning_str.html>
7. SouthwestAirlines.20May2007.9May2010.<http://www.elliott.org/help/southwest
airlines/>
8. Ahuja,Vandana.BuildingLoyaltytheSouthwestWay:LetYourCustomersDrivethe
Discussion.28Jan08.9May2010.
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<http://www.customerthink.com/article/building_loyalty_southwest_way>
9. HowtoProfitFromCustomerServiceRecovery?9May2010.
<http://www.customerexpressions.com/cex/cexweb.nsf/(GetPages)/244bb485721ebb4a85
257012004f8fb4>
Bibliography
a. Ramaswamy,Kannan&Modi,Manesh.SingaporeInternationalAirlines:Strategywitha
Smile.Thunderbird,TheAmericanGraduateSchoolofInternationalManagement.TB0173
Dec2001.
b. WhyFlySouthwest.6May2010.
<http://www.southwest.com/about_swa/why_fly_southwest.html?int=GFOOTER
DIFFERENCEWHYFLYSWA>
c. Nissim,Bill.TheABCsOFGreatBrands.6may2010.
<http://www.allaboutbranding.com/index.lasso?article=395
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