Flying low

Financial analysts politely describe the airline industry as “volatile” although straight-shooting insiders give an outlook ranging from “bad to downright ugly”. As far back as 1993, the US National Commission Report to the Congress has questioned whether this business has basic structural flaws or simply a “collection of poorly managed companies”.

Ironically, air travel continues to grow due to an increased propensity to fly. Statistics showed that more people died on America’s highways in three months than the entire history of commercial aviation. Thus the public believes flying is the fastest and safest way to travel.

Yet with the exception of a few airlines, revenues have lagged behind world GDP growth for the past 20 years. Highly susceptible to fuel price fluctuations and terrorist concerns, one-third of mainstream airlines in Europe, America and Asia earn barely enough to cover their capital expenditures. The global industry was already showing a net loss of around $3 billion even before 9-11. Americans flying across the Atlantic has since gone down by over 30 percent. Profits-per-seat declined since deregulation paved the way for budget airlines. In short, we may not see the usual titans scrambling to acquire an airline business anytime soon.

The same holds true in our airspace. Despite nixing the open-air-policy to limit competition in decades past, the Philippine Airlines’ financial statement showed losses year after year. The acrimonious relationship with their labor union PALEA, the threat of work stoppage, the lack of upgraded aircraft and electronic services tarnish the image of the national flag carrier. Asia’s first airline as they like to point out, is highly challenged to let the “beauty of the Philippines shine through”.

A recent PAL flight underscored the airline’s woes. In business class, the entertainment system conked out. Some footrests were askew and the cushions were missing. In economy, the video equipment was dead. But the saving grace was the wonderful crew. First, the purser, [I think her name was Cecilia Lopez], tried her darnedest to make the personal sets work to no avail. She apologized for the inconvenience without losing her poise or putting down PAL. The crewmembers tried to be of service in other ways. It made the trip more bearable and reinforced an oft-repeated notion that the best pilots and stewardesses are Filipinos. I guess caring and hospitality are inherent in our DNA.

But it is unrealistic to expect the same tolerance and forgiveness from the foreigners who see the flag carrier as a symbol of the country. In marketing, this experience is called the first-moment-of-truth (FMOT). It is the singular opportunity to make a positive first impression to predispose non-local passengers to fly with PAL again, and maybe even endorse the Philippines as a desirable tourist or investment destination. [Of course our airport does not help, but that’s another topic].

The Porter Competitive Model lists three fundamental goals of airlines: 1) Customer Service, 2) Return to Investor and 3) Country Strategic Resource. The priorities are the same: Safety, Efficiency, Capacity and passenger satisfaction. Security, war risk insurance and environmental consciousness are new concerns gaining importance.

PAL faces universal challenges like fuel costs, aircraft upgrade, and even union relations. History proved that employee concessions don’t solve deficit. In the 90s, US airlines axed 70,000 jobs but very few survived anyway. It would be unfortunate if PAL loses the crew, its best and arguably only asset. Concomitantly, PALEA should consider re-opening negotiations. Focusing on common purpose and a cause greater than mutual odium might break the deadlock for a win-win agreement.

There are three networks that have consistently been profitable and rated among the best carriers: Singapore Airlines (SIA), Cathay Pacific and Southwest (SW), a US domestic airline. It is not a coincidence that Singapore and Hong Kong are also favorite destinations. These airlines are subject to the same pressures and threats as their colleagues. Yet SIA is the top choice of the frequent flyers according to a Zagat Survey. What is it doing that PAL should emulate?

Singapore Airlines has become the gold standard. Notwithstanding profit pressures, their healthy bottom-line is the marvel of an uneasy industry. Despite multiple awards for excellence and an impressive travel infrastructure, SIA never lost sight of their role in realizing their nation’s vision to be the business and travel gateway to Southeast Asia. Never smug, they stay ahead of competition with clear, strategic directions.

This peerless airline has been the subject of case studies that examine its success model. Their watershed principle is rooted in clarity of purpose as the proud flag carrier of Singapore and commitment to customer service. From here, the strategies are organic. Continuous training of its personnel is high on the list. SIA puts a premium on constant internal communications, insuring that the staff is motivated and updated. This is matched with a consistent external communications for strong brand imagery. Who can forget the Singapore Girl campaign that has lured many five-star visitors to their shores? There is a deliberate synergy between the marketing of the country and the flag carrier that creates a powerful one-two punch with enviable results.

But the analysis identifies the critical success factor as SIA’s connection to its customers. They lead in electronic capabilities that deliver convenience while doubling as feedback mechanism. Even when flying has become commoditized, it enjoys a loyal following who choose to fly only with them.

SIA’s battlecry has always been to work diligently, plan boldly and strive for excellence. They continue to benchmark against worthy competitors even as they garner rewards and recognition. Despite crotchety relations with their labor unions that at one point required government intervention, professionalism and pride prevail. followed by profit.

If only the hostility between PAL management and PALEA could be tempered with patriotism, there would be no stalemate. Both parties should realize that they are in a symbiotic relationship that needs each other to survive. If stalemate leads to a shutdown, everybody loses. The national flag carrier might nosedive and drag down a country poised to soar with flying colors. What a terrible waste!

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