COME FLY WITH ME: Singapore's budget airlines battle

In times of crisis lie opportunities, is how the old saying goes. And that holds true for the aviation industry, which has not been spared by the global financial meltdown but is experiencing some signs of life. Less people may be traveling and regular long-haul trips might become a thing of the past, but as the market shrinks budget airlines are eyeing these conditions as the chance of a lifetime.

More passengers are turning to low-cost carriers for their flying needs and holidaymakers are booking shorter flights for their trips aboard. As more budget airlines enter this fray and two of the bigger carriers around - Qantas and Singapore Airlines - invest in their respective low-cost offshoots Jetstar and Tiger Airways - Singapore is becoming the central battleground for Asia's aviation dollars.
Evidence of the surge in travelers looking for cheaper travel options comes from Google, which shows that in terms of rising searches the term ‘Tiger Airways' saw the largest jump in search volume, rising by more than 5000%. ‘Air Asia booking' was the next most popular search term, and it grew by more than 400%. 

"Some of our top searches have been related to affordable travel, with search terms like ‘holiday deals' and ‘promo fares' rising fast and terms for ‘short breaks' and ‘last minute fares' have almost doubled in Singapore. We've also found that users have become more specific in their searches, using price-related queries like ‘cheap tickets to KL' or ‘promo fares to KL' rather than just ‘tickets to KL', in order to access the best deals online," Sajith Sivanandan, head of travel, retail and automotive at Google Southeast Asia, says.

Corroborating this fact are other travel search engines like Sprice.com, which has also seen an upward trend of searching and clicking on the three biggest budget airline brands operating in Singapore - Jetstar, Tiger and AirAsia. "The growing demand is definitely coming from today's travellers who are more price-sensitive and more embracing of the concept of fuss-free travelling," Vikas Gulati, vice president Asia Pacific of Sprice.com, says.

Given the growth this sector is witnessing, and echoing the rise of Ryanaiar and EasyJet in Europe in the last 10-15 years, how is this low-cost troika ensuring that they each have a distinct brand positioning? Have these airlines acknowledge the importance of going beyond just price to carve out a personality for themselves?  

"Even though these carriers have learned from their counterpart in the West like Ryanair, what is missing is a distinct attitude or personality which percolates through the system. The best brands are of a company that has a vision and a mission, and Air Asia is the only airline of the three to have started to build it up," Hari Ramanathan, Y&R Asia's regional planning director, says.

It's an opinion shared by fellow planner Frank Reitgassl, planning director of BBH Asia Pacific, who feels the three airlines "don't feel to be highly differentiated and lack clear brand meaning beyond offering the category generic 'cheap flights without frills'".

Reitgassl cites the strategy employed by Richard Branson for Virgin to create buzz, one also adopted by AirAsia's Tony Fernandes, but he says that ploy comes with some risks.

"Firstly one has to make sure that the owner's personality is big enough to be shared with the brand," he says. "Secondly, there's a danger that he remains the personality behind the brand without injecting personality into the brand. It's therefore crucial that this personality is carried through the brand's entire offering and all consumer touch points - its look and feel, the people on the end of the phone, the flight attendants etc"

Traditionally AirAsia, Tiger and Jetstar have built their brands on a recipe of tactical marketing, with little brand differentiation, and their communications have mostly hovered around the subjects of fares and destination.

 With growing competition in the low-cost sector, and more open skies agreements like the one signed between Singapore and Malaysia recently, these budget airlines are moving towards creating a more focused brand proposition. Their brand differentiation, though not distinct yet, is slowly surfacing. Jetstar, for instance, aims to exude a higher level of sophistication. AirAsia, arguably the strongest of the three, is positioning itself as holiday and lifestyle budget airline, and it relies heavily on the chutzpah of its CEO Tony Fernandes. Finally, Tiger Airways is the most price-focused of the trio, which itself can be considered a segmentation and brand strategy.

Is it all about money honey

When it comes to flying budget, do consumers actually care about the brand? Or is it only a decision based on price? Unsurprisingly, the answer favours the latter but these airlines are attempting to create a unique identity around their brands. For instance AirAsia's ‘No Admin Fee' campaign stimulated demand at a time when the market needed it most, and this was rewarded with what it claims were record-breaking sales. AirAsia has leveraged on its Williams AT&T F1 team sponsorship, offering guests a chance to win tickets to five Formula One races around the world, bringing low-cost travel and the high performance F1 together for the very first time. AirAsia is also a major sponsor of the new professional ASEAN Basketball League, with Tony Fernandes as chairman, and was involved in an effective PR stunt around sponsoring Manchester United.

In July Jetstar unveiled its biggest-ever brand campaign in Asia Pacific using the new tagline of "Low fares, good times". Jetstar is using Joanne Peh as its new brand ambassador and the push involves a heavy use of television, print, outdoor and cinema. Tiger has also been busy, is delving into more savvy promotional activities in Singapore and the region. To officially launch its new Sydney-Melbourne route, Tiger Airways Australia partnered with professional rugby league team in a PR stunt. Wests Tigers players Chris Heighington, Keith Galloway, Dean Collis, Lio Vaiga, Dean Webster and Neccrom Areaiiti hauled the Tiger aircraft out of the hangar at Melbourne Airport ahead of its 713 kilometre journey. 

But without very little between the three budget players, experts say there is only so much that they can do without mentioning the price tag anywhere in their campaign. The lack of strong differentiation means simple things like having a leather seat or flying from Terminal 1 in Singapore instead of the Budget Terminal has an impact on consumer choice.
"The broad issues facing budget airlines in the region is the pressure on them to ensure competitive rates but at the same time, ensure profitability and that's where these factors are becoming more critical to consider," Sprice.com's Gulati says. 

Leslie Ng, Jetstar's head of commercial, says it has a timely take off rate of well above 90% and trys to "provide the lowest fares but we don't compromise on quality". "Price is important but consumers need value as well and service remains an important element of our business," she says.

AirAsia has the same approach. "Our strategy is to continuously improve the quality of our product, while keeping to our promise of low fares.. the brand experience is extremely important," AirAsia's Low says.

AirAsia has increased its advertising expenditure this year and is looking at affiliate marketing, mobile and kiosk check-ins amongst others, particularly in Singapore. The airline now operates more than 31 daily flights out of Singapore compared with only four daily flights from Singappore 18 months ago. Its ad spend for Singapore has risen from US$1.46 million in 2008 to US$1.003 million in the first five months of 2009, according to Nielsen. 

Of the three players, Tiger enjoys the luxury of being a home-grown airline and a product of one of Singapore's best loved-brands, Singapore Airlines. Like its Malaysian-born rival AirAsia, Tiger increased its ad spend in Singapore from US$383,527 in 2008 to US$392,976 in 2009's first five months. The airline now flies to 31 cities in nine countries in the region and boasts of new flights to Penang and soon-to-be launched flights to Krabi four times a week. Jetstar also has plans to add new aircraft to boost its expansion plans, and currently it has launched new daily direct services to Penang and will start flying to Haikou in December.

The recent ban on advertisements that offer zero-dollar seats without revealing the full charges will have some positive effects, say industry insiders who feel that budget airlines will become more and more creative in terms of their messaging and media mix. The media mix for these carriers is still heavily dominated by print and television, followed by outdoor and digital.  

"The zero-dollar message dominates everything and possibly what could happen after the ban is that the low-cost budget carriers might start considering the formats they did not consider previously, like the size of the ad in the newspaper, type of banner online and so on," Arun Kumar, regional digital director of Aegis Media Singapore, says. 

According to Kumar, this could also result in a boost to mediums such as in-airport advertising, which could pick up as the competition grows and these carriers target more affluent travellers. Meanwhile, the low-cost carriers say they think the move is in the right direction and would extend support to any measure that brings in more transparency. 

 "It hasn't affected our demand. It's just a switch in communication strategies and messaging," AirAsia's Low says. All the three budget players have stepped up marketing in the region, as a result with messages that are more innovative and colorful. Tiger Airways is currently working on a major new regional marketing push and Air Asia has already launched an extensive regional campaign titled "Have You Flown AirAsia Lately", an integral part being the website haveyouflownairasialately.com. Richard Fraser, regional managing director for Proximity Asia, believes with AirAsia's recent brand positioning such as "Everyone can fly", you see them tapping into an emotional reality rather than price alone, and this makes a difference.

In BBH's Reitgassl opinion, big brand-building commercials are "counter-intuitive and expensive for brands that bribe themselves on low prices and no-frills".

"That's why budget airlines are great in spending their marketing budget very efficiently. E-mails and maybe some small press ads to announce new routes or promotional offers to get "bums on seats" are their bread and butter," he says. "And every now and then they get themselves talked about with a PR stunt. Ryanair recently asked the Aviation Authority for approval to allow flying people while standing on board the plane to save space and make flying even cheaper. Of course, the chances for this to happen anytime soon might be low - but what a great way to generate PR and prove their constant attempts to offer the most competitive prices to their customers."

Digital direction

For an industry heavily dependent upon the internet for its sales, digital marketing is all becoming an increasingly impart focus for the budget players. Air Asia's Facebook friend following in the region stands at more than 30,000 and growing. It also boasts of more than 2,000 Twitter followers, while Airasia.com has a staggering unique visitor traffic of 20 million and is growing at an average of 20% every month. Jetstar and Tiger also possess Facebook and Twitter presences, but all three agree to having a strong dependence on traditional media 

However, in the arena of search and affiliate marketing, these brands have a long way to go. "Yes they have a presence under their brand terms and thus complete the loop of communication from ATL ads to online, but type in ‘cheap flights' and they are nowhere to be found - ridiculous. They are in effect capping themselves at the value and volume of their brand equity," James Hawkins, director of Southeast Asia and Hong Kong for dgm, says.
We know that search accounts for more 75% of all online transactions, or at least the purchasing cycle starts with a search engine, so by not being there is simply like having a store that is always closed, Hawkins says. 

 In early 2008, a Google study found that about 75% of internet users had decided a travel destination but only 8% had decided on an airline prior to searching online. "Traditionally, budget airlines have been aggressive advertisers in the print medium to drive traffic online. Users see the ads in print and go online to search for the offers and book.  By combining this with targeted advertising on search engines, companies can generate incremental dollars and yield an ROI that can range between 1:3 to 1:20 (so US$20 dollars in sales for every US$1 dollar spent)," Google's Sivanandan says. 

What Sivanandan suggests is a two-pronged approach that airlines can adopt to drive customers to their website. First, an always-on campaign that focuses on their brand and city pairings available whenever a user searches, combined with a tactical campaign which is run only when an airline announces special fares or promotional offers. "By adopting this two-pronged strategy, airlines can take advantage of the ever present consumer, as well as cater to the spikes in volume that can be expected from special deals," he says.

Future focus

As competition tighten and price wars escalate, the budget airline brands will be forced to look at new revenue streams and segments. According to Nieslen Media Index, travelers tend to stay with their home-based carrier, so one method could for each brand to concentrate their marketing efforts away from their homeland, say Tiger in Malaysia for example.

Another area could be maintaining the influx of business and corporate travelers who have moved towards the budget market from the likes of Singapore Airlines and Cathay Pacific because of the recession. The low-cost trio are doing this by experimenting with their media mix and expanding their loyalty programmes. A refinement of their direct marketing practices and use of data could also pay dividends.

"A challenge for these airlines is in the engagements and direct communications space in order to provide a two-way communication loop. How does the airline use the customer data to share relevant information and engage is significantly enhances the reality of someone coming back and hence build loyalty," Proximity's Fraser says. Citing the example of AirAsia's blog, Fraser says the key to a sound product and strong brand, is involvement with the consumer and that's where digital provides a lot of scope.

A crucial mistake that Jetstar, Tiger and AirAsia mustn't make is to neglect their core audience. They cannot ignore lives of whom they have played a transformational role by making flying affordable and accessible to the masses. The life-changing experience is a powerful selling point for budget airlines and one that must play a role in its key brand messages. "It's also a part of hygiene factor for you to be a in a basket of trusted brands on the basis of safety record, punctuality and cleanliness which are the soft factors," Y&R's Ramanthan And these matters more to the ones who's life you have changed."

BOXOUT 1: TIGER BY THE TAIL
PROFILE DEREK YEO

The urge to make a real difference to the brand is what brought Derek Yeo to Tiger Airway, which he joined in February replacing Michelle Lim. With a marketing career spanning more than a decade, the 33 year-old has had a fair amount of experience working for government to semi-government bodies, to agency and now the client side. As head of marketing for Tiger, Yeo is responsible for not just branding and marketing but also generating ancillary revenues for the low-cost carrier. Yeo says it's not a total departure from what he was doing previously in his role with the Singapore Tourism Board. "I am still in tourism and hence it was not difficult a transition," he says. 

Yeo started his career in 1997 at International Enterprise (IE) Singapore, and after two years with IE he moved to Publicis Singapore as strategic planning manager where he worked on brands such as Renault, Whirlpool, UBS, NTUC Fairprice and Pacific Internet, and was also responsible for the launch of www.whirlpool.com.sg. "There was a real buzz for me to work for an agency as I  can be talking to a supermarket client and the next can be a telco or car company, you meet different people and you understand how every brand has got a uniqueness and value proposition," Yeo says. Inspiring Yeo to move back to the client side was a desire to "own things you do". "In the government or the agency you are actually one step away from the actual product or services," he says. "No matter what, you are not the one doing it or the one calling the shots." Asked for his thought's on the current marketing environment, Yeo believes marketing should have much more accountability.

"In good times there is a lot of frivolous spending, so now people are asking questions," he says. "You need to be accountable for every single thing you do and its not only abut the money that is spent but every single step in the planning of a campaign, way your customers look at you, the experience you give them on your website, in your stores and so on." Yeo is a big believer in market research: "Without deep and meaningful insights, it is really a case of ‘spraying and praying', whereas effective marketing these days demands a much more targeted and focused approach to get the most bang for your buck".

Yeo says his timing to join Tiger this year couldn't have been better, considering the growth-phase the airline is embarking on, and he describes Tiger as being "still a start-up" with a long way to go.

BOXOUT 2:
DIGITAL DISECTED

Noel Yeo, digital creative director at BBH Asia Pacific, runs his eyes over the websites of Jetstar, AirAsia and Tiger Airways.

How important is design, functionality and ease of use to the budget traveler? When a mere two dollars can make all of the difference between choosing one airline over the other, less value can be given to a so-called look and feel. Unless the look and feel is to come across as utilitarian, which Jetstar succeeds in spades. It eschews the clutter seen on the Tiger Airways site, which I suppose typifies most price-sensitive, tactical advertising. AirAsia isn't much better, although it miraculously succeeds at communicating its one key message: No admin fees. Jetstar's table format makes it remarkably easy to browse for the cheapest flights around your travel dates. Tiger Airways has the options displayed as a list, which can be just as effective. Not so simple with AirAsia. No chart. No list. Just a button to click that gets you to the next date, offering no idea just where the cheapest flights reside. Still, I doubt AirAsia is going to lose too many customers. That's because if the budget traveler is truly looking for the best deals, the traveler would be much like me, trawling through not one, not two, but all of the budget airline websites: scouring through the promotional deals section, keying in flight booking details, filling up every subsequent form until one gets to the credit card information page. Painstaking? Probably, but bargain hunting always comes with a bit of an effort, and to all of these websites' credit, the process has been sufficiently pleasant. The procurement flow is often intuitive and quick - better than most Flash-heavy sites belonging to purportedly more premium airlines. And that's probably something we can all pay some attention to.