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SIA’s credit card fee debacle: A sign of a brand with ‘inside-out thinking’?

Singapore Airlines has decided not to implement credit card service fees for selected classes of fare types – namely its Economy Lite fares. The move came quickly after the airline faced public backlash for the move announced just yesterday.

In a circular addressed to business partners obtained by Marketing, Singapore Airlines decided that “following a further review”, it would not be proceeding with the implementation of the credit card service fees. It also did not reveal what prompted the decision when contacted by Marketing.

The move to implement credit care service fees was initially only limited to its Economy Lite fares according to SIA responses to consumers on its Facebook page. However, the airline faced criticism as credit was regarded a common payment method for consumers. Moreover, transactions made via debit and PayPal were not affected by additional fare charges. The announcement also came shortly after SIA revealed in December new fare types for travellers with different levels of fares, privileges and flexibility – this included Economy Lite, which is the lowest of the three levels.

While Singapore Airline’s abrupt reversal of its plan to impose credit card service fees of 1.3% on certain classes of fares will not damage their brand in the long term, this might raise questions about the management team’s process to manage the brand well, Andrew Crombie, founder of crombie.design, said in a conversation with Marketing.

Clearly, it had an unexpected and intense adverse market reaction, which suggests that they are not in touch with the consumer.

“If it is planning to reclaim their category leadership role within three years, then a customer fixation must be core to its approach,” Crombie added.

In a cut-throat market with reducing margins, and with increasing competition, Crombie added that the value and share gains SIA needs will come through creating better overall customer value and better experience, rather than by small additional taxes on the consumer.

Whilst every brand makes errors of judgement sooner or later, this misread of the market hints at customer ignorance or inside-out thinking and reflects a poor brand management process.

It shows that the idea was not tested and caught before it hit the street,” Crombie said.

Last year, SIA Group reported an operating profit of SG$623 million in the 2016-17 financial year, SG$58 million or 8.5% lower compared to the same period last year. The organisation also employed an average of 24,350 workers at the end of March 2016. This included affiliates and units. This also led to a  Transformation Office being created with dedicated staff has been created. This follows SIA’s bid to comprehensive review what the organisation is doing and better position itself for growth.

Meanwhile Lawrence Chong, CEO of Consulus, said that customers have a lot of expectations when it comes to global brands such as SIA. As such, being “super responsive” is key.

“A mistake may have been made but it is important to demonstrate that you have the capacity to respond quickly to make up for it,” Chong explained. He added that it was a good move for SIA to backtrack on implementing the credit card fees quickly.

It shows that SIA is not tone-deaf and is keen to maintain customer loyalty.

The move, along with the new fare schemes, was likely initiatives to maximise revenue. According to Chong, while the move may not be brand endearing, it was about sustainability in a competitive environment.

 

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