Singapore Airlines’ impasse with Flight Center – and what it means for the brand

It’s been a fascinating day, as an outside observer of the impasse between Singapore Airlines and Flight Center – one of Australia’s largest and most powerful travel agents (they’re actually much more than just an agent).

The Contradictions – SIA vs Flight Center

Late last night, SIA sent out an email to its Australian frequent fliers, which announced that the airline’s tickets will no longer be sold through Flight Center. That came as a shock, since it’s like saying your website won’t appear on Google.

But things got more interesting, when Flight Center put out a release countering what Singapore Airlines had said, claiming that they’re still selling SIA tickets, but it’s just not the preferred airline. What that means is if you want to fly from Sydney to London, Flight Center would recommend Emirates, Qantas or another airline, unless you insist on flying Singapore Airlines. And that can still mean a lot of business loss.

No lessons learnt from the Indian fiasco?

SIA flight attendants on flights to India used to be tired by the end of the flight, since loads were high and passengers demanding. But these days, nobody minds doing those flights because the loads are very light. That means less work. And this is because the airline has lost its major ticket sales channel in India for the past six months – the travel agents.

If you recall, late last year, travel agents in India boycotted Singapore Airlines because the airline refused to pay them commissions. And that, in a market where 90% of sales used to be through these agents. It inspired a highly debated article on SimpliFlying about the importance of adhering to cultural sensitivities. And now history seems to be repeating itself.

Adverse effects on a great airline brand

SIA had done a fantastic job of building up a formidable brand in India, through innovative promotions for over five years. But much of these were undermined when agents there refused to sell the airline’s tickets.

Down under, in Australia, SIA has been lobbying to fly the coveted Sydney-USA routes for some time now. And the Flight Center impasse may just hinder that bid. Moreover, the potential impact of losing out on the cash-cow route Kangaroo route from Sydney to London may give competitors like Emirates and Qantas the boost they needed. Add to all this the difficult economic times and record recent revenue drops and you can imagine the trouble SIA might find itself in.

I love flying Singapore Airlines and would rather not see this happening to them. May be it’s the flight of top executives over the years to other carriers. May be its the knee-jerk reactions to save costs in the down turn. May be it’s just bad luck.

What do you think caused this? What do you think SIA can do to emerge out of this? Let’s discuss…

P.S: Special thanks to @MatthewPDavis who’s been updating me about this news.

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Showing 10 comments
  • Steven Frischling

    “Down under, in Australia, SIA has been lobbying to fly the coveted Sydney-USA routes for some time now.”

    The more SIA lobbies for the US-SYD route, the more I wonder why they want it. SIA flies multiple routes from the US to foreign countries, with Houston-Moscow probably appearing to be the most unusual, however the US-SYD route is not only crowded with four airlines currently flying LAX-SYD, but its sustainability is questionable.

    By the summer LAX-SYD will be serviced by Qantas, V Australia, United and Delta. This route is also serviced by Air New Zealand via AKL. Passenger loads are not what they used to be and eventually this route will most likely drop back down to three (inclusing NZ) carriers again.

    I understand SIA is in search of global domination, and they are well on their way, but the metrics of USA-OZ are not what they once were and need to be reevaluated.

    Steven Frischling
    The Travel Strategist

    • Shashank Nigam

      @Steve: The Moscow-Houston route was tactically positioned toward the “oil-crowd”, especially folks going from ex-Russian countries to Houston, since they can connect conveniently in Moscow.

      One of the reasons SQ is lobbying hard for Aus-US routes is because the great brand recognition they have in both these countries, but most of the pax are unable to fly via Singapore on that route. Hence, they can offer a premium product and service and tap on the high-end market there. But you’re right, competition is only getting tougher.

  • Who's greedy

    The issue with FCI and SQ boils down to the renumeration that SQ pay FCI HQ on flown revenue incentives and other backend deals. FCI have always been very agressive in these negotiations and I guess that SQ has said enoughs enough. FCI need to be able to prove that they can influence the sale at the coal face and move market share.

    FCI has always had a Price Beat Guarantee policy and this creates massive pressure on the FCI fare team to negotiate the best nett fare deal. Maybe SQ has an issue with funding a marketing stand by a retailer. Bear in mind that FCI are just as agressive with the other key carriers in the Aus market and in the end if they keep playing the same game with every airline then how can they guarantee greater market share to each airline without robbing business from the other carriers. The distribution policy of SQ has always been to ensure that they do not become too reliant on one distrubuter. Maybe FCI is a victim of its own success.

  • Gregg Saretsky

    SQ has a strong brand and a loyal following. Flight Center caters to the price-sensitive, brand agnostic travelers. Anyone interested in the SQ brand will find them at other agencies or online. Low yield sales may take a temporary hit but I wouldn’t count SQ out!

  • Ronald Kuhlmann

    This is not a brand issue but a sales policy issue. In order to assess its effect on sales, we would need to know what price Flight Center was extracting for SQ bookings. As a former airline sales manager, I can attest to the fact that there are agencies and corporate clients that demand conditions that make transactions a losing proposition.

    If the brand is as strong as they believe, passengers will continue to use the SQ product. If not, it once again proves that market forces and price trump brand loyalty and undermine the concept that a strong brand is key to success.

  • Penn Lewis

    misunderstandings happen all the time. If SIA wants/needs the busines, they will bend.

  • John Vincent

    Keep in mind that Flight Centre is also FCm Corporate Travel. Flight Centre/FCm will continue to ticket SIA due to coprote agreements out there. I don’t know the what went on with these two companies, but if it is anything like what has gone in the past with other “ticketing” locations it has a lot to do with commissions and back-end overrides. Also, SIA doesn’t offer the lowest fares in economy, and from what I understand that is a lot of what the Flight Centre brand sell.

  • Shashank Nigam

    @Penn, @John: It turns out that the dispute is really Flight Center asking for 8% commissions for recommending SIA as their “preferred partner”.

    And noticing from the past, I don’t think SIA is going to bend their back. They didn’t when they had a tussle with the Indian travel agents, and they’re unlikely to now.

  • davidbaer

    Having been a part of the Online Universal Work Marketing team for 4 months now, I’m thankful for my fellow team members who have patiently shown me the ropes along the way and made me feel welcome

  • davidbaer

    Having been a part of the Online Universal Work Marketing team for 4 months now, I’m thankful for my fellow team members who have patiently shown me the ropes along the way and made me feel welcome

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