Over the past four decades, it has earned a stellar reputation in the ﬁercely competitive commercial aviation business by providing customers with high-quality service and dominating the business-travel segments. World’s Best Airline award from Condé Nast Traveler 21 out of the 22 times it has been awarded and Skytrax’s Airline of the Year award three times over the past decade.
What’s not so well known is that despite the quality of its services, SIA is also one of the industry’s most cost-effective operators. From 2001 to 2009, its costs per available seat kilometer (ASK) were just 4.58 cents. According to a 2007 International Air Transport Association study, costs for full-service European airlines were 8 to 16 cents, for U.S. airlines 7 to 8 cents, and for Asian airlines 5 to 7 cents. In fact, SIA had lower costs than most European and American budget carriers, which ranged from 4 to 8 cents and 5 to 6 cents respectively.
It’s intriguing that SIA has combined the supposedly incompatible strategies of differ- harvard business review • july–august 2010 entiation—which it pursues through service excellence and continuous innovation—and cost leadership. Few enterprises have executed a dual strategy proﬁtably; indeed, management experts such as Michael Porter argue that it’s impossible to do so for a sustained period since dual strategies entail contradictory investments and organizational processes.
Yet pursuing dual strategies is becoming an imperative. The demand for valuefor-money products and services has shot up since the recent recession, particularly in developed countries, so even producers of premium offerings have to ﬁgure out how to grab opportunities in the middle and the low end of the market.
Moreover, multinational corporations face competition from rivals— many of them from emerging markets—that use new technologies and business models to provide good-enough offerings at attractive prices. Incumbents can ﬁght back by cutting prices or further differentiating products and services, but it’s often a losing battle.