Sibin Fan (https://blogs.ubc.ca/sibin/) discussed the unusual move taken by Singapore Airlines (SIA) to only business class on their five A340-500 aircraft, which are used to provide a direct flight service from Singapore to both Los Angeles, and New York.

It is interesting to consider why SIA did this. They seem to have chosen a profitable market, segmenting based on centres with a high volume of frequent, wealthy, and business travellers. They are likely to be less concerned with prices, allowing SIA to charge more if they can provide greater customer value. Also, by attracting more wealthy, business people to Singapore, they may also be satisfying SIA’s majority share-holder, the Singaporean Government.

SIA’s high-end reputation helps position them for this, but there are two other attributes that add value for the target customer. SIA has increased the prestige of the flight by limiting the passengers to a wealthier clientele, which may be considered more desirable, and may make for a better networking environment. In fact, on their website (http://www.singaporeair.com/en_UK/flying-with-us/business-listing/all-business-class/) one of the three advantages they mention is the snack corner, where customers can go to socialise during the flight. Secondly, it has cut the travel time to New York by around 4 hours by flying direct compared to the alternative SIA route. By having fewer passengers on board, they have also reduced boarding and baggage unloading times. Both time saving measures are valuable for wealthy individuals and business people whose time has a high opportunity cost.

Financially, based upon information and my calculations, if SIA has created enough value for their market through this service to get a similar percentage of seats sold as their 3-class flight, it is likely that this will be a significantly more profitable venture, and also benefit them by building their relationship with wealthy, business clientele.