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CEO Interview - Building On Strong

Goh Choon Phong, CEO Singapore Airlines

In his first interview as Singapore Airlines’ CEO, Goh Choon Phong says that he is keeping focused on the customer

Congratulations on your appointment. What are your priorities going forward?

I am very privileged to lead Singapore Airlines. One of my key challenges is how to make the world’s best airline even better.

Safety is always the number-one concern. But there are other key pillars that underpin our operating philosophy. Customer service excellence is really what Singapore Airlines is about. This is not only about attention to detail but actively engaging our customers and delivering a consistently high standard of service on all of our flights. We are constantly looking for ways to improve our service. One of the areas we are working on is providing a more seamless integration of customer service across all touchpoints—from booking to cabin service and ground support. IT will be an important enabler in this effort, and we will need to be able to interact with our customers through various pervasive platforms, including social media and mobile devices.

Product leadership is another pillar. This goes beyond having new aircraft, and includes everything that would enhance the travel experience for our customers, from seat design to meals to inflight entertainment. Everyone at Singapore Airlines takes this seriously. For example, senior management conduct regular meal tastings to assess the quality of our inflight catering. I should add that product leadership does not mean ever-more complex offerings or throwing money at a problem. It is necessary to be creative and keep in mind that simple solutions are often the best. For example, our new business-class seats are the widest in the industry and they go completely flat with a simple manual mechanism that is very reliable.

Then there’s network connectivity. We want to provide an extensive network with convenient connections to meet the travel needs of our customers. We had to cut capacity in 2008-09 because of the drastic drop in travel demand brought about by the global economic crisis, but we’ve injected 2.2% growth in the past 12 months. We expect capacity to grow further in the coming year. Some of this will be through the expansion of existing routes, but we are also starting new services. We are excited about serving Sao Paulo, Brazil from summer 2011. This thrice-weekly service via Barcelona will be our first destination in Latin America.

Ultimately it is all about bringing benefits to customers. That is our focus.

Are there areas you want to change?

Our product continues to be relevant to the market. We have a strong brand and we will build on it and stay true to our fundamental operating philosophy of putting the customer first.

I have implemented some organisational changes to better align our commercial activities and provide focus on some strategic areas. Products and Services now comes under the Commercial division rather than Operations. This gives the department a direct link to the customer. I also shifted Network Planning to Commercial to facilitate more nimble responses to any market change.

A new Corporate Planning division has been formed, which will review and recommend strategic plans for the company, including growth and aircraft acquisition matters. Given the importance of IT as an enabler to many strategic initiatives, I have also placed it under this division. The Corporate Planning division reports directly to me to ensure visibility.

Singapore has two important neighbours in India and China. Both are growing rapidly. How will these markets affect Singapore Airlines’ strategy?

These two countries are certainly growing very fast. But you have to explore beyond the obvious. One important point about China and India is that there is more disposable income available. Currently, 25% of urban households in China are classified as middle class and above, and this will grow to 50% by 2020. In India, consumer spending is expected to quadruple in the next 20 years. For an airline, these are the crucial numbers because we’re talking about people with far greater propensity to spend on travel. It will be no surprise to learn that we have been growing our footprint in India and China. Together with our subsidiary SilkAir, we serve eight points in China and 10 in India.

Are you looking for strategic partners in either country?

We already have a Star Alliance partner in Air China. We also invested in Great Wall Airlines, a cargo carrier. That is now part of China Cargo Airlines and we have a 16% share in the new entity.

In terms of organic growth to China, we would like to add services to Shanghai, Beijing, and Guangzhou, but it has been difficult to get viable slots. We would also like to operate from China to the United States, but we have to get the necessary rights from the Chinese Government.

In India, foreign investment in an airline is simply not allowed at this point, so we will look at organic growth by Singapore Airlines and SilkAir, and aim to enhance any cooperative efforts.

Are you worried about competition from Middle East carriers?

More than 400 aircraft will be delivered to the region in the next 10 years, so there will undoubtedly be a lot of competition. But that is something we are used to and, as long as there is a level playing field, we are happy to compete. Competition is healthy and it’s great for the customer.

Closer to home, will Asean liberalization make a big difference to the market?

It will if it happens. We support liberalized markets but it will take time for them to truly take hold in Asia, especially when it involves equity stakes. Airlines evoke strong nationalist feelings and there are bound to be concerns if an airline is owned by a foreign entity.

It is not just about how connections would be developed. By 2021, travel and tourism is expected to contribute more than $400 billion to GDP in South East Asia. It is a huge amount, and understandably governments and the public alike will get nervous if they think they don’t have control over their share of the pie. This is the type of concern that will impede a fully liberalized structure.

Moreover, Asia is a growth area, and Asian airlines are generally able to benefit financially from this growth, so there is less impetus to seek consolidation. This is quite different from the situation in Europe or the United States.

Would you consider a multinational business model like AirAsia?

Such a set-up is a lot easier for a new entrant low-cost carrier. For full-service airlines, that kind of structure is far more complicated. That is why, even though a multinational model for a full-service airline is now possible in theory, you don’t see an example in Asia.

Is the environment a commercial or a political problem? Do customers want to see airlines being environmentally friendly?

We have plenty of customer feedback on the environment. Customers do care. We are conscious of our environmental responsibility as a company and will do our best.

We fully support IATA goals regarding the environment. Some emissions-saving programs, such as having more efficient airframe and engine designs, will take time. And while we support the development of biofuels, we recognize that this, too, will take time. It could be many years before we see biofuels commercially available at an economical price and in sufficient quantities.

But there is much that we can and should do in the short term. For example, we can improve air traffic control (ATC) to reduce delays. We have been doing trials with air navigation service providers across the world.

Last year, there were continuous descent approach trials here in Singapore and over three months we saved 245 tonnes of fuel across some 600 flights. We are also encouraging our ops people to pursue vertical separation developments.

Authorities must also help by upgrading the older ATC systems. Each improvement may be small but it could add up to some substantial savings.

Europe is developing the Single European Sky. Does ATC need to be regional in Asia as well?

I think that would be a good idea. It would help everyone because it would reduce emissions and costs. We need a bigger perspective.

In the past 40 years, the industry has managed only a 0.1% margin. Does the industry structure mean it is a poor investment?

Fortunately we are one of the airlines that have done better than average. But, unfortunately, there is no immediate solution for the industry at large. There are some serious structural issues to resolve. For a start, even if a carrier disappears, the equipment never goes away. It just gets taken on by others, so we always have a capacity problem.

Security is high on the agenda. Can you really provide good customer service while the security experience is so awful?

This is a really difficult area right now. Security is obviously important but we must avoid knee-jerk reactions and being too draconian, especially when it doesn’t really improve security. There needs to be more dialog between government and industry on how to introduce measures that are effective but don’t intrude on customer service. It is not easy and, again, there is no short term solution.

The crucial point is to be more careful from the start because you can’t easily stop security measures once they are in place. Nobody wants to be the first to say “we don’t need this anymore.”

There should be a mechanism in place for the careful review of any new security measure before it is implemented but, for it to be workable, the review must arrive at a sound recommendation—even if it’s an interim one—within a short timeframe.

How can we improve volumes on e-freight services?

A key issue is convincing the rest of the industry about its benefits, including local forwarders. We have to convince them of the value proposition. For many, it seems expensive to change internal IT systems, so they need to know that there are savings and other benefits available. Perhaps we should look at how to incentivize them to join the e-freight scheme. There have been plenty of educational workshops in the industry and we should pursue this type of initiative but ultimately we need to demonstrate concrete returns. Once you achieve a critical mass it gets easier to implement, but you have to get to that point.

What would you like Singapore Airlines to achieve during your tenure?

I would like to see a stronger airline, a more extensive network, and greater cooperation with our partners. I also hope to identify and develop potential successors.

I would like to see continued enhancement of our services to customers. I have been with Singapore Airlines for more than 20 years and it is part of my DNA—and that of all staff in the company—to want to serve our customer well. It is very gratifying when customers tell us they appreciate the services they have received. Our passengers interact with us at many touchpoints, and our staff know that in letting a customer down, one wouldn’t just fail the customer, but also fellow colleagues who have done their best to serve them. This strong service culture is shared by all in Singapore Airlines, and it is a critical factor of our success. We will continue to build on that culture.

Finally, on 5-7 June, IATA will hold its next Annual General Meeting in Singapore. Do you have any advice for visitors?

We very much look forward to being the host airline for the Annual General Meeting. One piece of advice would be to stay here a bit longer if possible to enjoy what Singapore has to offer.

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