Chong: Keeping her head down as fuel costs rise

By Yeoh Siew Hoon

Rather than the obvious one of “more airlines will go bust if fuel prices continue to rise”, Jetstar Asia’s CEO Chong Phit Lian sees three other trends that will play out in the Asian aviation landscape in the coming years.

One is the promise of open skies in ASEAN by next January. “It could mean everyone setting up airlines and flying the same routes and hurting each other for a while.

“If it really means that airlines could fly point to point all over ASEAN, this could really change the landscape. You will see increased capacity and airlines dumping prices for a while, and then airlines cutting capacities and deploying their aircraft elsewhere.

“It’s a double edged sword but it’s a good move for ASEAN in the long run.”

Two, travel is no longer only for privileged and has become a democratic right in Asia with the emergence of low cost airlines. “You now see full service carriers wanting to start low cost airlines. Why? Because a lot of the airlines are national flag carriers and they’ve realised how expensive flying the flag can be.”

Third, there is a need for airports and other service providers to airlines to change their models. “For example, some airports don’t care if you use them for half an hour or an hour, they charge the same rate. I see a day when charges will be based on usage – there is a need to change the airport model.”

I met Chong at Terminal 1 of Changi Airport where she has her offices. Chong is as down-to-earth as you would expect a leader of a company that preaches low cost, and self-service, to be.

She stands in queue for a coffee along with the rest of the customers. “I’ve always been a believer in self-service. I think it’s because I am so impatient that I think it’s faster if I do things myself.

“Once in China, I walked into the kitchen and asked if I could cook my own food because they were taking so long. My end objective is always to get things done.”

When she travels on her flights, she speaks to her customers to find out why they flew with Jetstar and what else the airline can do to improve its product and service. That morning, she had just emerged from a session with ground handlers where she was motivating them to perform better service for her airline and thus, its customers.

Coming in from the cold into an industry that is more known for regulations than innovations has not been tough for Chong. She’s made a career out of going into industries of which she knows nothing. She went into Singapore Mint as CEO with no experience of that business.

“Within six months, you know what you have to do. It’s about managing resources – people, facilities and equipment – and it’s about managing value add.

“Today, with the fast pace of technological change, every CEO also has to be on top of that as well. Technology has changed our way of life – the old textbooks, you can’t use them anymore.”

Right now, though, she’d be the first to admit the old textbook rules of managing costs and making sure yields are going in the right direction, at a time when fuel costs have wreaked havoc to the low cost model, are coming in handy.

This means, making the airline more efficient – it has consolidated flights by focusing on the more popular routes and reducing the less frequented sectors – and trying to get as many bums on seats as possible.

“We have introduced a lot of promotions as well to keep people still flying. Price does move people sometimes. When demand is low and price is good, smart travellers know it’s the best time to buy.

“High fuel costs or not, travel is part of our lifestyle. When everything is going up at the same time, we will arrive at a new equilibrium and everyone will adjust to a new commercial reality. It will take time but it will find its own level.”

While there has been softening of demand on shorter routes, what she’s also seen is business travellers trading down to low cost carriers, especially on flights to Indonesia.

“We have seen a 2-4% drop in loads but at the same time, we have increased capacity, so our total number of passengers has increased.”

But she is not letting the high fuel costs dampen her spirits. If anything, she sees it as a challenge and an opportunity.

“When things get so down, the only thing that can happen is for them to go up,” she says. “Along the way up, some may fall and some will rise. You have to maintain a positive outlook, manage costs and ensure yields are in the right direction.

“Also, cost is a relative statement. What is cost to one is a real opportunity to someone else. The key is how to value add. I tell my staff, don’t tell me how you have cut costs, tell me how much you have value added.”

In April this year, Jetstar Asia announced it had gone into the black in the year ended March 31, 2008 – with a 20% increase in passengers and a passenger load factor of 75%, a growth of four percent over the previous year.

Whether it will stay in the black by the end of this financial year is another question but Chong says, “We are pushing very hard to get things done.”

With up to 80% of its business coming through its website, Jetstar Asia will continue to invest in this channel. “We’ve found it to be a very effective cost of sale especially in a market like Singapore. We also have a site for agents because there are still customers who still want that face to face contact.”

The airline also has a Jetstar Fan Club in which customers are encouraged to post travel reviews and photographs.

As for ancilliary revenues, Chong says it still isn’t a big part of the airline’s revenue model at the moment. “We do earn a fair amount through our f&b sales and duty free and commissions through selling insurance and hotels, and soon, land packages.

“It’s a question of what else can you sell onboard without antagonising your customers, and without adding complications to the crew process.”

She adds that Jetstar Asia is also looking into “arrangements to tap on passengers who fly to Singapore on other carriers”. “Not necessarily interline but self-interline – consumers are getting more knowledgeable and it’s a question of how we can reach them.”

Meet Yeoh Siew Hoon at her regular hangout, The Transit Café –www.thetransitcafé.com