Critically evaluate the operational activity of Singapore Airlines - Essay Example

?Operation management Table of Contents Operation management Table of Contents 2 Question 3 Question 2: 9 References 16 Question Critically evaluate how the operational activity of Singapore Airlines contributes to its success? Singapore Airlines is one of the best rated airline companies operating in the globe. The highly turbulent and capital intensive industry segment generates a considerable need for organizations like Singapore airlines to ensure better operational abilities. Considering the fact that the domestic market of the nation is very small hence the airline needs to use the international route to stay in the business and maintain profitability and sustainability. Moreover the competitive price wars being introduced into the market by the advent of the low cost carriers also plays a major threat to the profitability and sustainability of companies like Singapore Airlines. Hence it is imperative for Singapore Airlines to ensure operational excellence that can help the company stay afloat in the highly turbulent and competitive business market. Singapore airlines have crafted a well structured operational strategy to maintain sustainability and retain the competitive edge. In this regard the company has procured new and advanced aircrafts like Boeing 777 and 747 to save on costs and generate efficiency. It is the first company to have used the world’s largest carrier (Airbus A380) for long haul flights generating greater revenue per unit spent on operations (Ayob, n.d., p.7). The airline also had a good fuel hedging strategy under which the airline was the first among the major airline companies having international operations to be able to fully offset the entire quantum of price element by virtue of hedging strategies. This helped the company to save on costs in the highly volatile oil market that is characterised by heavy fluctuations and skyrocketing prices (Morrell & Swan, 2006, p.14). Singapore airlines have also used the hub and spoke model to enhance its reach to new areas. The airline has made Singapore the hub and draws passengers from neighbouring nations to its hub in smaller aircrafts. From its hub the company uses larger aircrafts like Boeing 747 and Airbus A380 to fly to far off destinations. In this way the company tries to use the international market to generate revenues. This assumes importance considering the fact that Singapore is a very small nation with a very small market and hence in order to maintain profitability and sustainability the company needs to tap the international audience. Figure 1: Operational Statistics-Singapore Airlines (Source: Singapore Airlines, 2010, p. 6) The figure shown above illustrates the operational aspects of the airline company. The figure clearly states that the carrier has generated a one percent change in the number of passengers carried with the figure at actual being 16647 (in thousands). The passenger load factor that is a measure of an airline’s usage of its capacity has also shown a slight improvement of 0.1 percentage point to 78.5 percent. However the figure is considerably impressive considering the dip in the number of passengers owing to recessionary activities in the economy and the advent of low cost carriers in the market. The figure for available seat kilometres has also shown an increase by about 2.3 percent. This implies that the carrier has augmented its efficiency in using its available passenger seats. The figure for revenue passenger kilometres also shows a significant increase of 2.3 percent to 84801.3 million kilometres in the year 2010-11. This implies that Singapore Airlines has generated greater efficiency in generating revenues by flying passengers over greater distances. The measure of passenger yield has also risen by about 14.4 percent to reach figures of 11.9 cents per kilometre. This implies that the company generated greater fare as revenue flowing per mile from the passengers across various routes. The increase in the value over its previous year shows that the company generated greater passengers as compared to its previous year. This shows the sustained efforts of the management of the organization to generate greater number of passengers and increase its sales volume. It also shows that the company has a better efficiency in using its existing capacity. Passenger unit cost is the measurement of the operational expense divided by the available seat kilometres flown by an airline. This value has registered an increase in the year 2010-11 by 3.5 percent taking the figures to a value of 8.9. This implies that operational expenses have increased significantly while capacity has not been increased to that extent. The skyrocketing price of fuel is one of the reasons that have increased the expenses of the company. Moreover with Singapore completely dependent on oil imports from other nations, it has become a very significant issue with regards to the maintenance and control of operational expense for the airline. Although hedging strategies have been incorporated by the airline company but fuel being an essential commodity it has become significant operational issue for the airline with regards to control of cost of operations. Finally the values of break even load factor that is a measure of the unit cost of the passenger that is again expressed as a total percentage of the yield obtained by sales from passengers. The figure helps in equating the operational cost of an airline with the operational expenses of the company. The figures for Singapore airlines show a dip by about 6.8 points to reach values of 65.2 as compared to the value of 72 of the previous year. This figures shows considerable operational efficiency of the carline company at a time when the other carriers are registering positive values of breakeven load factor. The negative value of breakeven load factor indicates that the company has been able to cover up the operational costs with the passengers carried and has also generated surplus. This remarks a significant achievement of an airline considering the fact that most of large international carriers have been unable to beat the positive values of breakeven load factor even after selling approximately the entire capacity at average rates (US Department of Transportation, 2003, p.1). Operationally the airline has expanded its operations to new destinations by including new destinations in Asia as well as South America. The airline has also launched greater value added services for the passengers that seek to increase the comfort of the guests of the airline. The recovery of the economies of the nations also shows considerable opportunities for the company. The airline also increased its frequency to its exiting and profitable destinations. The addition of Sao Paulo also marked the entry of the company in the South American market. Future plans for the company include greater use of demand and supply trends of the market to manage operations that includes adding new destinations and increasing frequencies on profitable routes. The airline also augmented its fleet capacity by adding new aircrafts that increased the efficiency of the company. Older aircrafts were leased to Royal Brunei airlines to generate costs from older aircrafts. The company also received its entire order for airbus A330-300 and Boeing 777-200s. In addition to the passenger services the company also augmented its cargo operations with considerably new aircrafts having an average age of nine years. Silk Sir, another subsidiary of the company also had a newer fleet of aircraft that has helped in generating greater efficiency for the airline generating cost advantage for the company. Use of newer aircrafts has also been able to reduce the carbon footprint of the company that has yielded considerable advantage with regards to maintenance of environmental sustainability (Singapore Airlines, 2010, p.17). Singapore Airlines also concentrated towards the aspect of retaining its existing customer base considering the fact that it is far cheaper to retain existing customers than to acquire new customers. The customer loyalty program of the company named KrisFlyer was also an instant hit with the target audience with customers enjoying greater privileges on repeat flying with the airline. In addition to loyalty schemes Singapore airlines also concentrated towards increased use of alliance partnerships. The company increased the number of partnerships to 29 alliances with the new additions being that of Aegean and TAM airline companies. This has allowed greater values and choice of greater destination for the guests of Singapore Airlines. Non airline partners were also increased with the addition of Bank of China, RHB Bank, American Express, HSBC and St George’s Bank, Australia. The partnerships have helped the customers to gain greater advantages and also get attractive bonuses. The alliance has helped the company to use the large customer base of these banks. The alliance with financial partners also helps the company as most of the passengers these days are using plastic money to purchase the tickets on airlines (Singapore Airlines, 2010, p.18). In addition to in flight and other partnerships Singapore airlines has also concentrated towards using ground facilities to generate opportunities and providing value to the customers. The new technology enabled passenger reconciliation system developed at the Changi airport seeks to considerably reduce the hassles of check in’s and offers passengers easy means of checking in at the airports. The new technology involves use of bar code based scanning devices with 2D technology that would automatically detect the barcode on the tickets and would considerably ease the hassles of passenger check in at the airport. The airline also entered into agreements with National Geographic and UnitelClassica for in flight entertainment. This has been an instant hit with the customers that has generated good values for the company in the form of good value addition to the passengers in return for their money. In addition Singapore Airlines has also used the Panasonic EX2 entertainment system in it’s in flight entertainment that has also generated considerable value for the organization and has helped in retaining and attracting new passengers for the company. This also assumes significance considering the fact that it is the only airline in the world to have such advanced entertainment facilities for passengers thus generating a unique competitive advantage for the airline among the other players in the market. Culinary aspect has also been taken in seriously by the airline company. Singapore Airlines has also launched Japanese meals for the business class passengers and offers a wide range of exotic Japanese cuisines for the passengers travelling by business class. The company later in the year also launched its own branded cookbook that offers a wide range of recipes from across the world made by renowned chefs from across the world. In the cargo segment the SIA Engineering Company that is a subsidiary of Singapore Airlines has also entered into alliances with aircraft suppliers like Airbus and Boeing for the maintenance and repair of the huge fleet of aircrafts. The cargo segment alone has been able to generate an operational profit amounting to 151 million US dollars in the last financial year (Singapore Airlines, 2010, p.16-26). The analysis of the operational strategies of the company reveals considerable good practices being pursued by the organization. Improvements and maintenance of focus and vision would not only help the company retain its exiting position in the market but would also open a plethora of opportunities for the organization that would help the company to emerge as one of the most formidable players in the industry segments and help generate long term sustainable competitive advantage in the business market. Question 2: Analyse and evaluate how the creation of the icon "Singapore Girl" helped Singapore Airlines to become a distinguished brand in Asia. Since its inception in 1947, Singapore Airlines has been delivering one of best airline services in Asian airline industry. By constantly offering customer oriented services, the airline company gained one of the mort reputed position in the global market place. However, gradually, the competition in airline industry keeps intensifying with global economic development. Moreover, after the airline deregulations policies in Asian countries, the competition intensified significantly as a number of domestic and international airline company entered in Asian airline industry. However, this liberalisation of global airline industry has also offered a number of opportunities to Singapore Airlines such as international market expansion that is helpful in achieving higher economies of scale, revenue per passenger etc. However, the increasing competition was stronger than available opportunities that directly affected its market share in its major Asian regions. This critical situation posed a greater threat to its market dominance and sustainability. In such threatening market scenario, it was necessary for Singapore Airlines to strike the market with different strategy. Besides, there were also other major issues which increase the Singapore Airlines’ concerns for sustainability. Prior to separation of Singapore from Malaysia in 1965, Singapore Airlines used to be known as Malayan Airlines and finally, in 1972, it was renamed as Singapore Airlines. During this period, the airline did not have scope for operating in the domestic market. Therefore, it had to face a direct competition from the leading international airline service providers. Moreover, it also had to face challenges as competitions lied in every activity like getting access for airport, right for securing landing rights, flight slots as well as attracting sufficient amount of foreign passengers (Tan, 2003, p.5-6). In order to combat with such intensified competition, the management started to focus on brand development strategy. A strong brand is one the most strengths which highly necessary for avoiding the unnecessary and threatening competition. Brand development strategy generally varies according to nature of industry and company’s mission and vision. However, the prime task in brand development process is to determine the basis based on which brand will be developed. Stephen Shaw (2007) has described that generally in airline industry, brand is developed on the basis of services like gaining customer satisfaction by offering punctually, better hospitality, baggage handling etc (Shaw, 2007, p.232). However, there are also three other major bases including cost, frequency of services and customer safely. In case of brand development process for Singapore Airlines, the management was looking for symbol that represented its best customer services. Singapore Airlines already developed its reputation is most of the Asian market but till then it had been attempted to follow a very specific branding strategy. The prevailing management of Singapore Airlines was aware than in brand development process, the company already held a strong synergy which had been gained through constant higher customer satisfaction, and effective and focused brand strategy was one of the major key strategic options available to the company. Moreover, the Singapore Airlines also determined to freshly position its brand services different from other leading airline company. In this process major basis for brand development identified by Singapore Airlines were innovations, excellent and high quality customer services, and the best technology etc. Prior to implementing this strategy, the company had already gained a significant amount of the loyal customers as its customers had experienced its high quality and customer oriented services. Such consumer-dedicated services had made one of pioneers in prevailing Asian airline industry. Before implementing brand building specific strategy, the Singapore Airlines introduced a number of innovative services. For example, for better serving the passengers it offered free beverages including alcoholic and non- alcoholic, hot meals etc. For entertainment purposes, it used to offer multiple entertainment systems like video-on-demand for every passenger. Besides, it also used maintained a healthy cabin ambience. Besides, Singapore Airlines had also introduced innovation in technology. For example, it always used the newest fleet and for replacing older fleets, it followed very strict policies. It always remains the first airline company who uses the newest fleet models for offering better comfort and safety level to its passengers. In 1970s, it collaborated with leading airline companies like British Airways and flew fleets like flew Concorde between London and Singapore. The technological innovation has offered it higher brand name with better cost efficiency. Another major feature of Singapore Airlines was that it always keeps changing its innovative services as it believed that such services last for few periods and soon followed by other competitors. Hence, this was reason; the company kept investing in its R&D for developing innovative ideas. The innovations were not limited within customer services but it had also brought innovations for marketing and promotional activities. Singapore Girl was an innovative effort for strengthening its brand through effective marketing and promotional activities, it aimed to differentiate the brand of Singapore Company. However, the cabin crew the company includes both male and female but the term Singapore Girl had led to personalize the cabin crew of the company. It has helped it to become one of the most popular international brand symbols. Brand symbols and taglines are meant to deliver a message to the target audience. These symbols, logos, and tagline must be clearly communicative and meets the prime objective of the companies. LePla, Davis, Parker (2003) has described brand logos and symbols and tagline as a major communication tools in brand development strategies. Moreover, brand massages with effective logos, symbols are very helpful in boosting the efforts given for marketing activities (LePla, Davis and Parker, 2003, p.15). Singapore Airlines realized the importance of effective brand communicating tools. Basically, the company wanted to deliver the message of the best customer services and caring and on the other hand, it also aimed to signify the Singapore culture. In these attempts, the company basically tried to develop an icon for its services and finally, the ‘Singapore Girl’ was born in 1972. However, the success of the Singapore Airlines was not merely gained by just creating the brand symbol, Singapore Girl, but the company had also given enormous effort to establish this brand symbol as internationally renowned icon (Blakeney, 2008, p.3). The management team of Singapore Airlines believes that training to each employees are highly necessary for offering the high quality customer services and hence proper training and motivation is one of the core feature of Singapore Airlines. The entire management and subordinate team have to gone through a comprehensive training. In case of the female cabin crew who represent the Singapore Girl underwent special training that continues nearly 15 weeks, whereas, the average industry training for airline industry last for 2 months. Therefore, this signifies that Singapore Airlines was determined to strike the market with a new avatar of high quality services. The trainings offered to Singapore Girls was comprehensive and included functional skills like serving passengers with foods and beverages, and other necessary safety related trainings. Moreover, Singapore Girls were also trained better soft skills, grooming, personal poise and deportment. They were made also experts in emotional skills for better understanding the passengers in order to offer the best services. In addition of such training for excellence service quality, Singapore Airlines grouped their cabin crew for specialized services like for entertaining, for wine serving. The management also kept trying to improve the skills of Singapore Girls as the changing demand and necessity of passengers. For example, the cabin crew were trained for innovative refresher courses for three to four days. On the other hand, the prime aspect in this entire process was the selection of proper cabin crew through better scanning and interviews. Selection of right candidate the represented the iconic Singapore Girls was also a challenging task. Every year, the company received nearly 1600 applications for the post but nearly 500-600 were selected. Heracleous and Wirtz (2009) have identified that while introducing the concept of Singapore Girl, Singapore Airlines tried to focus on duel strategy of excellence services with cost leadership. For this five major criterion were innovation, service design, synergies, profit consciousness and staff development. The Singapore Girl was the integral part of staff development activities (Heracleous and Wirtz, 2009, p. 274–279). Combination of Asian culture was one of the basic features of Singapore Girls that had made a unique brand symbol unlike other competitors of Singapore Airlines. Actually, the management had found a basis in culture for differentiating its brand from other international airline company. The symbol of Singapore Girl has offered the company a Unique Selling Proposition and gradually this symbol becomes identical factor for Singapore Airlines. The term ‘Girl’ stands of gentle, caring and courteous services and the Asian women are considered to charming, gracious and helpful. Singapore Airlines aimed to deliver the message through Singapore Girl that its services include these qualities. Strategically, it has position the Singapore Airlines as premium position in term of quality services offerings. Daniel Chan has commented that Singapore Airlines “capitalized on Oriental charm of with stewardesses of Chinese, Malay, Indian and Eurasian ethnic backgrounds” by the end of 1997, the cabin crew of Singapore Airlines included one third of cabin crew from different Oriental countries like India, Taiwan, China, Japan, Indonesia, Malaysia and Korea (Chan, 2000, p.460). The attire of Singapore Girls also signifies the core Asian culture as their costumes were designed from a typical Malaya wear called Malay sarong Kebaya and it was designed by the prevailing eminent designer, Pierre Balmain. The colours of Kebaya indicate designation of each Singapore Girl. There are four colours i.e. burgundy, blue, red and green, representing In-Flight Supervisor, Flight Stewardess, Chief Stewardess, and Leading Stewardess respectively. However, for there were also costumes for the male cabin crews as per their ranking that kept updating but Singapore Girls’ costumes remain same (Shanks, n.d.). Many have claimed that Singapore Girl has offered the Singapore Airlines a sensory branding position. The Singapore Airlines has offered its passengers full of entertainment, relaxation and smooth air transport services. The outstanding visually presentation of Singapore Girls has delivered its consumers a warm feeling. High quality and innovative services delivered by the Singapore Girl has helped the company to achieve one of the excellent airline service providers the global airline industries. The in0flight ambience and other services were developed in accordance to the personality of Singapore Girls. Eventually, it turned be one of the key success factors for Singapore Airlines. The services delivered by these girls were unique combination of Asian value and transport hospitality. This specific brand development strategy through Singapore Girls is an effective communicative tool for the company and moreover, the company kept delivering updated messages to its target audience by means of the iconic symbol with different setting and themes. Singapore Girls still remains of the major marketing tools for Singapore airlines that attracted a large number of international and domestic customers. The experiential brand strategy of Singapore Airlines through the concept of Singapore Girls has contributed in increasing value of the company and value of customers. This brand created though the Singapore Girl drives a significant amount of revenues. Martin Roll, an world renowned brand strategist has realized the importance of Singapore Girls to cope with the prevailing competition and hence he commented that “the Singapore Girl has contributed immensely to the success of Singapore Airlines' brand strategy and its entire positioning around customer and service excellence” (Roll, 2011). References Ayob, A.M. (No date). Singapore airlines limited: building a culture of service excellence. [Pdf]. Available at: http://mahdzan.com/papers/sia/SINGAPORE_AIRLINES.pdf. [Accessed on September 14, 2011]. Blakeney, R. (April 20, 2008). Singapore Airlines. [Pdf]. Available at: http://blogs.bauer.uh.edu/ibr/wp-content/uploads/2008/04/team-1-sia.pdf. [Accessed on September 15, 2011]. Chan, D. 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Available at: http://www.bts.gov/publications/special_reports_and_issue_briefs/issue_briefs/number_08/pdf/entire.pdf. [Accessed on September 15, 2011]. Read More