N mintin of lysi irlins and Singr irlins Businss Mdl - Essay Example

N ЕХАMINАTIОN ОF МАLАYSIА АIRLINЕS АND SINGАРОRЕ АIRLINЕS BUSINЕSS MОDЕL Insert your name Subject Date of submission Table of contents Introduction ………………………………………………………………………….. 3 Purpose and objectives of full service network carriers……………………………… 3 Singapore Airline Business model…………………………………………………….. 5 Malaysia Airline Business Model……………………………………………………… 8 Impact of government legislations on Singapore and Malaysia Airlines………………. 10 Conclusion……………………………………………………………………………….. 12 List of references………………………………………………………………………….. 14 List of figures……………………………………………………………………………… 14 Introduction The world airline industry has in the past few years faced various challenges. These challenges include: increasing fuel prices, high insurance premiums due to terrorism and rapid deregulation of the industry. Natural disasters ranging from hurricanes to volcanic explosions have hindered air travel. Consequently, the world airlines have recorded devastating losses of more than US$ 10 billion (Flint 2010). This has forced the airline industry to undergo numerous transformations. New kinds of airline, for example low cost carriers, have been introduced in the market. Moreover, the airline industry has been restructured through take-over, mergers and alliances across various business models. The traditional business models have been pushed to the back burner by hybrid models as the new models are favored for combining the best of any models. Business models affect how a company operates and delivers its services to clients. Focusing on airline companies, it is noticeable that use of full service network services carriers (FSNCs) has a great impact on the airlines operations. FSNCs affect how the airline will offer the service classes, the flight schedules, the services pricing, the geographical area covered and the whole airline operations (Beiger and Wittmer, 2006). Malaysia and Singapore Airlines in the recent years have managed to offer quality airline services and stayed at the top. This is evident by the number of international awards that they receive annually as the best airlines. All this success is attributed to different factors such as the business model used plus the legislation that governs the airline business in their countries. Purpose and objectives of full service network carriers A full service network carrier (FSNC) is the ability of the airline to provide a wide range of services both before the flight and during the flight. Such services are, showing the customers the different service class they have, connecting them to flights to different places e.t.c. those airlines that use the FSNC to operate, are referred to as hub and spoke airlines as the operation of the FSNC is based on the hub and spoke model (Doganis, 2001). Some of the airlines that operate using FSNC are Air/France, Iberia, Malaysia, and British Airways with most now most international airlines adopting the same. FSNCs are characterized based on the following aspects; The fleet type: this will include the different types of aircrafts the company has starting from small planes to large wide body planes. Understanding how many planes, their sizes help to plan adequately how to implement the FSNCs model. Airlines with many large planes will have a more complex model as compared to an airline with small planes. The Geographical area coverage: depending on how much geographical area the airline can access, this will determine which type of model to be used. For an airline company that has many international destinations, will require a large number of staff to operate the FSNCs (Pitt & Brown, 2001). On the contrary, the small airline companies which have a small geographical area to cover will not need much staff to guide the passengers. The structure of the network: FSNC is based on the hub and spoke network model. With this model, the airline company can easily control the flight patterns. For instance, for those passengers that have connecting flights, they will be shown which planes to use while those not connecting are given different directions. This way, the airline company can easily offer services to its customers without making them feel neglected. The schedule arrangement: From the use of FSNCs, it is easy to plan the flights depending on the number of customers and where they are going. The FSNC helps the airline to get the picture of how many passengers it can receive per day and how to plan the flights to effectively manage those passengers (Pitt & Brown, 2001). The services offered: Under this aspect, with the help of the FSNC model, the airline can create the service class that it offers. In most cases, it is around 2 to 4 service classes. With the categorization of the service class, planning for it will be easy same to serving the people in those different service classes. The pricing: with the full implementation of the FSNC model, the airline can easily determine the pricing of the services offered by the company. This will depend on the service class, destination among other things. Singapore Airline Business model A business must have a model which it uses as a guide in its business operations. Without a business model, then it is unlikely for the business to meet its objectives and goals (Miller et. al, 2009). The Singapore Airlines (SIA), has a business model which are based on four main strategies namely, core strategy, customer interface, value network and strategic resources (Singapore Airlines, 2013. All these four components are linked together by use of bridges that are the customer benefits, company boundaries and configuration. Below is the diagram that illustrates the business model of Singapore Airlines.   > Figure 1: Business model of the Singapore Airlines. The Core Strategy: This is what drives the Singapore Airlines business towards its main goals and objectives. It highlights the plans which the company has decided to use to compete against its competitors. It is based on three main aspects which include the business mission, different ion basis and the market scope of the airline company. The Business Mission: The top management has clearly communicated the business mission to its employees, the importance of satisfying the customers’ needs. This is what every business should do. This business mission is evident as Singapore Airlines (SIA) has received many awards internationally (Singapore Airlines 2013). The Market Scope: SIA has one main product to offer to its customers and that is air travel. For this reason, they had come up with ways to compete globally and this has made the company to succeed in its operations (Kee et. al 2011). Most of its flight operations are international as the domestic market is already flooded with other airlines. Differentiation Basis: As a passenger it is important to have to differentiate between the staff and other passengers. The SIA staffs are dressed elegantly and you can easily identify them. These are the people if you have any query about the airline they can help you out. Singapore Airlines Strategic Resources Under this we have four Strategic Resources aspects that make it possible for the airline to operate: they are namely; Core competencies: Singapore Airlines offers skills to their top management in running effectively the airline business. The skills covered are those of the staff to handle the passengers and other clients that visit the airline daily. Strategic assets; these are another aspect to consider. SIA has a wide range of planes that use their airport plus those that hey own as a company (Singapore Airlines 2013). More so, the SIA staff is also their assets as they pick only the best and by using the airline this is evident. Most of the staff comes from the Asian countries that airline flies. The other two aspects are core processes and configuration. This is how well the outlined strategies will be linked and carried out effectively during the airline operations. This SIA links effectively in its business. Customer Interface Under customer interface a lot about the customer well being is highlighted. It gives the procedure to be followed in order to fulfill the customer complaints at any time. For SIA they have a qualified staff to care of the customer complaints offer directions where necessary. Value Network Suppliers, partners and coalitions are what keep the company on its feet, without them not much can be done. SIA need suppliers to supply whatever the company needs to run such as food for passengers and fuel for the planes (Graf, 2005). Partners provide the necessary capital to keep the company running and same to coalitions which facilitate the airline to operate in different countries. Malaysia Airline Business Model According to (Malaysia Airlines, 2013), the Malaysia Airline business model is based on three broad strategies; the recovery plan, the game changers and the business foundations. Below is a diagram to show how the airline operates; Figure 2: Malaysia Airline Business strategies Recovery Plan The recovery plan can also be referred to as the rebranding period of the airline. The airline has simple objectives to cover; one is to make sure that the air has penetrated the market as much as possible. They made sure that they included all the major routes that the passengers use to go to their business destinations. Much is invested in making sure that they bring back the lost customers to other airline companies. This means that improved services and revised flight costs. Revised flight cost makes it possible for most people to afford to fly with the airline and at the same time the airline makes reasonable profits (Malaysia Airlines 2013). Game Changer Plan After getting noticed in the global market, the business has to make sure that it maintains presence and performance. Malaysia Airline has derived strategies to make sure they remain relevant in the air travel business. The airline has introduced new products such as the flight routes among other services just to attract more customers. Another way to make sure the airline keeps running is ensuring that the business has enough capital to operate. Malaysia airline has various partnerships and coalitions with other different companies (Malaysia Airlines Review, 2013). This has made the airline to run its operations smoothly. Business Foundations Good businesses foundations are what the airline believes are the main pillars of the business. Malaysia Airlines came up with three distinct fundamental elements which are; Customer experience: the key to success is to make sure that the customer is happy with the services offered. When customers are satisfied, they will spread the news to other potential customers who now use the airline as their preferred option. Operational Improvement: Malaysia Airline had to derive ways to which they would use to continuously improve their operations (Malaysia Airlines Review, 2013). They had to ensure that the costs of maintenance are minimal and the generated profits are used in investment that will be used in running the airline in the future. Make the airline a winning organization: With the new strategies in place how to make sure that they yield the results was another challenge. Malaysia Airline employed trained staff to aid in the operations of the company starting from the pilots to its support staff all are highly trained to do there. The same applies when they decided to work with different partners to make Malaysia Airline the best air travel to use. The airline’s commitment to its strategy is what has made it possible for it to perform well and get all those amazing international awards for a good job done (Graf, 2005). Figure 3: an image of Malaysia airlines, accessed from http://www.malaysiaairlines.com Impact of government legislations on Singapore and Malaysia Airlines Governments of both airlines companies have come up with laws to make sure that the airlines do not exploit its customers and work within the countries laws. This in some way has made the airlines be responsible for any damages that they have made during their time operations. In both airline companies, the government insisted on the importance of having a top notch security system. With a secure airline, more customers will want to travel with an airline. Since that now crimes are on the rise and the criminals daily come up with new ways of committing crime, it is advised for the airline companies to use the latest technology in their security implementation. Environment conservation has been on every government agenda since the roll out of the millennium development goals (Flint, 2010). Since there is a rise in the levels of carbon (IV) oxide, the government has put in place measures to restrict emissions of this gas from airline companies. In both countries, the governments have encouraged the airlines to purchase energy efficient planes that can operate on low fuel and thus low emission of CO2. To this commitment of environment conservation, the airlines have come up with environment conservation programmes together with the communities living around the airlines. In addition, the airlines have made it personal to talk to airplanes manufacturer’s to build energy efficient planes. More of a safety feature, the government has made sure that the planes have a certain number of years it can operate then be disposed (Kee et. al., 2011).. This was due to frequent plane crash which as a result of mechanical failures which can easily be avoided. Mechanical failures can be due to poor repair work on the plane or the plane is just old to still be used for air travel. In such cases, the airline is supposed to dispose the plane and buy another one. Having new planes it is a way of enticing new customers and old ones to stay with the airline. The governments of these two airlines have implemented legislations to make sure that any plane leaving the country has the perfect global standards as of required the plane to have. This helps build a reputation between different countries and also with the customers. In Malaysia Airline, they have come with a program to help offer sponsorships to students to study in other countries which is not a government requirement but more of an initiative (Malaysia Airlines 2013). The Malaysia government had a legislature that the airlines should come up with ways to help out the communities living around it or the whole country at large. Giving sponsorships to students is a way to promote literacy levels in the country and this builds a customer base for the airline. In both airline governments, they have a legislation that requires the airlines to pay taxes as per the profits earned annually. Through the payment of taxes, it has made the governments to operate providing more services to the airline companies themselves. More so, paying of the taxes shows to the country and customers that as an airline company is responsible for its actions. In the event of a plane crash, the governments of both airlines have a commission that looks into the crash determine what the cause was and how the affected should be compensated (Kee et. al., 2011). It is easier for the company to continue operating even if it faced a plane crash. This is so as the company will not use its own staff to investigate the crash. If the company is found to be responsible for the crash, then it has to pay the affected by compensation. There are proper laid out procedure to follow when compensating the clients courtesy of the government legislation. Conclusion Looking from the operation of both Singapore Airline and Malaysia Airline, it is easier to examine their business models. First the way they offer their services is in a professional manner which just makes the customer like them. The same goes for customer support where they are professional. By use of the FNSCs, it has made it possible for airlines to carry out their operations with a lot of ease and capitalize on other services. Now it is possible to run different products in an airline company thanks to FSNCs. In order to ensure security, governments are keen to ensure that legislations are in place to protect the customer together with the airline. List of references Beiger, T., and Wittmer, A. 2006, Air transport and tourism – Perspectives and Challenges for destinations, airlines and governments‟, Journal of Air Transport Management, 12, pp. 40-46 Doganis, R., 2001, the Airline Business in the 21st Century, Routledge, London, New York. Flint P (2010). World Airline Report. Air Transport World, July: 24-33. Graf, L 2005, „Incompatibilities of low-cost and network carrier business models within the same airline grouping‟, Journal of air transport management, vol. 11, pp. 313-327. Kee Mun, Musa, Wong and Ghazali. Branding satisfaction in the airline industry: A comparative study of Malaysia Airlines and Air Asia. University of Malaya, 50603 Kuala Lumpur, Malaysia. Accepted 23 March, 2011 Pitt, M., & Brown, 2001, ‘Developing a strategic direction for airports to enable the provision of services to both network and low-fare carriers’, Facilities, vol. 19, no.1-2, pp. 52-60. Malaysia Airlines 2013, Corporate information – awards, viewed 22February 2013, Malaysia Airlines Review. Viewed on March 30, 2013 from www.airreview.com Malaysia Airlines 2013, Corporate information – awards, viewed 22February 2013, http://www.malaysiaairlines.com/au/en/corporate-info/awards/latest.html. Miller, FP, Vandome, AF & McBrewester, J 2009, Business model, VDM Publishing House, Saarbrücken, Germany. Singapore Airlines 2013, Singapore Airlines – our awards, viewed 22 February 2013, http://www.singaporeair.com/en_UK/about-us/sia-history/sia-awards/ Source: Singapore Department of Transportation List of figures Figure 1: Business model of the Singapore Airlines. Figure 2; Malaysia Airline Business strategies Figure 3: an image of Malaysia airlines, accessed from http://www.malaysiaairlines.com Read More