How Singapore Airlines Manages - Case Study Example

Running Header: How Singapore Airlines Manages Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Table of Contents Table of Contents 2 Terms of References 3 Procedures 3 Introduction 3 Findings 4 SWOT Analysis 4 Strength 4 Weaknesses 6 Opportunities 7 Threats 8 Conclusion 9 Recommendation 9 Appendix: Work Plan 11 List of Figures Figure 1: Singapore Capacity in Different Regions .....................................................................5 Figure 2: Singapore Airlines Net Income for the Last 7 years ......................................................6 Figure 3: Singapore Change of Passenger Traffic..........................................................................7 Terms of References Singapore Airlines has been leading in the Asian region for a number of years. This research focuses on establishing how this company manages to remain at the top, despite of stiff competition in the market, and what it should rectify to retain its position in the future. This research is written by an external consultant focusing on the company's board of directors and the management with intention of appreciating their success and informing them on the possible loopholes that may cost the company's success. The research also intends on alerting the company's directors on the unutilized opportunities that can result to great success if utilized. This research will be submitted to the company on 14th of April 2015. Procedures The research is based on the secondary data which were obtained from the internet. Most information was obtained from websites analyses air travel records. Other information was obtained from articles and journals reports after conducting different analysis regarding the company or airline industry in the region. This information is selected since it gives a general overview of the company's position in the past and most recent dates, giving the researcher a chance to study trends. Introduction Singapore Airlines Limited was established in 1972 and is fully owned by the state. The company is engaged in cargo and passenger air transportation tour wholesaling, air charters, training of pilots, engineering services, air terminal services and other associated activities. Since its establishment, the company has experienced exponential growth all round. The company operates in Africa, West Asia, the Americas, Europe, South West Pacific, and East Asia. Its headquarters are located in Singapore, and its hub airport (s) located in Singapore Changi. Singapore airline has been among the leading airlines in the world. It is highly characterized by good financial records and the best customer services in the airline industry (Heracleous & Wirtz, 2014). Findings SWOT Analysis Strength The success of Singapore Airlines has been based on increased devotion to customer services. The company has always considered customers as one of its assets and thus, they always receive the best and top services and hospitality. The company provides in-flight menus that are well prepared by qualified chefs. It also offers in-flight state-of -the-art system of entertainment with an extensive choice of games, music and movies. It also provides quality alcoholic drinks to the customers. The attention and care the company offers to its customers has earned the company a number of travel and industry awards. This has also highly increased the company's competitive advantage in the industry (Star Alliance, 2015). Singapore is among the top airline brands with regard to volume of passengers carried and market capitalization in the industry. Airlines across the globe use Singapore Airlines as the brand and product benchmark which is a great compliment. The company has also adapted multi-brand model with SilkAir which is regional full-service subsidiary and Scoot which was recently launched and that turned to be the third long-haul LCC in the world after AirAsia X and Jetstar. SilkAir has been very profitable to the company and it is anticipated that Scoot will be much profitable in the near future since it continues to grow (Hoovers, 2015). The company also has an extensive airline network with more than 60 destinations in about 35 nations across six regions. This includes the two longest non-stop business flights. The company remains the biggest airline in Europe with destinations in London, Frankfurt, Zurich and Paris among other 11 destinations in Europe. It is also the biggest Asian airline in New Zealand and Australia and also the second biggest airline in Australia after Emirates and the fourth biggest in New Zealand after Emirates, Virgin Australia and Qantas. The chart below shows the company's capacity in different regions (CAPA, 2014) Figure 4: Singapore Capacity in Different Regions Singapore airline also has the strongest hub in Singapore. Despite of significant intensification of the international passengers' connections competition as a result of drastic growth of the Gulf hubs and carrier, Singapore remains a principal transit passengers' hub, offering a network and product that remains near or at the peak of the industry. Another major company's strength is that it has remained profitable for the last 40 years since its establishment. Although the company sometimes experiences drops in the profit made, it has never incurred any losses ever since it started its operations. This is unmatched and impressive achievement that enables the company to remain at the top in the industry since it can easily fund its operations and expansion projects. The graph below demonstrates the company net income in the last 7 years. Figure 5: Singapore Airlines Net Income for the Last 7 years Weaknesses One of the major company's weaknesses is aircraft plagued with persistent technical issues. For example in May 2014, the Airbus A380-800 of Singapore Airlines experienced technical issues while flying 263 passengers from Singapore to Hong Kong. The plane crew received a door warning and had to land. On April 2014, there was a delayed flight as passengers waited for completion of engine maintenance. On February 2014, another aircraft had to return to Singapore after 30 minutes of departure after the left hand door of main gear refused to close after gear retraction. All these mechanical issues in a single period destroyed the reputation of the company, making most customers to consider it unsafe to use the airline (MarketLine, 2015, p. 5). The company is experiencing limited mainline growth chance as its home market seems to be comparatively mature. Although the company experienced rapid growth of the number passengers in the last decade, this has eventually slowed down. The company currently has an average growth rate of below 2% per year. The company has intensely depended on international traffic. However, the intensifying competitions from its growing competitors particularly Gulf carrier has highly limited the passengers growth rate in the company. This can also be attributed to high travel charges associated with Singapore Airlines. Below is the graph illustrating the company's passenger traffic: Figure 6: Singapore Change of Passenger Traffic Opportunities The world is experiencing a boom in the tourism industry. This could enhance the demand for company's services. According to MarketLine (2015), the volume of international tourists increased by 51 million in 2014 from what was recorded in 2013. The Asia Pacific and America region registered 5% and 7% increase in tourism arrival respectively. Middle East and Europe experienced a growth of 4% each. If this trend continues, the air line which serves in most parts of Asia and which is among the best airlines linking Asia to Europe will definitely experience a high growth in the number of passengers. There is currently a strong view for the international air freight sector. According to Hoovers (2015), international air freight industry improved in 2014 after experiencing declines in 2013 and in 2012. The industry is expected to experience a steady growth in terms of volume and value in the following five years. This increases the hopes that being part of the sector, Singapore Airlines will also experiences the predicted growth to positively contribute to the world air freight growth. Singapore Airlines still has a chance of deepening its partnership with all its 24 partners to increase its operation area. This would give the company an opportunity to extend its services far and wide and thus making more profit. The company is also working on premium economy product with intention of introducing on long-haul aircraft. This will assist boosting its revenue in the future (Heracleous & Wirtz, 2014). Threats The airline industry is quite competitive and thus Singapore airline must remain competitive to survive in the industry. The company is currently experiencing a stiff competition from Gulf carrier which has highly affected its passengers' growth rate. Gulf carriers also remain aggressive and huge competitors for economy and premium passengers in the biggest part of Singapore Airline markets. The airline market in the Southern Asia is currently experiencing overcapacity. This has been due to expansion of over ambitious SIA competitors. This has resulted to over supply an aspect that can highly influence the prices as companies fight to survive in the competitive environment. This create a possibility that Singapore Airlines may be forced to lower its prices to remain operational in the region. The Singapore Airlines rival hubs are gaining strength with time. Although Changi still remains the leading hub in the region, other airlines in the area have been developing quite swiftly and in some instances they have been extra innovative in this mission. Kuala Lumpur International has particularly experienced drastic improvement in the last 2 years. Beside Changi is relatively more expensive than the upcoming airports, an aspect that reduces its competitive advantage in Southeast Asia (CAPA, 2014). Conclusion Singapore Airlines has been experiencing steady growth since its formation in 1972. It is currently known as one of the leading airline companies in the world. Singapore has managed to maintain its good financial and general performance record by extending its services to different parts of the world. It currently has 60 destinations in 35 nations in the world. The company has the strongest hub in Asia an aspect that strengthens its competitive advantage in the region. It also offers the best customer services in the airline business. This makes it more preferred among airline customers in its operation region. Although the company is experiencing extensive competition, the above advantages have always made it shine over its competitors. However, the company is currently experiencing a number of challenges which if not taken care of may influence its position in the industry. Some of these challenges include rapid growth of its major competitor in the region, and a decline in the rate of passenger growth. Recommendation It is evident that Singapore Airlines has been performing quite well in the last 40 years. However, the company is currently experiencing stiff competition than it has ever experienced before: The company should consider reducing its travel cost to match its competitors in the region to be able to increase its passenger growth rate The company should retain its current level of customer services to continue enjoying the benefits they bring to the company The company should also consider establishing new partnerships and strengthening previous made partnerships to expand its services far and wide The company should consider advancing its engineering level especially in maintenance, to prevent damages that would cost its reputation The company should also consider establishing a lower class that would consider those that regards their charges as very high. This can be attained by lowering premium standards a bit. References CAPA, 2014, ' Singapore Airlines SWOT: challenges continue as competition intensifies as shown by 1QFY2015Results' [online] < http://centreforaviation.com/analysis/singapore-airlines-swot-challenges-continue-as-competition-intensifies-as-shown-by-1qfy2015-results-180289> [Accessed on April 13, 2015] Heracleous, L & Wirtz, J, 2014, 'Singapore Airlines: Achieving sustainable advantage through mastering paradox' The Journal of Applied Behavioral Science. vol. 50, no. 2, pp 150-170. Hoovers, 2015, 'Competitive landscape report Singapore Airlines Limited' [online] [Accessed on April 13, 2015] MarketLine, 2015, 'Singapore Airlines, Ltd. SWOT analysis' MarketLine. Star Alliance, 2015, 'Singapore Airlines' [online] < http://www.staralliance.com/en/about/airlines/singapore_airlines/#> [Accessed on April 13, 2015]. Appendix: Work Plan Statement of the problem Singapore Airlines has been experiencing exponential growth without major market challenges. However the company is currently experiencing stiff competition from different emerging and developing companies in the industry. This has resulted to decrease in the rate of passengers growth, an aspect that threatens the company's future financial position in the market. Statement of Purpose The main research purpose is to identified features that have enabled the country to remain competitive in the market and possible problems that the company is facing that may interfere with its future success. Research Strategy The researcher will conduct a secondary research where different reliable materials from different sources will be identified. These materials will be obtained from internet sources. The used references include: Source 1 Article in a website CAPA, 2014, ' Singapore Airlines SWOT: challenges continue as competition intensifies as shown by 1QFY2015Results' [online] < http://centreforaviation.com/analysis/singapore-airlines-swot-challenges-continue-as-competition-intensifies-as-shown-by-1qfy2015-results-180289> [Accessed on April 13, 2015] This source was used since it gives detailed analysis of the company's performance in the past, and some of its previous working strategies and achievements. This article was also recently published and thus it contains recent information Source 2 Journal Heracleous, L & Wirtz, J, 2014, 'Singapore Airlines: Achieving sustainable advantage through mastering paradox' The Journal of Applied Behavioral Science. vol. 50, no. 2, pp 150-170. This article was used since it discusses some of strategies that company applied in the past to remain competitive. It also analyzes some of the decisions taken regarding the company's operation and their outcome. The article was also recently published and thus it contains recent information. Source 3 Article in a website Hoovers, 2015, 'Competitive landscape report Singapore Airlines Limited' [online] [Accessed on April 13, 2015]. This report analysis the Singapore past performance and some strategic and performance measures that have been applied recently, analysis their possible outcome in the future. The paper was used dined it focused on recent changes that are taking place regarding the company's competitors Source 4 Pdf article in an online database MarketLine, 2015, 'Singapore Airlines, Ltd. SWOT analysis' MarketLine. This paper was used since it gives SWOT analysis of some of important company's aspects that affect its competitive advantage. The paper is recently published and thus most of its information is recent. The paper is also from a credible source and thus it has reliable information. Source 5 Website Star Alliance, 2015, 'Singapore Airlines' [online] < http://www.staralliance.com/en/about/airlines/singapore_airlines/#> [Accessed on April 13, 2015]. This site contains records of all airlines in Asia and Europe. It therefore analyzes unique features of each airline that have contributed to its success. Therefore the site provided the researcher with unique practices that results to success in the Singapore Airlines. Read More