airline industry | My Assignment Tutor

[4:39 PM, 5/24/2021] +968 9910 6731: Singapore Airlines (SIA) The airline industry has been plagued by several factors such as overcapacity, commoditization of offerings, cutthroat rivalry exacerbated by the entry of low-cost carriers, and intermittent periods of disastrous under-performance. Several macro-level socio-economic factors such as rising oil prices, the SARS crisis, frequent concerns about the eruption of bird flu and now Covid19, the Asian tsunami, and rising terrorism concerns have further impacted profitability adversely. In 2006, the global airline industry suffered a net loss of $500m, or 0.1% of revenues, accumulating net losses of $42bn between 2001 and 2006 (International Air Transport Association, 2007). In this industry environment, Singapore Airlines has consistently outperformed its competitors. It has never posted a loss on an annual basis, has achieved substantial and superior returns compared to its industry, and has received hundreds of industry awards for its service quality. SIA has achieved this outstanding performance by implementing a dual strategy: differentiation through service excellence and innovation, together with simultaneous cost leadership in its peer group. Such a strategy was deemed unachievable by Michael Porter who held that differentiation and cost leadership must be mutually exclusive since they require different kinds of investments across the value chain. Singapore Airlines is positioned as a premium carrier with high levels of innovation and excellent levels of service and has made a strategic choice of giving priority to profitability over size. SIA has deployed the Airbus A350-900XWB aircraft on new air routes from Singapore to Cape Town via Johannesburg, Düsseldorf and Stockholm via Moscow and return. The Airbus A350-900XWB aircraft are also replacing older, less efficient aircraft as part of the company’s fleet modernization strategy. Furthermore, the airline has acquired the new ultra-long-range variant of the Airbus A350-900XWB for use on its proposed new non-stop services from Singapore to Los Angeles and Newark Liberty Airport in New Jersey, USA. The longest flight stage length is the Singapore to San Francisco route which is 7339 nautical miles (13,594 km) in length. The shortest stage length is between Singapore and Kuala Lumpur (160 nautical miles or 297 km). The new non-stop services from Singapore to Los Angeles and New York City will be the longest non-stop services operated by Singapore Airlines. The flight stage lengths between Singapore and Los Angeles and Singapore and Newark Liberty Airport are 7621 nautical miles (14,114 km) and 8285 nautical miles (15,344 km), respectively. The greatest number of available seat kilometres (ASKs) are generated on Singapore Airlines Airbus A350-900 XWB service from Singapore to San Francisco (3.57 million ASKs). The smallest number of ASKs produced are on the short-haul service from Singapore to Kuala Lumpur (75,141 ASKs). Its airline subsidiaries which include 100% ownership of regional carrier Silk Air, budget carrier Tiger Airways (49%), and Virgin Atlantic (49%) cover the key customer segments within the industry. According to CEO Chew Choon Seng ‘‘we intend to play in all the segments – SIA at the high end, Silk Air on middle ground and Tiger Airways at the low end’’ (Outlook, 2004). Presently, Singapore Airlines’ passenger fleet consists of wide-body aircraft from five aircraft families: the Airbus A330, Airbus A350 XWB, Airbus A380, Boeing 777 and Boeing 787 Dreamliner. The airline also operates Boeing 747-400 cargo aircraft. As of 30 September 2020, there were 132 passenger aircraft and seven freighters registered in the Singapore Airlines fleet. SIA does not aim to be a lot better but just a bit better in every one of its functions and offerings than its competitors. This not only means constant innovation but also total innovation – innovation in everything, all the time. Importantly, this also supports the notion of cost-effectiveness. Continuous incremental development comes at a lower cost than radical innovation but delivers that necessary margin of value to the customer: ‘‘It is the totality that counts. This also means that it does not need to be too expensive. If you want to provide the best food you might decide to serve lobster on short haul flights between Singapore and Bangkok for example, however you might go bankrupt. The point is that, on that route, we just have to be better than our competitors in everything we do. Just a little bit better in everything. This allows us to make a small profit from the flight to enable us to innovate without pricing ourselves out of the market.’’ (Yap Kim Wah, CEO of SIA). ‘‘Most new changes that really secure the wow effect are those things that customers never expected. we have our Product Innovation Department that continuously looks at trends and why people behave in a certain manner, why they do certain things. And then we do a projection of 3–5 years of what is going to happen. For the airline, it’s not just about having a smoother flight from A to B. That will be taken for granted. It is really about what are the customers’ lifestyle needs. Can you meet these lifestyle needs?’’ Examples of such innovations include the Krisworld on-demand entertainment system for all classes, Internet and phone check-in for all classes. [4:39 PM, 5/24/2021] +968 9910 6731: flights between Singapore and Bangkok for example, however you might go bankrupt. The point is that, on that route, we just have to be better than our competitors in everything we do. Just a little bit better in everything. This allows us to make a small profit from the flight to enable us to innovate without pricing ourselves out of the market.’’ (Yap Kim Wah, CEO of SIA). ‘‘Most new changes that really secure the wow effect are those things that customers never expected. we have our Product Innovation Department that continuously looks at trends and why people behave in a certain manner, why they do certain things. And then we do a projection of 3–5 years of what is going to happen. For the airline, it’s not just about having a smoother flight from A to B. That will be taken for granted. It is really about what are the customers’ lifestyle needs. Can you meet these lifestyle needs?’’ Examples of such innovations include the Krisworld on-demand entertainment system for all classes, Internet and phone check-in for all classes. Use of information technology is an essential feature of SIA’s strategy both in enhancing customer service as well as increasing efficiency. SIA’s web site is one of the most advanced and user friendly in the industry, where customers can check schedules, buy tickets, check into a flight, manage their Krisflyer (frequent flyer) account, find out about promotions, and even choose their meal for their next flight. Given that agents’ commissions can be up to 7.5% of total operating costs (and reservations/ticketing a further 5.4%) effective use of IT can significantly reduce costs and enhance service levels. From 20 January 2018, SIA started offering new fare types to better suit each passenger’s travel needs. There are three distinct fare types, and a passenger is able to select a combination of fares, privileges and flexibility that best meets their requirement. The revenue management system is dynamically updated with the latest passenger booking information for each market.

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