Company Business Case_Singapore Airline

docx

School

University of Windsor *

*We aren’t endorsed by this school

Course

BSMM 8350

Subject

Business

Date

Feb 20, 2024

Type

docx

Pages

Uploaded by CoachBaboon3174

Company Business Case – Singapore Airline Sylvia Yunbing Lin (110119666), Muhammad Ahmad (110105306) Odette School of Business, University of Windsor BSMM8550 Domestic Transportation and International Shipping: Section 02 Dr. Shashi Shahi November 24, 2023

Company Introduction Singapore Airlines (SIA) is a renowned global airline leader that has strategically positioned itself as a premium carrier, targeting both business and leisure travelers who value superior in-flight experiences and are willing to pay a premium for quality service. As a member of star alliance, it was voted as the Skytrax World's Best Airline 2023 and won the World's Best Airlines as well as Best Cabin Staff in 2023. It owns Singapore Airline, a luxury carrier, including SIA Cargo, which operates freighter fleet and manager the cargo hold capacity in SIA’s passenger aircraft, Scoot, a low-cost carrier, on medium and long-haul routes from Singapore, predominantly throughout the Asia-Pacific region, as well as SIA Engineering handles maintenance, repair and overhaul (MRO) business. Case Study Due to Covid-19 pandemic in 2019, Singapore Airlines suffered a great loss and in operation mud as the border and travel restriction. To enhance its financial performance and streamline the operations, it needed to formulate a robust operational strategy. The significant reduction in the global network and the suspension of services to various destinations necessitate a strategic focus on optimizing costs, particularly in variable expenses. Therefore, SIA should prioritize measures to control fuel costs and enhance fuel efficiency. SIA airlines got lots of complaints after pandemic, affecting its reputation and potential growth. Singapore Airlines must focus on optimizing its transportation operations, particularly in the cargo segment. The cargo business has exhibited strong performance with high load factors and profitability. However, the weak performance in on-time delivery poses a risk to cargo customer satisfaction and profitability. The aging average fleet age of cargo planes suggests a potential impact on functionality and service. In adapting to fast-changing customer needs and maintaining its leading position in the competitive market, Singapore Airlines should pay attention to the evolving dynamics of consumer behavior in the air travel market. SIA should tailor pricing and service strategies to cater to the unique preferences of customers. Furthermore, considering the impact of the pandemic on travel patterns, SIA should invest in digital solutions, contactless experiences, and flexible booking options to meet the evolving expectations of travelers and maintain its competitive edge in the airline industry. Case Questions 1. What operational strategy should Singapore Airline take to improve performance facing unforeseen global crisis? 2. What should Singapore Airline do to minimize delays and customer dissatisfaction to provide seamless experience? 3. How to adapt to evolving customer needs and maintain its leading position in this competitive market? Case Analysis Due to the disruptions caused by the Covid-19 pandemic, the Singapore Airlines (SIA) Group had to significantly scale back its global network, including the suspension of services to several destinations. The total revenue in 2021 recorded $7614.8 million, increasing by 99.6%, while the expenditure in 2021 stood at $8224.5

million, increasing by 30% on a year-on-year basis. It also narrowed its full year operating loss by 75.7% to $610 million ( Figure 1 ). Revenue from Europe as route region ranked the highest among worldwide, followed by Americas, South West Pacific, East Asia, and West Asia and Africa in 2021, which is different as regular top ranking of East Asia because of border restriction. Thus, SIA Group should focus more on the Europe if the Covid effect continues ( Figure 2 ). Figure 1 Figure 2 Revenue from Singapore Airlines experienced a decline of $5432.6 million (69.6%) to $2373.1 million and revenue from Scoot decreased by $2153.7 (83.3%) to $432.9 million in 2021 compared to pre-pandemic level in 2019, indicating a big loss in passenger segment during this Covid but fast recovery of Singapore Airline rather than Scoot. However, the cargo business continued with its sterling performance as revenue of $4339.3 million, which reached the peak during past 10 years, buoyed by tight air freight capacity and strong demand that resulted in higher yield ( Figure 3 ).

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Figure 3 Variable cost accounted for 65.94% of total expenditure, including fuel cost (28.41%), staff cost (23.1%) and handling cost (10.2%), while fixed cost occupied 34.06%, including aircraft depreciation (23.1%), airport and overflying charge (5.77%), and aircraft maintenance and overhaul cost (5.19%) in 2021 whereas fixed cost of 20% during pre-pandemic period ( Figure 4 ). As the largest expense, control the fuel cost and increase the fuel efficiency is critical to Singapore Airline. Fuel productivity of the passenger fleet, measured by load tonne-km per barrel, decreased 18.6% to 363ltk/BBL, mainly due to surging fuel price and lower passenger load factors in 2021 ( Figure 5 ). Figure 4

Figure 5 The demand for air cargo showed strong growth on the back of robust general cargo demand due to inventory restocking. SIA Cargo spared no effort in capturing revenue opportunities, against the backdrop of a protracted industry capacity crunch for both air freight and ocean freight. Load factor of air measures the percentage of air flight capacity that has earned revenue. In freight transportation, cargo load factor is calculated as the ratio of actual revenue earning output (revenue ton-miles) to the maximum possible revenue-earning output (available ton-miles). The cargo load factor in 2020 and 2021 reached a high record over 83%, representing the top record during 10 years. It indicated that the SIA cargo had sold most of its availability and was easy to spread its fixed cost, allowing cargo segment stay profitable. The cargo yield increased to 73 cents/ltk and the cargo unit cost experience a drop to 27.2 cents/ltk. The cargo load factor of 83% was much higher than the break-even load factor of 37.3%, which was determined by unit cost and passenger yield, indicating the reason behind huge cargo profit ( Figure 6 ). Figure 6 Cargo customer satisfaction showed that the overall rating was approximately 4.1 in 2021. The cost different between service level increments was

higher closer to the perfect service, which identified as rating of 5 for customer satisfaction. Therefore, it’s better to invest and adopt strategy to decrease the number of cases rating 1 to 3, especially in America and Europe ( Figure 7 ). Looking into the trend of cargo on-time delivery, it revealed the weak performance of on-time delivery with 71% in 2021, below the average level of 83%. This delay will affected cargo customer satisfaction and eventually its profits (Figure 8) . Additionally, the fleet average age of cargo was up to 18.4 years in 2021 which may also influence its cargo flight functionality, flexibility and service. Figure 7 Figure 8 The Average Annual Expenditure on Airline Fares Per Consumer Unit ($) represents the average amount of money spent on airline fares by a consumer unit over a year, tracking changes in consumer behaviors related to travel expenses, including frequency of travel, the distance traveled, travel preference, and number of people in the consumer unit who travel. It revealed that the consumers were conscious on spending money on the air travels. Singapore airline should consider how to approach them with innovative services ( Figure 9 ). Developed country travel market had base price elasticity for short-haul routes of 1.3. US travel market had slightly

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

high price elasticity with air travel perhaps less budget-oriented than in other developed economies with short-haul route of 1.6. It indicated that price elasticity decline as countries become richer and markets mature. Developing countries typically had a greater responsiveness with the price change, such as its short-haul elasticity of 1.8. There was also evidence that long-haul journeys were seen by passengers as different, more desirable, to the more commoditized short-haul markets, so price elasticity was higher the longer the distance. The increase of demand on the air flight would be more responsive to the decrease of airfares especially for long distance trip. ( Figure 10 ) Figure 9 Figure 10 Recommendations For Singapore Airlines (SIA) to efficiently manage unforeseen circumstances, particularly those resulting from the Covid-19 pandemic's interruptions, a thorough operational plan is necessary. Priority should be given to cost optimization, especially fuel management, through contract renegotiations and

the investigation of fuel-efficient technology to lessen the effects of fluctuating fuel prices. To increase the percentage of on-time deliveries and boost customer satisfaction in the cargo segment, SIA should concentrate on improving cargo operations at the same time. This may be achieved by streamlining logistics, optimizing routes, and even updating the cargo fleet. Gaining from profitable divisions could help counterbalance losses in the passenger segment, particularly in areas like Europe. Modernizing the fleet is necessary to combat the average fleet age of cargo planes and improve customer satisfaction and delays. Purchasing a newer, more efficient aircraft could increase overall functionality, flexibility, and service reliability. To improve customer satisfaction and minimize delays and increase the percentage of on-time deliveries, cargo operations must use operational efficiency strategies like technology-driven solutions and improved processes. Maintaining SIA's position as the industry leader requires constant adjustment to changing consumer demands and market conditions. In a constantly evolving travel industry, tailored service offers that make use of digital technologies for frictionless experiences and flexible booking alternatives can draw in and keep clients. Furthermore, it is crucial to comprehend price elasticity in various market groups, particularly how sensitive developing nations are to price fluctuations. Using dynamic pricing strategies can maximize profits and satisfy a range of customer needs. Constant innovation in services, facilities, and experiences will distinguish SIA from rivals and appeal to budget-conscious travelers as well as those looking for upscale travel encounters. By addressing these goals holistically, Singapore Airlines will be strategically positioned to thrive and grow sustainably in the face of industry changes and obstacles. To achieve cost optimization, given that a sizable amount of variable expenditures come from fuel costs. An effective fuel management plan becomes essential given the unpredictability of gasoline costs. To reduce the impact of price swings and stabilize operating expenses even in the face of unstable market conditions, this strategy entails investigating fuel-efficient technology and renegotiating contracts. Moreover, it is critical to streamline cargo operations, and since the cargo industry is performing well, it is even more crucial to maximize this sector. Customer satisfaction can be greatly increased by optimizing routes and improving logistics management to increase on-time delivery rates. Investing in a modernized freight fleet also guarantees increased flexibility, dependability, and quality of service.It is imperative to concentrate on profitable segments since the cargo segment's increasing revenue domination represents a chance to offset the passenger segment's losses. Concentrating on routes with strong demand, particularly in areas like Europe, can assist in taking advantage of lucrative opportunities. Fleet modernization is essential to reduce delays and improve the customer experience. Concerns about functioning and service are raised by the average fleet age of cargo aircraft, which is aging. Purchasing a newer, more effective aircraft increases customer happiness, operational efficiency, and reliability. Modern aircraft have cutting-edge technology installed, which minimizes operational and maintenance problems. Streamlined procedures, better routes, and technology developments in the freight industry can greatly cut down on delays and increase operating efficiency. Better on-time delivery rates are guaranteed as a result, which raises client satisfaction and encourages loyalty.

Personalized service should be provided to adjust to changing client wants and market dynamics, since consumer behavior is shifting toward contactless experiences and flexible booking possibilities, which calls for creative service solutions. In a cutthroat industry, attracting and keeping consumers depends on investing in digital solutions and customizing offerings to fit a range of client preferences. Furthermore, it's crucial to comprehend pricing elasticity in various market niches. Dynamic pricing strategies can meet a range of customer expectations while optimizing revenue. The greater sensitivity of developing economies to changes in prices highlights the necessity of flexible pricing methods to effectively capture demand. Singapore Airlines is unique because of its constant innovation in service offerings. It keeps the airline at the forefront of customer experience and draws in a variety of consumer demographics, solidifying its status as a premium carrier. By putting these suggestions into practice, Singapore Airlines will be in step with consumer preferences and industry changes, which will promote resilience and steady growth in the face of difficult market conditions. All the strategies work together to present SIA as a customer-focused, flexible, and competitive airline by addressing distinct operational, customer-centric, and market-oriented factors. Executive Summary Singapore Airlines (SIA) encountered substantial hurdles during the COVID-19 pandemic, resulting in operational setbacks and revenue fluctuations across its segments. To fortify its operations, SIA must prioritize income diversification and cost efficiency. Key strategies involve a focus on fuel-efficient measures such as fleet upgrades and route optimization to curtail variable costs. In addition, modernizing fleets and guaranteeing on-time delivery are essential to support the growing freight industry, and utilizing technology and training to enhance passenger services and raise consumer satisfaction levels overall. Enhancing freight operations is critical, requiring modern fleets and optimized logistics to ensure on-time delivery. Concurrently, utilizing technology advancements to improve passenger services would reduce customer discontent. To satisfy changing client expectations after the epidemic, investments in digital technology and flexible booking alternatives are essential. Revenue optimization and customer alignment will be made possible by customizing services based on elasticity data and market-specific pricing strategies. Improving cargo satisfaction requires addressing regional challenges, particularly in America and Europe. Regular observation of fare-related consumer behavior enables prompt service modifications to be responsive to changes in the market. By putting these suggestions into practice, Singapore Airlines will become more competitive in the airline sector, improve customer happiness, and adjust to changing market demands. It will also become more efficient in terms of operations.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Company Business Case_Singapore Airline

Related Documents