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SWOT Analysis of Singapore Airlines
Singapore Airlines is one of the world largest airlines and undoubtedly one of the most successful ones. Synonymous with service excellence, branding and its marketing icon, the "Singapore Girl", the airline has grown to be the third largest airline in the world (base on the 2013 World Airline Awards) since its incorporation in 1947.
This article explores the strengths, weaknesses, opportunities and threats (both external and internal) of Singapore Airlines by utilizing the SWOT analysis technique. This can assist in the process of strategic formulation, paving the way for sustainable competitive advantages and success of the airliner.
Singapore Airlines enjoy various competitive advantages and strengths that has contributed to its success over the years.
Strong Government Backing - Temasek Holdings, an investment company owned by the Government of Singapore, owns more than half of its voting stock in Singapore Airlines. With strong backing from the government, the stability and finances of the airline can be assured and secured.
Geographical Diversification - Singapore Airlines conducts its operations from Changi Airport in Singapore. The airline conducts passenger flights to more than 60 cities in over 30 countries worldwide. This is excluding its subsidiary SilkAir, which conducts regional flights to more than 30 cities within Asia. This geographical diversification reduces risk for the organization as it will not be over reliant on any particular region for revenue.
Young Aircraft Fleet - Singapore Airlines regularly renews its already young and modernized fleet of aircraft. Notably, it was the first airline in the world to fly and operate the Airbus A380 in October 2007. Based on a survey conducted in January 2012 by Airlineatlas, Singapore Airlines was ranked as the number 2 airline with the youngest fleet in the world.
Service Excellence - The professional flight crew are prominent and remains synonymous with the airline. Singapore Airlines' marketing efforts have often revolve around its flight crew and the excellent service they provide. The service excellence is highlighted by the plethora of awards that has been awarded for cabin service and hospitality. The flight attendants (otherwise known as the "Singapore Girl") are carefully recruited and have to undergo strict training to ensure service standards.
The weakness of Singapore Airlines has been exposed as profits continue to decrease, by as much as more than 80% since the financial year of 2011.
Expensive - Singapore Airlines is one of the world's most expensive airlines and even introduced a $23,000 Suites class in 2008. The Singapore Airlines' Suites class is the most luxurious means of air travel on a commercial jetliner and tops most First class travel packages that are currently available.
Reliance on International Traffic - Singapore is a very small country with the domestic market being very limited. As of 2015, the local population stands at less than 6 billion. There are no intercontinental flights available due to the size of the country. Thus Singapore Airlines has to rely heavily on international travelers and passengers to/from foreign countries.
Lack of Strong Partners - Despite having a codeshare agreement with 24 partners worldwide as of the time of writing, the partnerships are rather limited as only 8 of them serve Singapore. In addition, as a member of the Star Alliance, the world largest airline alliance, it does not half codeshare agreements with 50% of the alliance members.
Growth of Tourism in China - According to a report by Amadeus travel and Oxford Economics, tourism in China is booming and is expected to drive the travel industry. This is attributed to its surging middle class, which is poised to overtake the United States by 2017. Singapore Airlines can make use of opportunity to attract and participate in China's travel industry.
Leveraging its Young Fleet - As of 2015, Singapore Airlines has one of the youngest (not to mention most fuel efficient) aircraft fleet in the world, standing at at average of 7 years old. It is constantly renewing its fleet and is always at the forefront of adopting new commercial airlines. This is indeed remarkable and is worth leverage to the airline's advantage.
Increased Destinations - Currently, Singapore Airlines operates passenger services to over 60 cities in more than 30 countries around the world. The number of destinations is expected to increase with it's code-share agreements, future contracts and its regional wing, SilkAir.
Increased Competition - Undoubtedly, the aviation industry is very competitive. Singapore Airlines’ faces the threat from both direct competitors and indirect competitors, with the former being airlines that fly on the same routes, and the latter from airlines that have indirect flights as well as other modes of transport.
Examples of Singapore Airlines’ competitors include Emirates, Cathay Pacific Airways, All Nippon Airways, Qatar Airways and dozens of emerging budget airlines such as JetStar, Scoot and Tiger Airways. These airlines are a threat in many factors, which include: cheaper fares, improved customer service, flexible flight schedules, alternative routes served, safety record and reputation, code-sharing relationships and frequent flyer programmes.
To add, the price discounting and fare-matching (especially with emergence of budget airlines), fuels price competition. Adjusting prices of air fares could have a negative impact on their operating and financial results. Therefore, this competition can lead to decreased operating margins in the long run.
Increased Fuel Prices - Like all airlines, Singapore Airlines' operating costs are affected by the prices of jet fuel and pose a significant impact. International prices of crude oil have always been volatile and bfluctuated widely due to a variety of factors that are not within the control.
In the financial year of 2012, cost of jet fuel formed 40% of SIA’s total expenses. According to Market Realist, fuel costs comprise an average of 30% of an airline’s operating costs. Therefore, when fuel prices increase, the operating costs of Singapore Airlines will also increase, which will have a significant impact on profitability.
Do You Know?
In January 1914, the St. Petersburg-Tampa Airboat Line became the world's first commercial passenger airline service. The 21 kilometres flight, flown by test pilot Tony Jannus, operated between St. Petersburg and Tampa, Fla. was short-lived and only existed for 4 months.