Airlines Reject Criticism Fares After Drop -Myassignmenthelp.Com

Question: Discuss About The Airlines Reject Criticism Fares After Drop? Answer: Introducation Singapore Airlines Limited (SIA) is the Singapores flag carrier airline having its hub situated at Singapore Changi Airport. It was founded 70 years ago on May 1, 1947 as Malayan Airways. However, its operations commenced nearly 45 yearly ago on October1, 1972. Singapore Airlines is ranked among the top 15 carriers in the world in terms of revenue passenger kilometers and has occupied 10th position in the world for international for the number of international passengers carried. Many airline related subsidiaries are included in the Singapore Airline group. It has two subsidiaries namely Scoot and SilkAir. Scoot operates as a low-cost carrier while regional flights to various secondary cities are operated by SilkAir. The flights of Singapore Airlines cover five continents which is around 62 destinations in 32 countries starting from its primary hub i.e. Singapore. Singapore Airlines is full-service airlines whose vision provides that it does not work to be an excellent company, instead its basic purpose is to become an excellent citizen of the world. It is completely dedicated towards providing the air transportation services of best quality along with maximizing the returns for its employees and shareholders. For this purpose, Singapore Airlines have adopted various cost-leadership and service differentiation strategies (Heracleous Wirtz, 2010). The main competitors of Singapore Airline include Cathy Pacific, Emirates, British Airways, Qatar Airways, Etihad Airways, etc. Despite of the competition, it has continuously recorded growth trends in the last years (Heracleous Wirtz, 2014). External Environment Analysis The airline industry is majorly impacted by the national political frameworks due to the excessive control of the authorities despite being deregulated. The competition landscape and the industry profitability are impacted due to the development of the industry because of favorable government policies. Singapore is considered among politically stable countries. According to Political and Economic Risk Consultancy (PERC), Singapore faces lowest political risk in the continent. Singapore is a democratic country where the leaders of the nation are elected by the people. This independence leads to political stability in the country thereby leading to peace and improved standard of living in the country. The Liberal Aviation Policy provides a degree of stability to the Singapore aviation. As its open sky policy has helped country to grow as a key air hub. It provides liberal framework for air services and cities which are linked to the country. The lasting influence of the government poli cies and force on the airline industry must be clearly recognized by all the players of the industry while embracing market liberalization. The failure to follow can put the Singapore Airlines in trouble and engage them in various suits. For example, the falling prices of oil in earlier years resulted in extreme pressure for the airline to reduce price of tickets. (Today, 2016). Economic The airline industry is linked with the regional, national and international development of the economy and therefore the airline industry is affected by the economic environment. Singapore is a free market economy which has the highest per-capita income in ASEAN. The business sector is supported by the corruption-free environment. And the financial and legal framework assists the business in effective functioning. The government plays an active role and owns substantial productive assets. Recently, the economy has been diversified by the government. Interest rates, crude oil prices, growth in GDP and peak and trough of the economic cycle impact the airline industry by lifting the input costs of the industry. According to the results of the research of International Air Transport Association (IATA), there is considerable growth in the disposable income of the people which has subsequently resulted in the growth of GDP which has ultimately increased the demand for travelling by air (L acar, 2009). In future, the number of passengers for airlines is expected to increase. It is going to help company to increase its revenue. The revenue of company can be increased by boosting digital investment. However, the global economic environment is uncertain which poses a growth opportunity for Singapore Airlines in the form of positive forecast for air passengers and a threat in the form of volatile fuel prices (Wirtz, Tuzovic Ehret, 2015). Social Airline industry is significantly impacted by the social environment of Singapore which has diversified culture due to the strong influence of tacit rules and social norms on the consumer who is a social being. Moreover, the demographic groups to which the customers belong define the behavior of the customers. For instance, the travel preference of middle age group should be studied by the airlines for meeting their specific demands and developing appropriate products and services accordingly. As with the increase in the number of low cost carriers, the consumers have started preferring low cost travel formats over premium types of travel (Oum Yu, 2012). Therefore, airlines with premium management strategies such as Singapore Airlines can introduce different service standards which can compete with low cost carriers. The company can make it possible with the study of sociological and demographic attributes for the purpose of determining future opportunities. Technological The advancements in technology in airplanes such as reclining seats, headsets and setback entertainment systems have made significant improvements in the efficiency of the airlines along with enhancing the overall experience of the customers and personalizing customer service. However, technological development such as internet can also threat the airlines which can change the way of living, working and interaction with people and reduce their need for travelling long distances. For instance, Singapore aviation focuses on digital technology to understand need of customers and improve operations of company. The company is also exploring better systems to track aircraft round the clock. Legal The national carriers of the airline industry are significantly impacted due to the changes in regulatory framework such as Air Transport Policy and Regulation framed by the International Civil Aviation Organization (ICAO) at the regional and global level. The government keeps on bringing different political strategies; some of these has considerably impacted aviation industry in the country. For instance, after the terrorist attack of September 2001 the government has made regulatory changes and it has impacted the way passengers are screened for air travel. Environmental The concern for the environmental friendly services is increasing among the airline passengers day by day (Chang, Park, Jeong Lee, 2014). The ministry of environmental and air pollution makes effort to maintain air quality and other ecological factors. The countrys mangrove area is danger for extinction for many species. The drainage act helps to control quality of water. It is the major concern of country that it does not have plenty of water to support needs. To fight with this problem, water is recycled after detoxification (Lynes Dredge, 2006). Most of the airlines have also started integrating the green issue into their policies related to the corporate social responsibility (CSR) and marketing plans (Cowper-Smith de Grosbois, 2011). Porters 5 Forces Since high capital is involved in the airline industry, the entry barriers are very high. Since it is a saturated industry where there are only few national carriers representing each economy, the support from the national government is a crucial factor. In simple words, growth in traffic is a result of growth in national carriers rather than access to the marketing of new competitors. The saturation in the airline industry is evident from the congestion of airports and skies especially large regional hubs. So, the new companies need to invest high capital and take various approvals and license from the government before entering the industry. It discourages new entrants to establish itself in Singapore. It is advantage to Singapore aviation as they continue to control market. Therefore, the threat of new entrants for Singapore Airlines is low. Threat of substitutes- Low The environment impact of the air travel is increasingly being taken into consideration which resulted in various virtual enterprises and real-time telecommunication technologies are promoting work from home instead of previously preferred long-term business travels. In Singapore, people travelling to other countries such as Asia have no option other than airplane. As, flight is the only way to commute and there is no viable option other than taking flight. Therefore, the threat of substitutes for Singapore Airlines is low. Competitive Rivalry- High The falling prices of the fuel resulted in the improved financial results of airlines companies and have increased the competition while there are still many who are struggling for their survival in the industry. The constant fights for territory and expansion are common along with various price wars. Bringing improvement in services and lowering of costs are the focus areas of the major players in the industry. However, the rivalry within the industry occurs on route-by-route basis (Fan Lingblad, 2016). The rivalry is very intense due to serving by different airlines. The company can differentiate itself by enhancing its services. Overall, due to efficient service provided by named airlines, the competitive rivalry of Singapore Airlines is high. Bargaining power of the customer- Moderate The customer base of the airline companies is very diverse and the proportion of amount spent by each customer is very small. The airlines do not alter their business operations for meeting the personal needs of the individual customers. The pricing or quality issue results in switching of the airlines by the customers. Proliferation of the internet along with decline in the travel agents and high street airline offices have resulted in lessened switching costs of passenger flights. Moreover, attempts have been made by the airlines to increase switching costs through creating a provision for loyalty schemes or in association with partners in strategic alliances. Therefore, it can be concluded that the bargaining power of the customers in the airline industry is moderate. Bargaining power of the Supplier- Moderate The suppliers have power to negotiate with airlines over material and equipment. So, the suppliers have strong bargaining power. The company has relatively weak position. In a transportation industry the suppliers of the airline industry are in strong bargaining position. In case of fleets are supplied by the two companies; Boeing and Airbus. Due to duopoly, the manufacturers can set delivery time and establish prices due to the existence of only few suppliers in operation In the case of engines, oligopoly exists for the supply. The companies such as General Electric, Rolls and Royce and Pratt and Whitney create oligopoly.. Therefore, the bargaining power of the suppliers is moderate. Opportunities There are several opportunities for Singapore Airlines for its development in the future. There are only few competitors in the industry and Singapore Airlines still leads the industry. It can benefit by further incorporating innovations in its services such as e-cigarettes and reserve its leader position. Threats The volatile price of the aviation turbine fuel poses a serious threat for the business operations of Singapore Airlines. Technological advancement in the quality of service provided in the flight also poses a threat for Singapore Airlines. The offerings of Singapore Airlines are now under the danger of becoming old fashioned which were once innovative due to the introduction of cabin products by the European Airways (Hashim, 2016). Issue Analysis Singapore Airlines need to work on developing more innovative technologies for attracting the customers towards their airlines as all the airlines are increasingly adopting psychology for providing greater experience to their customers. It should also look forward for cost cutting measures to conveniently handle rising prices of the aviation turbine fuel. It should also aim for entering new markets for capturing new business opportunities. Recommendations For staying competitive in the market, Singapore Airlines should thoroughly understand the plans pursued by other competitive airways to improve the comfort and quality of service provided to the customers. It should also aim at dominating the major regions of the globe for creating greater potential for foreign investments which in turn will allow Singapore Airlines to withstand their quality efforts (Heracleous Wirtz, 2012). It should also employ some cost cutting measures for the purpose of reducing the fleet size and selling the excess aircrafts to the other low-cost carriers that are currently at the phase of expansion (Schofield, 2016). Cost can be reduced by cancelling those processes that does not contribute towards the profitability of airlines. The cost cutting measures will help Singapore Airlines in managing the volatile prices of aviation turbine fuel and diversifying risks (Kaynak Kucukemiroglu, 2015). It should also work on creating service excellence by way of looking into the manner in which the front-line staff fosters relationship with their customers in order to create personalized service such that it can be easily differentiated from its competitors (Wirtz, Heracleous Pangarkar, 2008). It will help in staying competitive in the market and providing better comfort and services to the customers. For this purpose, space beds should be installed. E-cigarettes facility can be provided which will create the feeling of tobacco smoking on airplane. Also, for establishing better relationships with the business class customers, same or higher value comfort should be offered. Installation of space beds and e- cigarettes will also increase the revenue of Singapore Airlines in the long run as it will result in higher utilization of the seats. Conclusion This report highlighted the micro and macro environment of Singapore Airline Limited which faces various opportunities and threats due to the presence of various elements in the environment depending upon the presence of competitors, number of suppliers, new entrants, substitutes, etc. The analysis of external environment of Singapore Airlines Limited highlights that it needs to focus on innovative technologies for enhancing the experience of the customers on the flights. 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