Singapore Airlines’ strategy Essay

Custom Student Mr. Teacher ENG 1001-04 24 October 2016

Singapore Airlines’ strategy

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. The internal organizational practices outlined in this paper, such as continuous people development and rigorous service design are key aspects of operationalizing and sustaining this positioning and strategic choice.

At the corporate level, SIA follows a strategy of related diversi- fication. The Singapore Airlines Group has 36 direct subsidiaries and associated companies (Singapore Airlines, 2008). SIA Group subsidiaries include Singapore Airport Terminal Services (80.8%), Singapore Engineering Company (81%), and Singapore Airlines

Cargo (100%) (Singapore Airlines, 2008).

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). The shareholders in Tiger Airways include Temasek (the Singapore government’s investment arm as well as SIA’s majority owner) and Irelandia Investments, the private family investment vehicle of Anthony Ryan, the founder of Ryanair, one of the world’s leading budget carriers.

As part of its international strategy, in April 2000 SIA joined the Star Alliance, one of the three major airline alliances (the other two being Oneworld and Skyteam). In the meantime various divisions of the SIA Group have been investing in China and India through strategic alliances with local organizations (cargo division, airport services, engineering services and catering).

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 userfriendly 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%) (Doganis, 2006), effective use of IT can significantly reduce costs and enhance service levels. When the current CEO, Chew Choon Seng took over in mid-2003, cost cutting was on the top of his agenda with particular emphasis on cutting non-fuel costs by 20% within 3 years, and outsourcing IT functions to IBM. The sustained drive for efficiency as well as quality has enabled SIA to increase the spread between breakeven load factor and actual load factor to 6.7% by 2006

With regard to business-level strategy, Singapore Airlines has managed to deliver premium service to very demanding customers (achieving differentiation); at a level of costs that approach those of a budget carrier. This achievement challenges Porter’s suggestion that differentiation and cost leadership are mutually exclusive strategies. Singapore Airlines supports this dual strategy of differentiation and internal cost leadership through the core competency of cost-effective service excellence, enshrined in a unique, selfreinforcing system of organizational processes and activities.

Global presence of Singapore airlines

SIA has a route network extending to 63 destinations in 35 countries, serving Asia, Europe, North America, the Middle East, the South West Pacific, and Africa. SIA has one of the youngest fleets of any major airline, with an average age of just over 6 years. The airline operates a fleet of Boeing 777s, Airbus A330-300s, A340-500s and took delivery of the world’s first A380-800 for commercial service in October 2007. Excellence in customer service has been integral to SIA’s success. Superb inflight service is the cornerstone of its reputation for customer service and hospitality. SIA has developed a reputation for being an industry trend-setter.

The list of industry-leading innovations by SIA includes being the first to offer free headsets, a choice of meals and free drinks in Economy Class in the 1970s, and the first with satellite-based inflight telephones in 1991. SIA has also taken inflight dining to new heights with the formation of its International Culinary Panel. In 2004, Singapore Airlines created aviation history with the introduction of the world’s longest non-stop ultra long-haul commercial services between Singapore and New York (Newark). The care and attention that Singapore Airlines gives its customers, symbolised by the Singapore Girl, has earned the airline many industry and travel awards, including Conde Nast Traveller’s “Best Global Airline” award for 21 consecutive years, Travel and Leisure’s “Best International Airline” award for 14 consecutive years, and Wall Street Journal Asia’s “Most Admired Singapore Company” accolade for 17 consecutive years.

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