Aviation Assignment: Singapore Airlines And South-East Asia

Singapore airlines and South-East Asia
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Table of Contents
 TOC \o "1-3" \h \z \u  HYPERLINK \l "_Toc480994388"
Part I: Company profile  PAGEREF _Toc480994388 \h
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1.0 Background  PAGEREF _Toc480994389 \h
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Part II: Regional Profile  PAGEREF _Toc480994390 \h
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2.0 The size of the airline industry in South-East Asia  PAGEREF _Toc480994391 \h
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Part III: External Strategic Analysis  PAGEREF _Toc480994392 \h
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3.0 South-East Asia regional economies  PAGEREF _Toc480994393 \h
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4.0 South-East Asia regional tourism and key events  PAGEREF _Toc480994394 \h
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5.0 Bilateral agreements  PAGEREF _Toc480994395 \h
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Part IV: Internal Strategic Analysis  PAGEREF _Toc480994396 \h
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6.0 Competition  PAGEREF _Toc480994397 \h
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SWOT Analysis  PAGEREF _Toc480994398 \h
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Strengths  PAGEREF _Toc480994399 \h
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Weaknesses  PAGEREF _Toc480994400 \h
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Opportunities  PAGEREF _Toc480994401 \h
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Threats  PAGEREF _Toc480994402 \h
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7.0 References  PAGEREF _Toc480994403 \h
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Singapore Airlines and South-East Asia
Part I: Company profile
1.0 Background
Singapore Airline was started in 1937 as Malayan Airways; however, the airline was later joined by British Imperial Airways, Ocean Steamship Company of Liverpool and Straits Steamship Company. However, due to economic uncertainties caused by the Second World War, the airline remained inactive and became operational after the war in 1947. Malayan Airways’ first flight was from Kellang Airport in Singapore to Kuala Lumpur on 2nd April, 1947. However, the number of flights increased to three flights in a week on the same route before venturing on other destinations such as; Kota Bahru destination, Kuantan destination, Penang destination and Ipoh destination. The company expanded rapidly through acquisition of extra aircrafts and opened up major destinations globally. However, the political uncertainties led to change of airline’s name from Malaysian Airline to Malaysia-Singapore Airline (MSA) in the year 1966. After renaming the airline, the Malaysian and Singapore increased their share holding to 42.79 percent each through injecting more capital. However, remaining shares were acquired by Qantas, Ocean Steamship Company, Straits Steamship Company, Brunei government and BOAC. However, political differences between the two countries in 1971 led to termination of the MSA alliance. Therefore, the properties of MSA alliance were divided between the two nations and Singapore taking the biggest share although it compensated Malaysia for the unequal property sharing. Singapore received the premises hosting the head offices, all jumbo jet aircrafts, aircraft hangars, major overseas offices, maintenance facilities located at Paya Lebar Airport and the major computer operation system. However, Malaysia received all equipment situated in the country; minor offices located overseas, the entire Friendship Fleet and all Britten-Norman aircrafts (National Library Board; Singapore, 2017).
The dissolution the MSA alliance led to the emergence of Singapore Airlines which became the country’s major airline and it adopted all international routes used by MSA across Middle East countries, Europe countries and South and North Asia nations. The airline’s first commercial flight was inaugurated at Paya Lebar Airport. The company became the first ever Airline located in South East Asia to own air bus known as Boeing 747-200. However, after acquiring the new jumbo jets, the financial advisors expected financial losses and this led to formulation of strategies to cut cost and start vigorous branding and advertising at the global scene. The airline’s domestic market declined and this led to venturing into new international routes (National Library Board; Singapore, 2017).
The airline operates from Changi Airport in Singapore and is the leading airline in South East Asia and the airport is a major stop-over and refueling center for aircrafts destined for Australia and beyond. Singapore Airline remains the highest ranked airline globally and commands a large market share globally. The airline bases its success on innovation, setting new trends as well as setting new standards in airline industry. The airline operates in more than 62 destinations serving six continents globally. The airline has the latest technological young fleet of air buses with a mean age of approximately seven years. The airline operates around 109 Airbus A330 aircrafts, Boeing 777 aircraft and Airbus A380 aircrafts and the fleet is young and based on the latest technology (National Library Board; Singapore, 2017).
Part II: Regional Profile
2.0 The size of the airline industry in South-East Asia
The South-East Asia aviation industry is experiencing high economic advancement with an economic development growth rate of approximately 4.1 percent per year. The industry’s growth in the Asia region is much high than the global economic growth rate of the aviation industry which stands at 2.9 %. India as well as China remains the major sources of the regions’ airline industry growth as the region commands 31 % of the global Gross Domestic Product which is expected to rise to 39 % in the next two decades. The new emerging aviation market in Asia is projected to follow a similar trend and experience significant growth and this will foster a robust economic growth rate in the capacity of the airport, airlines operations and airline customer traffic. Commercial airlines in the South-East Asian experience increasing demand due to the increasing number of middle class earners in Asia countries. Therefore, most of the people in the Asia have substantial levels of income which makes them afford air travel. However, although the region faces challenges emanating from conflicts based on regional politics and currency fluctuations, the regional airlines are making profits. For example, the regional airlines earned $5.8 billion in the year 2015 and $6.1 billion last year (DBS Group Research, 2015).
The economic development of the industry in Asia is as a result of liberalization through changes like open skies in Asian airline market that has facilitated international airline operations and implementation of new models of carrier that operate at low costs. Therefore, liberalization has favored advancement in new markets resulting to development in the regional airlines and the industry at large. The companies in South-East Asia operate freely in new locations because of favorable visa issuance among the member states and this has facilitated the passenger to travel freely across South-East Asia. Most of the regional airlines have formed joint cross-border venture subsidiaries to venture in the global market and this has made the regional airlines avoid stringent regulations of foreign airline ownership. The airline subsidiaries created by the regional airlines usually apply LCC model that aims at making the fares low for short-haul trips for leisure traffic when flying in single-aisle airplanes. However, the regional airlines have resulted to targeting corporate passengers through offering large aircrafts with premium standard cabin meant for medium-haul markets that provide flights for business class travelers. The LCC flights contributes the regional development of the industry as they offer cheap and easily accessible flights that meet the demand of the average income earners. The airline industry is fast getting international recognition and is set to get to the world’s number one market. The air traffic in Asia is expected to advance by approximately 6.2 % in the next two decades and passenger traffic will hit 48.7 % of the world’s passenger traffic. The industry in South-East Asia expects approximately 100 million new travelers annually due to the regions rapid economic growth, effective structures and affordability to travel services (DBS Group Research, 2015).
To cater for the increasing demand for the airline services, the airlines are required to acquire 15,130 aircrafts expected to be approximately valued at $2.35 trillion. The airlines operating in the region are expected to increase by three times from the current 6,350 aircrafts in 2016 to approximately16, 970 aircrafts in 2035. The high growth of LCC’s will likely increase demand for approximately 11,160 one aisle aircrafts and the demand for wide body aircrafts will stand at approximately 3,680 in the next twenty years. Cargo planes also play a major role to the advancement of the industry in South-East Asia since the goods to be transported by air is increasing as a result of uneven terrain and fast oceanic coverage. Therefore, most of the largest international and efficient cargo transporters are located in the region and the cargo will experience high increase rate of 5.2 % per year. The regional carriers are will have to acquire 306 freighters and approximately 572 converted freighters in twenty years time (Nau, 2015).
The economy performance of South-East Asia is tremendously moving to a service and consumption-based from export economy, industry investment and wide and heavy-industry based on the past. Although the general economic advancement is likely to slow down, it is likely that spending of the customers and services are expected advance at a higher rate than the entire industrial output for the average run. However, the newly introduced economic models adopted by the regional airlines will likely foster future advancement in the industry leading to 6.4 % increase in passenger traffic in two decades time. The local market has a significant growth of double-digit advancement and the industry expects new entrants in the regional market and emergence of new models (Nau, 2015).
Association of South East Asian (ASEA) Nations comprising of core countries that have the biggest airlines like Thailand, Indonesia, Malaysia, Singapore, Philippines and Vietnam is an economical and political organization. The region has approximately 9 % of the global population of 625 million people and the leading airline is Singapore Airline and Garuda Indonesia. South-East Asia is dominated by low cost airline carriers such as Air Asia Group and Lion Air Group and they serve approximately 50 million passengers annually. The South-East carriers command a 15 % of the global demand for flight services. However, the ASEAN airlines international expansion is highly regulated by the state although the member states were allowed to operate between their capitals without regulations. For international airlines to venture in these states, they resulted to forming joint ventures with local companies so as to get operational access in these countries (Nau, 2015).
The airlines industry in the region experienced turbulence in 2014 as a result of political instability in some countries although the airline returned to profitability in 2015. However, the profit margins of the airlines in the industry remained low in 2016 despite the low fuel prices and relative calm to the region’s political turbulences. The South-East Airlines underperformed financially last year in comparison to other regions such as Europe, Australia, North-Asia and North America. The financial performance of the region’s airline industry in 2017 is expected not to be as good as last year and this will be in line with the performance of the airline industry globally (Nau, 2015).
Part III: External Strategic Analysis
3.0 South-East Asia regional economies
The real GDP of ASEAN member countries namely Cambodia, Philippines, Singapore, Indonesia, Thailand, India, China, Vietnam, Myanmar and Lao PDR stood at 6.5 % in 2016. However, the real GDP is expecte...