Singapore Airlines-SWOT Analysis Assignment Coursework Help

Assignment and Coursework Writing Help on SWOT Analysis of Singapore Airlines Limited

 A business analysis of Singapore Airlines Ltd., a company engaged in passenger and cargo air transportation and related activities, is provided, focusing on its strengths, weaknesses, opportunities for improvement and threats to the company. Strengths include specialized services divisions. Weaknesses include civil class actions. Opportunities include the growth of global tourism industry. Threats to the company include tough competition and price discounting.

 

Company Profile of Singapore Airlines

 

 

Singapore Airlines Limited (Singapore Airlines or "the group") is engaged in passenger and cargo

air transportation, airport terminal services, engineering services, training of pilots, air charters, and

tour wholesaling and related activities.The group operates in East Asia, South West Pacific, Europe,

the Americas, West Asia, and Africa. It is headquartered in Singapore and employed 22,746 people

as on March 31, 2012.

 

The group recorded revenues of S$14,857.8 million ($11,859.5 million) during the financial year

ended March 2012 (FY2012), an increase of 2.3% over FY2011. The operating profit of the group

was S$285.9 million ($228.2 million) in FY2012, a decrease of 77.5% compared to FY2011. Its net

profit was S$335.9 million ($268.1 million) in FY2012, a decrease of 69.2% compared to FY2011.

 

 

 

SWOT ANALYSIS of Singapore Airlines

Singapore Airlines is engaged in passenger and cargo air transportation, airport terminal services,

engineering services, training of pilots, air charters, and tour wholesaling and related activities. The

group has a diversified geographical spread, which ensures that the group does not rely on any one

geographic market for a majority of its revenues, which substantially reduces its business risks.

However, intense competition could pressurize the operating margins of the group.

 

Strengths

Diversified geographical spread mitigates business risks

 

Singapore Airlines has a diversified geographical spread.The group operates across various regions

such as East Asia, Europe, South West Pacific, West Asia, Africa, and the Americas. Singapore

Airlines operates flights to 63 cities worldwide, while subsidiary Silk Air offers flights to 39 cities in

12 countries. During FY2012, the group carried a total of 17.2 million people across its network.

The group generates significant revenues from its airline operations across all the geographic regions

it operates in. In FY2012, East Asia, the largest geographic segment of the group, accounted for

37.1% of total airline revenues. This was followed by South West Pacific region, which accounted

for 12.1%; Europe, which accounted for 11%; the Americas region, which accounted for 5.8%; and

West Asia and Africa, which accounted for 3.6% of the overall revenues. Non-scheduled services

and incidental revenue accounted for 30.3% of the total revenues in FY2012.

Thus, the diversified and evenly spread revenue base ensures that the group does not rely on any

one geographic market for a majority of its revenues, which substantially reduces it business risks.

 

Specialized services divisions

 

Although, the group is primarily a passenger airline, it also offers other specialized services, which

diversifies its business risks and provides stability. The group operates through four reportable

operating segments, including airline operations, cargo operations, engineering services, and others.

The airline operations segment provides passenger air transportation through Singapore Airlines

and its wholly-owned subsidiaries Silk Air and Scoot. While Singapore Airlines is a full-fledged

traditional airline, SilkAir and Scoot are specialized carriers. SilkAir is positioned as a premium short

to medium haul carrier for locations across Asia. Another wholly owned subsidiary, Scoot operates

medium-to-long-haul, low-cost flights between Singapore and Australasia, China and others regions.

The cargo operations segment of the group is involved in air cargo transportation and related activities.

The segment operated through Singapore Airlines Cargo (SIA Cargo). SIA Cargo operates to

destinations around the world with a fleet of B747-400 freighters. It also manages the cargo space

on Singapore Airlines passenger aircraft.

The engineering services segment primarily provides airframe maintenance and overhaul services.

The segment also provides line maintenance, technical ground handling services and fleet

management programs. It also manufactures aircraft cabin equipment, refurbishes aircraft galleys,

provides technical and non-technical handling services and repair and overhaul of hydro-mechanical

aircraft equipment. The segment also includes SIA Engineering Company, a leading player in the

maintenance, repair and overhaul (MRO) industry which provides engineering services to over 85

airlines globally.

Young aircraft fleet

 

The airline operations of the group include passenger and cargo air transportation. Singapore Airlines,

along with its wholly-owned subsidiary Silk Air, carries out the passenger air transportation operations.

The group's cargo air transportation is carried out by SIA Cargo. In FY2012, the group's operating

fleet consisted of 133 aircraft, including 120 passenger aircraft and 13 freighters. Singapore Airlines

and SilkAir operated 100 and 20 of the passenger aircraft, respectively.The group holds the youngest

fleet of aircraft. The passenger fleet operated by Singapore Airlines comprised 100 aircraft, with an

average age of six years and two months. SilkAir's fleet comprised 14 Airbus A320s and six Airbus

A319s, with an average age of six years and three months.The freighter fleet of SIA Cargo comprised

13 B747-400 freighters, with an average age of 11 years and three months.

 

In addition, the group continues to take delivery of new Airbus A330 and A380 aircraft, in line with

its policy of maintaining a young fleet. These new aircrafts have low fuel burn per-seat-kilometer,

and emit lower carbon emissions. Singapore Airlines benefits from a young aircraft fleet as it keeps

maintenance costs low, besides reducing security issues related to the performance of the fleet.

 

Weaknesses of Singapore Airlines

Investigations by competition authorities and civil class actions

Singapore Airlines and its subsidiaries are party to various investigations by competition authorities

and civil class actions. For instance, several authorities in the US, European Union, Australia, Canada,

New Zealand, South Africa, South Korea, and Switzerland conducted an investigation on the group

to ensure whether the surcharges, rates or other competitive aspects of air cargo service were

lawfully determined. In FY2012, the group agreed to pay the South African Competition Commission

an administrative penalty of ZAR25 million ($2.8 million), as part of a settlement. Also in the year,

the group accepted a settlement offer from the plaintiffs in the Canadian air cargo class actions to

resolve all such actions on an agreed basis for an amount of CAD1.04 million ($1 million). Similarly

in 2011, SIA Cargo was fined $62.5 million by the US, $135.7 million by the European Commission

and $3.6 million by the South Korean Fair Trade Commission. Consequently, Singapore Airlines'

third-quarter of FY2011 net profit fell 29%.

In addition, civil class action lawsuits were filed against the group and SIA Cargo in the US, Canada,

Australia and South Korea by external parties. Furthermore, Singapore Airlines was named in civil

class action damages lawsuits in the US and Canada alleging an unlawful agreement to fix surcharges

and rates on transpacific flights. Thus, legal costs associated with the investigation and the lawsuits

and the amount of time required to be spent on these matters would have material adverse impact

on the group's business, financial condition and results of operations.

Opportunities of Singapore Airlines Limited
Growing global tourism industry

The tourism industry worldwide has witnessed a strong recovery since its downfall due to recession

in 2008-09. Despite concerns over the global economy, international tourism demand continues to

show resilience. According to the World Tourism Organization (UNWTO), international tourist arrivals

grew by 4% in 2012 to reach 1.035 billion. Emerging economies grew by 4.1%, while advanced

economies grew by 3.6%, with Asia Pacific showing the strongest results.The UNWTO expects the

tourism industry to continue growing in 2013 at a rate of 3% to 4%. In terms of region, prospects for

2013 are stronger for Asia Pacific with projected growth of 5% to 6%, followed by Africa (4% to 6%),

the Americas (3% to 4%), Europe (2% to 3%) and the Middle East (0% to +5%).

Furthermore, according to International Air Transport Association (IATA), by 2016 there will be 3.6

billion air travelers. China is expected to be the biggest contributor of new travelers. Of the 831

million new travelers expected in 2016, 380 million will travel on Asia Pacific routes and of those

193 million will be associated with China (159 million domestic and 34 million international).The US

will remain the largest single country market for domestic passengers (710.2 million) and international

passengers (223 million). Thus, Singapore Airlines, with its strong operational base and expertise,

is well positioned to benefit from increasing global tourism industry, which in turn would help the

group to generate additional revenues.

Growth through operational alliances

Singapore Airlines focuses on operational alliances and joint ventures to increase the opportunities

for sales and growth in earnings. During the recent past, the group entered into several collaborative

strategic relationships that provide it with market growth opportunities.

Earlier in February 2012, Singapore Airlines started code-sharing on Australian domestic flights

operated by alliance partner Virgin Australia allowing customers travelling to and from Australia with

more travel options and seamless connections. Earlier in January 2012, Singapore Airlines and

Scandinavian Airlines signed a MOU to introduce direct flights between Singapore and destinations

in Scandinavia, including with direct flights to the Swedish capital Stockholm. The airlines would

participate in joint operations, including the coordination of flight schedules and joint sales activities.

Similarly in 2011, Singapore Airlines entered into a partnership agreement with JetBlue Airways to

offer an expanded schedule and route selection without added costs. Under the terms, passengers

can travel on both airlines on a single ticket.Thus, such strategic operational alliances would further

strengthen Singapore Airlines' market position and strengthen its reach as it would allow the group

to cater to a large base of travelers around the globe.

Launch of Scoot low-cost carrier

The group recently launched the Scoot low-cost carrier for medium-to-long-haul flights to boost its

presence in the low cost flight market and prevent slide of its customers to other low cost carriers.

Scoot, a wholly owned subsidiary of Singapore Airlines operates medium-to-long-haul, low-cost

flights between Singapore and Australasia, China and others regions. A number of the routes of

Scoot are completely new, while others are new to no-frills airline operations. Scoot is amongst three

largest low cost carriers in the fast growing, long-haul low-cost sector in Asia. The other two being

Jetstar and AirAsia X.

The launch of the new brand positions the group across the full circle of the passenger airline market,

which in turn would enable it to attract a larger customer base thereby boosting its revenues and

growth.

Threats of Singapore Airlines
Intense competition and price discounting

The airline industry is highly competitive. The principal competitive factors in the airline industry are

fares, customer service, routes served, flight schedules, types of aircraft, safety record and reputation,

code-sharing relationships, capacity, in-flight entertainment systems, and frequent flyer programs.

Airline profits are sensitive to even slight changes in average fare levels and passenger demand.

Singapore Airlines faces direct competition from other airlines on its routes, as well as from indirect

flights, charter services, and from other modes of transport.

Some of its competitors are AMR, Cathay Pacific Airways, Delta Air Lines, Japan Airlines System,

All Nippon Airways, United Continental, and Korean Air Lines. In addition, price competition between

airlines occurs through price discounting, fare matching, increased capacity, targeted sale promotions,

and frequent flyer travel initiatives. A relatively small change in pricing or in passenger traffic could

have a disproportionate effect on an airline's operating and financial results. Therefore, intense

competition could pressurize the operating margins of the group.

Risk relating to natural calamities

The results of operations of Singapore Airlines are threatened due to natural disasters, such as

cyclones, volcanic eruptions, among others. For instance, in 2011, Japan witnessed one of the worst

hit earthquakes in its history off the Pacific coast of Tohoku, which triggered powerful tsunami waves.

The tsunami caused a number of nuclear accidents, primarily at three reactors in the Fukushima I

Nuclear Power Plant complex. Several airports in north-east Japan were affected due to this

catastrophe. As a result, the group suspended all flights to Narita International Airport and Haneda

Airport in Tokyo. Further, during FY2011, Singapore Airlines' operations were impacted by snowstorms

in parts of Europe and the US east coast, and earthquakes in New Zealand.

Earlier, in 2010, the Eyjafjallajokull volcano in Iceland erupted and emitted ash to heights in excess

of 9 km (30,000 ft) causing significant disruption to European air travel. Due to this, the aviation

industry lost $1.8 billion revenues and more than 10 million passengers were stranded in various

airports worldwide. In addition, cargo trade was also severely hit. Similarly, the group cancelled its

flight services to Taiwan in 2009 due to Typhoon Morakot, a strong typhoon in Taiwan.

These natural calamities could have an impact on the group's operations resulting in strain in its

financial condition and cash flows.

Price volatility in petroleum markets

Jet fuel forms the main raw material used in the airline industry. The demand for petroleum and

related products has historically been cyclical and sensitive to the availability and prices of oil and

related feedstock. Historically, international prices of crude oil and refined products have fluctuated

widely due to many factors that are beyond the control of companies like Singapore Airlines. The

cost of jet fuel formed approximately 40% of the total expenses for the group in FY2012. Hence,

with an increase in the jet fuel prices, the operating costs of the group also increases which can

have an adverse impact on the total profitability.

Statutory regulations

As an airline operator, the group undertakes operations based on the stipulations of statutory

regulations relating to airline operations. Singapore Airlines is required to conduct passenger

operations and cargo operations on international routes in accordance with the stipulations of

international agreements. These stipulations include treaties, bilateral agreements, and the decisions

of the IATA. A violation of specific laws and regulations by the group could result in the imposition

of fines and penalties.

The group is also subject to numerous statutory environmental protection regulations. These

regulations are imposed on airline companies with regard to issues such as aircraft emissions of

greenhouse gases, use of environmentally polluting substances and their disposal, and energy

usage at major offices. Singapore Airlines shoulders a considerable cost burden in order to adhere

to such statutory regulations. If the current regulations are strengthened or if new regulations, such

as environmental taxes, are introduced, the group has to incur large additional costs, which would

impact the Singapore Airlines operating margines

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