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.
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 LimitedGrowing 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 AirlinesIntense 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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