Sia Case Study

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  • Topic: Singapore Airlines, Airline, Cathay Pacific
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  • Published : February 26, 2012
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Singapore Airlines
by Lau Geok Theng with the assistance of Leong Wai Yee

In September 2010, senior executives of Singapore Airlines (SIA) were wondering what strategic thrusts they should adopt over the next ten years in order to remain competitive and profitable. The company had just announced increases in fares averaging S$200 (US$148) more for economy seats and S$1,000 (US$743) more for premium seats, given the improved economic climate and increased air passenger counts in recent months. The company had also announced that Mr Goh Choon Phong would take over as Chief Executive Officer in January 2011 when the current CEO, Mr Chew Choon Seng retires in December 2010. Mr Goh had been with the company since 1990 and had held various senior positions including Director of Singapore Airlines Cargo and Senior VP of Finance. The airline industry was not an easy one to survive in, as the performance of companies was highly reliant on factors often beyond their control. Other than regulations imposed by governments, airlines were buffeted by external influences such as economic climates, disease outbreaks, natural disasters, and changes in oil prices. Relative to competitors in the industry, Singapore Airlines (SIA) had outstanding performance so far, evidenced by the numerous awards and titles that it had achieved. SIA faced strategic dilemmas regarding which path to take – a path of continuity or a path of change? Company History The history of the SIA group dated back to 1937 when Malayan Airways Limited was registered, although flight operations really began ten years later. On 1 May 1947, a twin-engine Airspeed Consul took off from Singapore Kallang Airport on the inaugural flight for the services that were to be operated between Singapore, Kuala Lumpur, Ipoh and Penang (the latter three are cities in Malaysia). In 1963, with the emergence of the new Federation of Malaysia, the airline was renamed Malaysian Airways Limited. In 1965, following Singapore’s separation from Malaysia, the airline’s equity was divided equally between the Malaysian and Singapore governments and the airline became known as Malaysia-Singapore Airlines (MSA) Limited. In 1968, the sarong kebaya uniform designed by Pierre Balmain was first introduced and the Singapore Girl emerged to later become an internationally recognized icon. The expansion of routes created more differences in national priorities: Singapore pushed for greater 1

international connections while Malaysia wanted to focus on domestic networks within its territories. In January 1971, the two governments agreed to establish separate national airlines, leading to the discontinuation of MSA operations in October 1972. Two new airlines then emerged – Singapore Airlines (SIA) and Malaysian Airline System. The newly formed SIA had a modest fleet of ten aircrafts, staff of 6000 and a route network spanning 22 cities in 18 countries. It could not rely on government bailouts as the government shareholder made it clear from the outset that the airline had to provide service and generate economic benefits and profits on its own. The government might help in creating an efficient infrastructure, negotiating traffic rights and maintaining labor peace but there was no interference in SIA’s operation and no subsidies. Growth at SIA was rapid. The network increased to 57 cities in 37 countries in 1989 and 119 cities in 41 countries in 2001. Revenues increased from S$340 million in 1972/73 to S$2.7 billion in 1983/84. Profits increased from S$96 million in 1983/84 to almost S$1 billion in 1989. In 1985, the Singapore government reduced its holdings in SIA to 63% by floating shares in the Singapore stock market and sold the shares to employees and made private placements overseas. In 1986, the government further reduced its holding to 56% and increased the foreign ownership proportion to 27.5%. Management Structure SIA was headed by Chairman Stephen Lee Ching Yen and Chief Executive Officer Chew...
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