“Singapore International Airlines: Preparing for Turbulence Ahead”

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HRM 380 | Case 1

“Singapore International Airlines:
Preparing For Turbulence Ahead”

Prepared for:

Mr. Tajuddin Ahmed
Faculty Member,
School of Business,
North South University, Bangladesh

Prepared by:

S. M. Tanveer Saad
ID no. 041-154-530

Kazi Mushruqul Huq
ID no. 051-307-030

Saiful Azam Zulfiquer
ID no. 052-030-030

Syeda Sabrina Ameer
ID no. 053-288-030

Syeda Ishrat Fatema
ID no. 061-525-030

Nusrat Sikandar Amreeta
ID no. 061-679-030

Monday, January 26, 2009

Executive Summary:

The growth of modern Singapore can be traced back to the policies and priorities established by the then prime minister who was a staunch believer in free trade and internally driven growth. Despite of, the Government being the majority share holder Singapore International Airlines (SIA) faced heightened competition from the start as the government declared that it would not give any subsidies to the airline. SIA traced its roots to an organization which had proved to be quiet beneficial to the fledgling company. From the crews’ impeccable safety record to personnel with crucial operating experience helped SIA to reach over 90 destinations in more than 40 countries all over the world by early 2003. SIA established an enviable record both in terms of the operational performance and its profitability history.

Using its brand image, geographic location, and outstanding service as the cornerstones of its strategy SIA enjoyed a run of exemplary profitability and service performance by the year 2004. It had built its strategy around the principles of a differentiated positioning.

In recent years, there have been many environmental shocks, such as SARS, that have challenged the continued viability of the model. The model of strategy that SIA had built in order to compete in the airline business in the late 1990s’ is to take some important steps to fortify its position globally. By joining the star Alliance SIA expected code sharing services, fine tune traffic flows and enter destination where it did not had access, like more secondary cities of USA and South America. However, despite the obvious advantages, the alliance network brought some concerns like restoring the brand image of SIA which it so carefully nourished over the years. The loss of control over some key decisions also posed challenges to SIA.

To gain the control of alliance SIA took some decisions which later came out to be a bit costly for them. Such as the partnership with Air New Zealand resulted in loss and hasty retreat from the initial foray to establish control of the key Australia- Asia routes.

The second wrong move was to acquire the 49% of the equity with U K based Virgin Atlantic Airways for 1.6 billion. Virgin’s decision not to join the Star Alliance placed SIA in delicate position and the threat of invoking the ire of other alliance partners should it favor Virgin over United and other for channeling some of its transatlantic passengers. On the other hand rejecting the opportunity to participate in the venture of Virgin Blue, which later posted very good returns in the Australasia market was another wide of the mark decision of SIA.

The low cost carriers in Asia became one of the greatest threats for now. The Air Asia and Virgin Blue have acquired considerable percentage of Asian and domestic Australian markets and SIA has found itself challenged by the entry of many other low-cost airlines in its home market.

SIA is at the cross roads in its history and the next few strategic moves would determine the rise of the best Asian Airline to become a global player commanding the respect of the world’s largest carriers. The case closes with a decision that SIA needed to make about how it would address the onset of low-cost competitors, and whether it would make sense to move away from its differentiated premium approach.

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