SilkAir’s success in the regional air transportation services has proven to be achieved with the right implementation of business strategies over the years.
An analysis of the macro-environment of the airline industry with the use of the PESTEL framework was inevitably explored to better understand the current situation of the environment SilkAir is operating in. This is done so as to analyze the overall impact on the growth of Silkair. In order to provide a better understanding of the current competition and the driving force in this competitive industry, the Porter’s five forces model was used to further analyze SilkAir’s position in the industry.
The resources and competences of the company is what make it so successful and sustainable today. SilkAir’s strategic capabilities were accessed with the Value, Rarity, Inimitability, and Non-substitutability (VRIN) concept. Several attributes were factored into the success of SilkAir achieving sustainable competitive advantage in the industry.
In summary, SilkAir has been able to maintain its position by providing an extensive network of regional travel, along with excellent service and providing competitive fares. SilkAir works to maintain this position by adding new travel routes and ensuring stringent requirements in the selection of its crews and staffs while keeping its prices at the most competitive levels.
SilkAir is a wholly owned subsidiary of Singapore Airlines formed in 1976. Its newly appointed Chief Executive Officer (CEO), Leslie Thng, has been part of the company for 13 years. With a current total fleet of 21 aircrafts, SilkAir operates out of its base at Changi Airport to an extensive network of destinations within Asia. This strategy of flying to destinations within five-hour radius has proven to be effective and works best for the airline, being one of the most dominant airlines in Singapore.
The airline has quietly emerged as a strong competitor in the short-medium haul market dominated by low-cost carriers such as AirAsia and Jetstar. In addition to that, SilkAir is by far the most profitable brand in terms of profit margins, when compared to other airlines in the Singapore Airlines Group, which includes Singapore Airlines, Tiger Airways and the latest addition to the group, a long-haul low-cost carrier, Scoot.
Despite the difficult operating environment and challenges faced by the airline, SilkAir continuously maintain its long-term approach to product and service excellence. It has also introduced new inflight offerings and more importantly, continues to take advantage of opportunities to expand its network. In addition to that, SilkAir continues to increase the capacity to current destinations. Its wholly owned subsidiary, Tradewinds Tours and Travel Private Limited, contributes to the success of SilkAir’s strategy in providing packaged tours to destinations flown by the airline.
2. Macro-environment Analysis
An analysis using the PESTEL framework needs to be undertaken on a regular basis as the external environment is extremely complex and dynamic (Thomas 2007). We believe that the following economic, social/cultural, technological and environmental factors are relevant to SilkAir as it influences the company as well as those in the airline industry.
Singapore’s open economy can never be fully insulated from changes in the global economy. Being exposed to the European market, the airline industry in Singapore has been impacted by the European debt crisis, which set off a wave of uncertainties in the economy and caused a global impact. The banking crisis have caused concerns about the availability of financing needed to help aircraft manufacturers, Airbus and Boeing, maintain their high levels of production (Hepher & Evans 2011). The increasing price for aircrafts due to robust demand, coupled with high fuel prices led to...