c

 



 
 



 

Singapore has Air Services Agreements with over 90 countries and territories. Besides this, there has always
been a focus on developing Singapore to be a leading air hub, and Singapore does so by being a strong
advocate of open skies. It is also crucial to note that the tourism industy is an important sector for the
Singapore economy, with it forming 3% of our Gross Domestic Product. SIA is a major player in the
industry, generating a huge amount of revenue years after years.



 

The airline industry in Singapore had already taken root before Singapore's independence in 1965. It's
flagship airline, the Singapore Airlines, began with the establishment of the Malayan Airlines in the 1930s.
When Singapore merged with Malaya to form Malaysia in 1963, Malayan Airways also changed it's name to
Malaysian Airways. In 1972, this was split into the current day Singapore Airlines and Malaysian Airlines
System (MAS). Since then, Singapore Airlines and the Singapore airline industry had grown considerably,
with Singapore Airlines being the flag carrier of Singapore. Singapore Airlines had built itself a remarkable
brand name; the Singapore airlines industry had gone on to be very successful; Singapore's Changi airport
became one of the best and busiest airports in the world, winning many accolades along the way; as the
airline industry played a major part in Singapore's economic miracle of turning from a third world country to
a first world country in a matter of a few decades.

 



 
For airlines industry in general, and of course the Singapore airline industry, the type of market is classified
under the consumer services market. It is a market where the organizational actors (airlines) sells products
(service forming a large part) to buyers (airline passengers) who consume them. Things like air transport for
passengers, in-flight services, meals and comfort, are things that are being bought, purchased and sold,
rather than physical goods. Physical goods like duty-free products (watches, pens, etc) being sold down
the aisle in SIA does not form the bulk of the goods being bought and sold. Purchases of airline tickets and
transactions are made via ways like online bookings and physical cash payments in travel agencies. The
pricing of it also depends on several factors. For example, the costs may be higher in instances where there
is Emphasis on service excellence, and when the aircraft provides middle-to-high class travel, such as the
case of Singapore Airlines. On the other hand, prices will be comparatively lower when there is an emphasis
on budget and low cost travel, such as the cases of say, budget airlines like Tiger Airways and Jetstar. Other
factors like competition among airlines, fuel prices and state of international economy also plays a part in
determining pricing. Also, sellers and buyers in the airline industry market find each other via ways
like websites, advertisements in mass media, local travel agencies and ticket counters. SIA's advertisement,
branding and publicity efforts is quite unique as compared to other major international airlines. While
other reknowned international airlines chooses to emphasize on services and aircraft in general, SIA focuses
it's publicity mainly around flight crew. SIA's promotion features the Singapore Girl (Air Stewardess on SIA)
very prominently. by portraying Singapore Girls as extremely graceful and hospitable air stewardesses who
provide excellent in-flight services to passengers. This particular promotion and branding strategy, with the
Singapore Girls at the centre of it, has been extremely successful throughout the years, creating a
successful marketing image for SIA and thus attracting customers both locally and worldwide. However, in
2007, SIA made a slight alteration to their branding strategy. While the Singapore Girls still remain in their
promotions, the focus will now be on SIA's modern fleet and technology. With this slight change in strategy,
SIA hopes to continue to attract local and international passengers. In all, SIA sttempts to alter it's branding
and advertising campaigns as and when required, in order to better suit the contemporary situation, and in
order to attract as many passengers as possible.


 
c

 

The airlines industry is extremely important to many countries, and especially so for Singapore. Much of
Singapore's economy is highly dependent on the airline industry, and SIA in general. First and foremostly,
the airline industry facilitates the many business exchanges in and out of Singapore by providing a reliable
source of international travel. Next, a significant and lucrative component of the Singapore airline
industry is the freight or cargo service, where a huge amount of goods is transported for commercial gains.
This also generates a significant amount of revenue for the Singapore's economy.Furthermore, the
Singapore airline industry also supports many other industries in Singapore which is extremely dependent
on it, like for example, the tourism industry, food and beverage industry and the hotel industry. So
basically, besides creating wealth and jobs that are directly related to the airline industry, it also
indirectly generates many other jobs and much income for other dependent industries. So as we can see,
the airline industry is extremely important to Singapore and it's economy. An incident in 2003 highlights this
particular point. At that time, there were signs that Singapore was facing a little problem with SIA pilots,
which may well disrupt SIA and the Singapore airline industry. So then-Senior-Minister Lee Kuan Yew,
issued a stern warning to SIA pilots that the Government 'will not allow them to go slow or work-to-rule,
which would damage the airline's reputation and cost it hundreds of millions of dollars in losses in a matter
of months'.




 
 







The flag carrier of Singapore. Singapore Airlines(SIA) is one of the worlds leading airlines. Despite the highly
competitive nature of the international airline industry, SIA has managed to retain its superior performance.
SIA has used both actor-oriented mechanisms and product-oriented mechanisms to build up its brand
reputation which propelled the airline to its current levels of success. According to Dr Cheong Choong Kong,
former CEO of SIA

''Effective and original advertising, together with word of mouth praises from satisfied passengers, would
create an aura of superior service and style. The aura, once established, had to be sustained through
constant training, clever advertising'' [1]

The image of the Singapore Girl was created in the early 70's and for the first 2 decades of her existence,
SIA invested as much as S$750 in advertising. A pioneer in creating such a ˜
 in the international airline
industry, SIA's competitors have emulated its method but to a lesser degree of success. [2]
The primary message "Singapore Airlines - A Great Way to Fly" has been consistently conveyed in
advertising that consists of print media and commercials. All communication messages are featured through
the iconic Singapore Girl in different themes and settings. [3]

From the above, it can be seen that the creation of the Singapore Airline's brand has been SIA's most
effective and most vigorously pursued strategy.

p 

 


SIA has also expanded its expertise into the area of aircraft maintenance and engineering. SIA Engineering
Company was formed on 1 April 1992 from the Engineering Division of SIA and is a subsidiary of SIA.[4] It
is a leading aircraft maintenance, repair and overhaul company that provides engineering services to more
than 85 international air carriers and aerospace equipment manufacturers. The company has 23 joint
ventures in 8 different countries, furthering the scope of the SIA and its relevance in the airline industry of
not only Singapore but other countries too. [5]

This strategy not only eliminates SIA's vertical competitions (aircraft maintenance companies would be
vertical competitors), it has also allowed it to become a bigger market player and competitor in the airline
industry overall.

p

SIA is a combination carrier. This means that it offers different kinds of cargo services including carrying
cargo in the freight hold of its scheduled passenger flights and operating a network of scheduled, all-cargo
flights.[6] In the late 1990¶s SIA split off its cargo divisions as separate subsidiary companies with their own
staff, pilots and fleets of freighter aircrafts.[7] This strategy goes beyond competition and cooperation as
subsidiaries and SIA behave like different companies whereby SIA Cargo has to pay SIA owned planes for
cargo space. However both companies fall under the same brand of SIA and their overall performance is
taken into account when assessing how well the company does annually.

 
˜ 


Other subsidiaries of SIA include : SilkAir and Tradewinds Tour and Travel [8]

[1] Heracleous, L., Wirthz, J., Pangarkar, N. (2009). Flying high in a competitive industry : Secrets of the
world's leading airlines (Pp 65). Singapore,Singapore: Mc Graw Hill.

[2] Heracleous, L., Wirthz, J., Pangarkar, N. (2009). Flying high in a competitive industry : Secrets of the
world's leading airlines (Pp 66). Singapore,Singapore: Mc Graw Hill.

[3] Roll, M. (2007). Singapore Airlines - An Excellent Asian Brand. Retrieved

from http://www.allaboutbranding.com/index.lasso?article=382

[4] SIA Engineering Company © (2008). SIA Engineering Company History. Retrieved
from http://www.siaec.com.sg/company/history.html

[5] SIA Engineering Company © (2008). SIA Engineering Company Profile. Retrieved
from http://www.siaec.com.sg/company/profile.html

[6] Doganis, R. (2010). Flying off Course: Airlines Economics and Marketing (4th ed.) (Pp 291). New York:
Routledge.

[7] SIA Cargo © (2004). Welcome to SIA Cargo- About Us. Retrieved
from http://www.siacargo.com/aboutUs.asp
[8] Singapore Airlines © (2010). ßur Subsidiaries. Retrieved
fromhttp://www.singaporeair.com/saa/en_UK/content/company_info/siastory/subsidiaries.jsp?v=-
54095254&

U 



' 

SIA has managed to retain its quality and efficiency due to its policy of keeping its fleet young. The newest
aircrafts not are not only more fuel efficient but are also easier to maintain. In the 1980 it had the first
A300 Superbus, the B747-300 Big Top, the B757 and the A310-200. Both Boeing and Airbus, the major
suppliers of aircrafts and the biggest vertical competitors of SIA were eager to gain a foothold in Asia for
their new aircrafts at the time and by purchasing the B757 and A310 at a time of recession for both airlines
and airline manufactures, SIA was able to receive generous concessions[1]. In 2000, the Airline placed 19
A380s on firm order and a US$4 billion order for 20 more B777-200s in 2001. [2]

SIA's timing of the purchases of its aircraft fleet can be seen as a competitive strategy. While most airlines
would stay away from making such deals at a time of recession; SIA's forward looking attitude allowed it the
upper hand and hence the concessions.

(More information on suppliers found below)

 
  

As the international airline industry grew, longer flights to airports further away became more common. As
such, it was no longer enough to just fly consumers to their destinations, they had to be entertained and fed
as well. In the 1990s, Singapore Airlines revolutionized inflight communications and entertainment through
the KrisFone and KrisWorld offerings that include entertainment such as movies and games. Keeping up with
its brand image as the provider of the most excellent services, SIA was the first to involve the International
Culinary Panel, in creating inflight meals in 1998.[3]
Singapore airline's evolved its strategies as the market evolved, the collaboration with the ICP showing that.
However, it is also considered a market maker worldwide because its strategies have led to the evolving
nature of the airline industry. Its emphasis on comfort and services partially led to the changing nature of
air travel from merely a form of transportation to a overall experience that includes entertainment, food and
comfort.

(More information on KrisWorld below)

[1] Heracleous, L., Wirthz, J., Pangarkar, N. (2009). Flying high in a competitive industry : Secrets of the
world's leading airlines (Pp 68-70). Singapore,Singapore: Mc Graw Hill.

[2] [3] Singapore Airlines © (2010). SIA History. Retrieved

fromhttp://www.singaporeair.com/saa/en_UK/content/company_info/siastory/history.jsp?v=-1246849661&

http://www.singaporeair.com/saa/en_UK/content/company_info/siastory/subsidiaries.jsp?v=-54095254&







Major Airlines all over the world have been facing competion from budget airlines. In response to the
competition, Tiger Airways was launched in 2004 with SIA owning a 49% stake and Temasek Holdings
owning 11%(as of 2004). [1] Since the launch of Tiger Airways, SIA now has a hand in all the segments of
the airline industry ± with SIA on one hand, a high end immaculate service providing luxury carrier, Silk Air
in the middle and Tiger Airways in the more affordable lower end segment. However it is still facing stiff
completion from other airlines namely British Airways, Emirates, Cathay Pacific, Malaysia Airways, which
have emulated its service brand and budget airlines like Jetstar, Air Asia, Lion Air, Cebu Pacific in the lower
end.

refer to: www.staralliance.com

[1] Tiger Airways Singapore Pte Ltd © (2010). Milestones. Retrieved

from http://www.tigerairways.com/sg/en/milestones.php?y=2003

U 




Ueritical Competion/Cooperation

p

Singapore Airport Terminal Services (SATS) provides services of ground handling and airline catering
services. It is the major service provider at Singapore Changi Airport where it serves more than 70% of the
airlines operating at the airport. Leading international airlines such as British Airways, Cathay Pacific, EUA
Air, Qantas, Singapore Airlines and United Airlines have chosen to partner with SATS.

SATS Cargo - In 1977, SATS opened an airfreight terminal at Paya Lebar Airport capable of handling
160,000 tonnes of cargo a year. At the end of the 1999-2000 financial year, SATS owned and operated five
airfreight terminals with a combined handling capacity of 1.3 million tonnes of cargo a year and two catering
centres capable of producing 27 million meals a year. In the first quarter of 2001, a sixth airfreight terminal
costing S$270 million with a handling capacity of 800,000 tonnes of cargo per annum commenced
operations.[1]

Although SATS can be seen as a vertical competitor as it provides necessary for airlines to operate and is a
independent company with its own strategies, SIA owns 80.61% of its shares(as of 2009). This makes it a
subsidiary of SIA and therefore not a direct competitor. This can be seen as another strategy of the market
maker(SIA) as it profits from the services that its major competitors buy.

[1] Singapore Airport Terminal Services Ltd © (2009). Singapore Airport Terminal Services-About
Us. Retrieved fromhttp://www.sats.com.sg/newsats/about_us/sats_story.html

[2] Singapore Airport Terminal Services © (2009). Singapore Airport Terminal Services- Investor Relations.
Retrieved fromhttp://www.sats.com.sg/newsats/investor_relations/corp_info.html

ß 




   

The Singapore Government holds a majority share in SIA 54.42% as of 2009.[1] Despite this, the
government refrains from intervening in its operations and has opened up Singapore skies to other carriers
without giving SIA any preferential treatment.[2] However the government stake contributes to stable
workforce and sees to that unions do not disrupt the airlines services in demand for higher wages and
salaries.

[1] SIA. (2010). Investor Relations Shareholder Info - Singapore Airlines. Retrieved March 28, 2010, from
Singapore Airlines:http://www.singaporeair.com/saa/en_UK/content/company_info/investor/stock.jsp

[2] Heracleous, L., Wirthz, J., Pangarkar, N. (2009). Flying high in a competitive industry : Secrets of the
world's leading airlines. Singapore,Singapore: Mc Graw Hill.



SIA -

Images taken from:

http://onearthtravel.com/blog/wp-content/uploads/2009/04/singapore_airlines.jpg

http://onearthtravel.com/blog/wp-content/uploads/2009/04/singapore_airlines.jpg
http://elitechoice.org/wp-content/uploads/2008/05/singapore_airlines_luxury.jpg

http://elitechoice.org/wp-content/uploads/2008/05/singapore_airlines_luxury.jpg
http://www.plaza.ch/stones/Pictures/SingaporeAirlinesSingapore.jpg

http://s3images.coroflot.com/user_files/individual_files/76740_Bk3fvr7WUrD0rDwpk5z4AkTN5.jpg

 

 


   

 

!
The Changi Airport Group is also a major market maker in the Airline industry of not only Singapore but
worldwide. However as it is a relatively new company, its strategies will be found under a discussion on
CAAS below.



In the airline industry , suppliers are important actors in the market as they are able to shape the market
according to the quality and type of goods they offer as well as the services they provide. In this sense, the
 bargaining power of suppliers are able to influence many other actors in the industry, such as the firms
and organizations in the airline industry as well as the consumers.

The most important supplier of the airline industry is the aircraft suppliers as the fleet of aircrafts are the
most crucial resources any airline company possess. The aircraft supplier industry is concentrated,
with Boeing and Airbus dominating it. Both being superior aircraft manufacturers, airlines have limited
alternatives for their supplies of aircrafts. The lack of competition between Boeing and Airbus reduces the
possibility of a price war between Boeing and Airbus as barriers to entry to the aircraft supply market is high
due to the existing incumbency advantages they enjoy. With contracts of orders to fill for the many
international airlines, Boeing and Airbus need not be too concerned with the entry of a new competitor
especially when they have so much accumulated experience and knowledge of building the most superior
aircraft. In addition, vertical integration for these companies is also unlikely. As such, aircraft suppliers have
great bargaining power over airline companies.

In trying to choose between these two suppliers, airlines take several important factors into consideration.
Since every production of an aircraft can take can take up to several years to complete, airlines industry
would have to predict demand for air travel over the next few years to decide on the type, size as well as
the number of fleets to purchase. For example, when Airbus first introduced the A380 (also known as the
SuperJumbo), Boeing was preparing to launch their very ownDreamliner . Although they were launched at
the same time, the two suppliers were ultimately offering starkly different products. While A380 was the
world's largest aircraft, Boeing's Dreamliner is a mid-sized aircraft. The respective suppliers have made their
forecast of the future of the airline industry with Airbus seeing the industry to be growing at a fast rate with
the rising affluence of the emerging markets while Boeing predicts that the downturn of the economy due to
thefinancial crisis of 2007-2010 would eventually hamper air travel .

With two different product offers, airlines had to decide and act fast on orders to get their hands on the
lastest technology. International airlines such as Emirates, British Airways and Singapore Airlines were
airline companies who already have orders for both the A380 and Dreamliners.

From here, we can see the impact of these suppliers on the airline industry. With improved and
revoluntionary products, the airline industry is shaped differently when these organizations place orders for
their fleets and attempts to satisfy customers as well as to increase their profitability.

Comparatively, other suppliers of the airline industry, such as the providers of in-flight entertainment
systems catering have less bargaining power, as these industries are more competitive and fragmented.
Airline companies have considerable ability to choose and switch between these suppliers. Cooperation
usually results between the airline company and these suppliers to ensure the quality of their products.
Since these suppliers have less bargaining power, they must ensure that they are able to work well with the
airline companies in order to secure future contracts as well. One such form of cooperation can be seen
when Singapore Airlines announced that Panasonic Avionics Corporation has been selected to create its
new in-flight entertainment system, KrisWorld . In addition, tie-ups with other external organizations such
as Nintendo was established to achieve greater quality of entertainment for Krisworld.

refer to: Airbus versus Boeing revisited: International Competition in the Aircraft Market - pdf file

mY Uerticle Cooperation: Labor Market, SIAEC, SATS, Singapore Food Industry

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"
 

#


 $%"
 &
'
Effect on Consumers
mY Budget Airlines:It is a type of airline that provides a cheaper alterntive to flights but also eliminates most
traditional in-flight services, for example: unreserved seating, no in-flight catering (passengers have to pay
to get food on board), a fare scheme where fares increase with respect to the number of bookings already
made, it is a scheme where early reservations are rewarded). Singapore's first low cost carrier, Ualueair,
was started on 5th May 2004 and not long after, a subsidiary of the Singapore Airlines, Tiger Airways was
launched to compete in the low cost carrier market. Qantas, which was Singapore Changi Airport's second
most dominant carrier after Singapore Airlines, also started Jetstar Airways and Malaysia came up with
AirAsia to round up the list of budget airlines competing in Singapore. With budget airlines, consumers have
a choice to choose a cheaper alternative to flying without the normal passenger benefits.
mY Luxury Airlines: Provide premium services and comfort to travelers
mY SIA voted best luxury airline in 2009 for 3rd year running in Ultratravel 100 awards
mY SIA is the first to operate the Airbus A380, which replaces the Boeing 747 as the biggest aircraft.
mY Although SIA provides premium services and comfort, it does not come cheap. First class tickets cna cost as
much as S$10,000, the business class, around S$6000, and the economy class ranges from S$1400 to
S$1600.
mY Premium Services to consumers include: The Business Class in the Airbus 380 offers the widest seats
(85cm) in its class as compared to other airline and also features a passenger corner for passengers to pick
up snacks and mingle. The Singapore Ailine KrisWorld where customers can choose from over a thousand
entertainment options which include movies and games. Screens are also bigger (58cm for first class, 39 cm
for Business and 30 cm for Economy Class). KrisWorld also provide passenger with a wide range of office
applications which can be accessed via handsets, so as to allow them to work onboard.
mY SIA's strong brand equity is one of its major assets, with the credit crunch and the introduction of low cost
carriers, it is a challenge to keep delivering on the high cost promise of quality and service as it requires a
constant flow of investments and cash, achieved only through price premium strategies. A customers'
perception of the price/value equation, their future buying behaviour and loyalty are only achieved through
the maintenance of quality of the SIA brand. They are conitually improving their quality of the classes
available.
mY For example, they introduced an upgraded First-Class in B777-300ER aircraft in 2006 and a new Regional
Business Class in aircraft A330-300.
mY Credit Crunch: Flying is a more expensive alternative to traveling as compared to other forms and the
industry has been hit hard by the credit crunch.Luxury airlines were more badly affected by the credit
crunch as compared to the budget airlines. Customer's perception and behaviour changed due to having less
income. However, in every industry, there are always people willing to pay more for better services
regardless of the economy, and the luxury airlines have to maintain their quality in order to not lose this
customer base. SIA is a prime example of this.

Effect on Consumption

mY Consumption in this market is closely tied to economic growth and world events. 1997 Asian currency crisis,
September 11 terrorist attacks, recent credit crunch e.g. all have a heavy effect on the market.
mY Consumption also divided into income classes. International Flights catered more for high to middle income,
while budget caters for lower income groups.
mY Consumption affected by world events. Terrorist attacks in the early 2000s instilled fear for a certain time.
Gobal recession also deter consumers from flying.
mY Consumption is affected by consumer preference. For example, Singaporean tourists might prefer Japan and
Korea compared to Cuba. Business travelers might prefer major cities in Europe, North America and parts of
Asia.
mY Consumption affected by state of economy. For example, leisure travelers tend to more price sensitive
compared to business travelers. Hence in times when oil prices force airline ticket prices to rise,
consumption by leisure travellers might decrease
mY Consumption affected by technological progress. For example, in the past when aircraft technology was not
as advanced, fewer people traveled on planes. Now, with more advanced technology, flying can be made
more affordable with budget carriers and long haul flights are made possible, which can in turn fuel demand
for air travel.
mY Consumption is affected by the flexibility of a passenger's schedule and how they choose their classes when
flying. This may be one of the main reasons why some people or why companies send their employees on
trips using Business class, besides the reason that Business class offers more quality service and comfort.
mY Consumption is affected by a passenger's preference, Some people may choose comfort over expense and
do not mind paying more for the service However, preference is also affected by the state of the economy.
Thus, they are all linked.

Sources:

1) http://www.venturerepublic.com/resources/Singapore_Airlines_-_An_Excellent_Asian_Brand.asp

2) http://www.singaporeair.com/saa/en_UK/docs/company_info/investor/annual/SIA_AnnReport0708.pdf

3) http://www.seattlepi.com/business/300154_boeingsingapore18.html

4) http://www.southalltravel.co.uk/news/India/19177677/Singapore-Airlines-voted-Best-Luxury-Airline.html
)

5) http://www.statemaster.com/encyclopedia/Low_cost-carrier

  
 

 

Singapore¶s airline industry has contributed to the economy in many different ways be it directly or indirectly
enhancing Singapore¶s economic status. In most direct terms, the aviation industry in Singapore contributes
about 5.5%, or S$7.9 billion, to Singapore¶s GDP[1] which shows how great an impact it brings considering
the fact that this figure may continue to increase with people becoming increasingly affluent and the rise of
budget airlines making air travel more affordable and available to all.

The Singapore airline industry provides a necessary mode of transport be it for people, goods or services
internationally. With the affluent Singapore Airlines (SIA) serving customers for more than 60 years and the
budget airlines on the rise, the airline industry now caters to almost everyone from all social classes hence
increasing passenger traffic and covering customers over much larger sections of society. The airline
industry has contributed to various industries that require human traffic flow internationally, namely the
tourism industry and also provides locals with more opportunities for interaction between overseas business
partners via institution exchanges. Moreover, the presence of freight and cargo air-shipping increases trade
between Singapore and countries internationally, enhances GDP as well as foreign direct investments (FDI),
implying a great impact on Singapore¶s economy.

The airline industry in Singapore has also contributed greatly to the employment sector, with the Singapore
Airlines Group employing 29,457 staff members at the end of the fiscal year on 31 March 2007[2]. It also
ensures the survival of other related supporting industries and hence the employment of these related
sectors be it the aviation engineering, aircraft leasing, tour operations, air catering, ground handling[2],
airport, air cargo, or even the food and beverage, hotel, hospitality in general as well as other tourism
related industries, just to name a few. Considering these linked industries and the employment related, the
airline industry does indeed have an extremely huge impact in its contribution to our local economy.

Singapore Airlines has always been one of the top airlines in the world for years, and has gained much
reputation not only in terms of good service, comfort etc, but also as a result of creating aviation history by
bringing a number of firsts such as being the first to pilot the world's largest aircraft, the A380, on 25
October 2007[3], operating the world¶s first multi-sector demonstration green flight[4], just to name a few.
Moreover, Singapore Changi Airport has earned the top title of the World¶s Best Airport in 2010[5]. This very
much creates a reputable image and global status for Singapore which indirectly boosts the entire economy
as a result of increased tourism and business opportunities as a result of the enhanced reputation.
Finally, the international strategic airline alliances between Singapore airlines and other airlines around the
world also induces great economic impact in terms of reduced airline costs, increased revenues and profits
as well as increased traffic by expanding operations and accessing new markets (increased exposure to
more countries and geographical locations, and more flows between these countries be it in terms of human
traffic flow or flow of goods and services)[6].

Size of the market

SIA alone is estimated to have more than 18.3 million passengers per year[7]. Apart from International and
luxury airline SIA, other airlines based in Singapore are mostly budget carriers. SIA currently owns 34.4% of
Tiger Airways[8] while Jetstar/ Ualueair is managed by Newstar Holdings Pty Ltd[9].

How does it relate to overall economic growth and dynamics?

The airline industry in Singapore is strongly related to the economic growth and dynamics. This is evident as
its growth is affected by the recent economic downturn, with SIA¶s ³revenue declining 30 per cent to $2.87
billion´ from a net profit of $358.6 million last year[10] and was also forced to delay the delivery of 8 A380
superjumbo jetliners as a result of the economic downturn.

Sources:

[1] Wikipedia. (n.d.). Aviation in Singapore. Retrieved March 28, 2010,

from: http://en.wikipedia.org/wiki/Aviation_in_Singapore

[2] Wikipedia. (n.d.). Singapore Airlines. Retrieved March 28, 2010,

from: http://en.wikipedia.org/wiki/Singapore_Airlines#Structure

http://en.wikipedia.org/wiki/Singapore_Airlines#Structure

http://en.wikipedia.org/wiki/Singapore_Airlines#Structure

[3] © 2010 Singapore Airlines. (2010). The Creation of Singapore Airlines. In Singapore Airlines. Retrieved
March 28, 2010, from:http://www.singaporeair.com/saa/en_UK/content/company_info/siastory/history.jsp

[4] Singapore Airlines. (3 February, 2010). Singapore Airlines Aspires To Greener Skies. In Scoop. Retrieved
March 28, 2010, from:http://www.scoop.co.nz/stories/BU1002/S00074.htm

[5] SKYTRAX. (n.d.). SINGAPORE CHANGI AIRPORT NAMED WORLD'S BEST AIRPORT IN 2010 WORLD
AIRPORT AWARDS. Retrieved March 28, 2010,
from:http://www.worldairportawards.com/Awards_2010/Airport2010.htm

[6] Nunes, N., Farago, S., Travis, J. (May 1997). THE ECONOMIC IMPACT OF INTERNATIONAL AIRLINE
ALLIANCES. In Commonwealth of Australia 1997. Retrieved March 28, 2010,
from: http://www.pc.gov.au/ic/research/information/aircraft/aircraft.pdf

[7] Star Alliance. (n.d.). Singapore Airlines. Retrieved March 28, 2010,
from: http://www.staralliance.com/en/about/airlines/singapore-airlines/

[8] Tiger Airways. (n.d.). Investor Relations. Retrieved March 28, 2010,
from: http://www.tigerairways.com/sg/en/about_us.php?r=SGEN

[9] Jetstar. (n.d.). Our company. Retrieved March 28, 2010, from: http://www.jetstar.com/sg/en/about-
us/our-company.aspx
[10] The Sydney Morning Herald. (September 4, 2009). Singapore Airlines delays further A380 deliveries.
Retrieved March 28, 2010, from:http://www.smh.com.au/travel/travel-news/singapore-airlines-delays-
further-a380-deliveries-20090904-fajx.html

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The airline industry in Singapore is mainly regulated by the Civil Aviation Authority of Singapore (CAAS), a
government body that ensures that airlines adhere to the rules of civil aviation. The role of the CAAS is in
managing the nation¶s airport, Changi International Airport, providing regulatory support and facilitating the
development of infrastructure and manpower for the growth of the industry. According to its website, the
CAAS states six strategic thrusts: safety oversight and promotion, air hub development, aviation industry
development, air navigation services provider, aviation knowledge and expertise, shaping international
aviation [2]. It also facilitates government intervention required in the international arena, especially
regarding route structure and frequency of flights.

Apart from the CAAS, the Singapore government is also a major regulatory authority in the airline industry.
The Singapore Government, through Temasek Holdings, holds a majority share of 54% in SIA [6]. The
government¶s stake contributes to stable workforce, wages and salaries which reduce cost for the airline.
Although the government repeatedly tries to distance itself from SIA [1], Minister Mentor Lee Kuan Yew
intervened in 2004 to prevent a pilots strike over pay cuts [5]. However, government intervention in the
airline industry is declining even though it is still higher than most other industries [7].

The decline in government influence on the airline industry in Singapore is partly attributed to agreements
such as the Open Skies agreements [7]. Open Skies agreements are agreements between countries to
liberalise their aviation rules so as to encourage more air traffic between the countries involved. Such
agreements also seek to reduce government intervention as the industry becomes more deregulated [8].
One example of such an agreement is in the late 1990s, where the US and Singapore signed an Open Skies
Agreement that would allow SIA to fly to new destinations in the US [7].

Major airlines in Singapore such as SIA and SilkAir together with 230 other airlines around the world are
part of the International Air Transport Association (IATA). The association represents, leads and serves the
airline industry in general [3]. The IATA sets guidelines and regulates areas of activities such as airline and
aircraft operations, cargo, navigation services and safety and security [4]. The airline industry is also
indirectly related to other policies set by the government as well. For example, laws regarding unions might
impact the wages and salaries component of an airline¶s cost structure [7].

Sources:

[1] Agence France-Presse. (2006). Singapore moves to defend air-hub status as no-frills rivalry heats up.
Retrieved March 28, 2010, from USA Today:http://www.usatoday.com/travel/news/2004-04-07-singapore-
hub_x.htm

[2] CAAS. (2009). ßur Strategic Thrusts. Retrieved March 28, 2010, from Civil Aviation Authority in
Singapore (CAAS):http://www.caas.gov.sg/caas/en/About_CAAS/Our_Strategic_Thrusts/?__locale=en

[3] IATA. (1997-2010). About Us. Retrieved March 28, 2010, from International Air Transport Association
(IATA): http://www.iata.org/about/Pages/index.aspx

[4] IATA. (1997-2010). Areas of Activity. Retrieved March 28, 2010, from International Air Transport
Association :http://www.iata.org/whatwedo/Pages/index.aspx?NRMODE=Unpublished

[5] SDP. (n.d.). The Truth About Labour. Retrieved March 28, 2010, from Singapore
Democrats: http://www.singaporedemocrat.org/labour.html

[6] SIA. (2010). Investor Relations Shareholder Info - Singapore Airlines. Retrieved March 28, 2010, from
Singapore Airlines:http://www.singaporeair.com/saa/en_UK/content/company_info/investor/stock.jsp

[7] Singh K., Pangarkar N, Heracleous L. (2009). Casebook: BSP3001 Business Policy and Strategy.
Singapore: Cengage Learning Asia Pte Ltd.

[8] Wikipedia. (2010, January 13). ßpen Skies. Retrieved March 28, 2010, from
Wikipedia: http://en.wikipedia.org/wiki/Open_Skies_Agreement

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The increasing unpredictability of the economy has resulted in a rise in demand for budget airlines, at the
same time, enabling them to increase their market share and gain reputation among members of the public.
This increase in demand will probably see a rise in the number of budget airline companies as well as an
expansion of the current ones. This might as a result pose a threat to well-established reputational airlines
including Singapore Airlines and SilkAir . However, the counter-competitive measures by both airlines
such as the introduction of cost-saving measures and the slashing of airfares might actually mean that the
rise of these budget airline companies would in turn have little impact on their stabilized demand patterns.

Oil prices are expected to rise due to the increasing demand for oil (which is expected to exceed its
supply), and as a result, the global airline industry sees a drop in profitability[1] and depressing shares[2]
especially with regards to major airlines such as that of Singapore Airlines. Despite all that, the oil issue
might seem less of a threat to Singapore Airlines which recently launched the world¶s first multi-sector
demonstration green flight that uses around 6 percent less fuel than normally required[3], hinting on a
decreasing influence the oil market has on the company.

Sources:

[1] Done, K. (May 30, 2005). Oil prices µdestroying¶ airline profitability. In msnbc. Retrieved March 28th,
2010, from: http://www.msnbc.msn.com/id/8036674/

[2] The Associated Press. (July 31, 2007). Airline industry optimism sapped by surging oil prices. In
USATODAY. Retrieved March 28th, 2010, from:http://www.usatoday.com/travel/flights/2007-07-31-airline-
fuel-costs_N.htm

[3] Singapore Airlines. (3 February, 2010). Singapore Airlines Aspires To Greener Skies. In Scoop.
Retrieved March 28, 2010, from:http://www.scoop.co.nz/stories/BU1002/S00074.htm&nbsp ;