Singapore Airlines

1. COMPANY BACKGROUND

Singapore Airlines (SIA) is one of the leading global airlines, renowned for their innovative technology, stringent safety regulations and excellent service. It is the world’s most awarded airline having secured “Best International Airline” award for 6 consecutive years. SIA covers a network of 60 destinations in 33 countries around the world (Singapore Airlines, 2016).

SIA is primarily funded by government investment with Temasek holdings claiming 55.46% of voting stock. SIA has grown at an exponential rate since its establishment in 1972 with their recent fiscal year of 2015 yielding $15.228 billion in revenue. SIA differentiate itself from competitors by building global networks through new partnerships and offering aviation-related services by its subsidiaries. SilkAir operates short-haul destinations to secondary cities while Scoot and TigerAir serve as low-budget carriers, all part of the SIA Group. By offering both full-service and low-cost airlines, SIA can appeal to the largest customer base.

To strengthen its brand image, SIA introduced “Singapore Girls” in 1968, featuring their air hostesses in sarong kebaya uniform. This eventually became the mascot of SIA representing dignity, respect and courtesy, much like the culture SIA upholds with its high standard of service.

2.0 PESTEL ANYALSYSIS

PESTEL analysis is a method used to analyze and identify macro-environmental factors that directly affect corporations. The PESTEL comprises political, economic, social, technological, legal and environmental elements. By utilizing the PESTEL model, SIA would be able to efficiently and effectively react to potential environmental changes and therefore mitigate any negative outcomes.

2.1 POLITICAL

Since Singapore gained its independence in 1945, the People’s Action Party (PAP) has dominated the government, establishing political stability. Singapore is a democratic country, ranked fourth least corrupted nation in the world (The IMD World Competitiveness report, 2016). The “Little Red Dot” also maintains good diplomatic relationships with over 185 countries. The Singapore government’s policies on businesses are transparent and efficient, setting minimal restrictions to the industry and allowing for more investment. According to Inland Revenue Authority of Singapore (2016), the government provides an attractive corporate tax rate of 17%, the lowest out of the 10 countries with largest GDP. With this taxation policy, SIA can minimize the tax burden from the various tax treaties and enjoy less tax regimes.

2.2 ECONOMIC

Singapore’s economy is an active free-market economy, one of the world’s advanced economies. Singaporeans enjoy highest GDP per capita in ASEAN countries with the amount of USD 51855 in year 2015 (Singapore GDP, 2016).

Since the airline industry involves both national and international boundaries, they are affected by global economic uncertainty. One example of threat to SIA is the rising price of fuel. Opec, the world’s largest crude oil producer, decided to decrease its production of crude oil in Africa (Krishnan, 2016). This directly or indirectly affected airline’s fuel cost. As a result, some airlines raised their ticket prices to compensate for the rise in fuel cost. SIA was not impacted badly because of the premium pricing strategy, but there is a limitation whereby it can utilize such strategy.