AIR CARGO FORECASTING, MANAGEMENT, LOGISTICS AND OPERATION IN

SINGAPORE AIRLINE

Author: Azamov Sardor (228660), Mimi Khalidah Ismail (233683)

Affiliation: Universiti Utara Malaysia

Address: International Business Department, School of International Studies, College of

Law, Government, and International Studies, Universiti Utara Malaysia,
06010 Sintok, Kedah, Malaysia

Telephone: +60174138781, +60137377650

Email: s228660@student.uum.edu.my, mimi_khalidah@sois.uum.edu.my

ABSTRACT

Singapore Airlines Cargo is one of the chief among air freight operators in the world. In order
to improve strategic development initiative, the company has identified importance of
forecasting accuracy as its strategy to its operational effectiveness and efficiency. The main
reason behind the accurate forecasting, permits the company to have the appropriate resources
availability, at the right time and place. The purpose of this paper to take on an evaluation of
recent month-to date forecasting used by Singapore Airlines Cargo. The study comprised of
historical data on freight and cargo operation from 2013 to 2016 covered profitable routes of
the company. A research carried out, using World Air Cargo Forecast (WACF) analysis on the
forecasting of Singapore Airline Cargo freight demand. Data in the form of historical cargo
operation over a three-year period together with most profitable routes included in the study.
Initial analysis between years presents that air cargo forecasting could be problematic, because
of the demand instabilities. Those demand fluctuations, influential especially to economic
factors and external market. The study adds contribution to current literature on air cargo
forecasting and examines the problems of air cargo forecasting.

Keywords: Air Cargo, Forecasting Approaches, Operations

1. INTRODUCTION

Airline cargo business is more complex than passenger airline service. Despite rising
fuel prices (Barber, 2010), growth rates of nearly 6 per cent are predicted annually up to 2029.
This makes the market one of the fastest growing within the airline industry (Zhang & Zhang,
2002). Passenger figures for air travel, by contrast, are expected to continue declining (Goll &
& Rasheed, 2011; Zhang & Zhang, 2002). Although the importance of air cargo to the airline
industry cannot be underestimated, the industry faces considerable challenges. One which has
begun to attract the attention of scholars concerns capacity plan (Amaruchkul &
Lorchirachoonkul, 2011; Bish et al., 2004), or more specifically, capacity "overbooking"
(Kasilingam, 1997; Low et al., 2010; Rothstein, 1985). The practice is popular within the
industry because it allows air cargo companies to minimize losses of revenue from unsold
capacity. They achieve this by selling, months in advance, more cargo capacity (volume and
weight) than may be available to freight forwarders, (Amaruchkul, et al, 2010; Popescu, et al,
2006). Fluctuating levels of uncertainty over the proportions of "shows" to "no shows" prior to
departure are therefore serious business considerations. Henceforth the question of forecasting
and forecast modelling inside the air cargo industry is critical to operational efficiency.

This paper presents about a study commissioned by Singapore Airlines Cargo, which
is one of the major operator in Asia Pacific, in the market for air cargo and freight. Presently,
the Singapore Airlines Cargo is rank 7th position. Singapore Airlines has long been one of the
most highly recognized airlines, and its cargo division is no different. With dense operations
throughout Southeast Asia, the company has expanded service in North America, Europe and
the Middle East. Singapore Airlines Cargo operates 13 Boeing 747 planes, but no new orders
are reportedly on the horizon (PIERCE, 2011). During 2002 SIA Cargo was able to reach 4.83
% and it was ranked four in among global freight carriers. On the other hand, by 2010, SIA
Cargo market share dropped and ended up by 3.57 % (Smeritsching, 2013). In a market
comprising approximately 600 active airlines worldwide with cargo capacity, Singapore
Airlines Cargo's share of the market places the company into the top quartile.
2. PROBLEM STATEMENT

An in-depth study has been undertaken in order to explore and untangle the factors
influencing demand forecasting and consequently to improve the operational performance of
an air cargo handling in the Singapore Airline Cargo. The study use Singapore Airline Cargo
as the scope for this paper.

Demand forecasting is one of the critical issue almost every organization from
manufacturing to shop retailers. Nevertheless current an indefinite economic environment,
measurement of forecasting become major obstacle. (Andrey Davydenko, 2013). Recently,
most studies aimed to identify the real life implication of demand forecasting more than
operational performance of companies and trading environment. In real-practice world, the
demand forecasting process does not provide necessary level of accuracy, to effectively cope
with the high demand uncertainty. This has a negative impact on the whole range of air cargo
operations, but especially on the management of the workforce, which is the most expensive
resource in the air cargo handling industry. Besides forecast inaccuracy, a range of additional
hidden factors that affect operations management have been identified. A number of
recommendations have been made to improve demand forecasting and workforce management
(Uriel Magaña, 2016).

The paper was carried out to evaluate how efficient and effective time series method
used by Singapore Airlines Cargo in forecasting which has found one of the effective method
under WACF to measure forecasting (Acar and Gardner 2012; Fildes & Kingsman, 2011; Poler
et al. 2008; Stapleton, Hanna, & Ross, 2006), retailing (Lau 2012) and the trading environment
(Adebanjo 2009). Uncertainty like this likely to impact on demand management (Croxton et
al., 2002), and hence the ability of cargo operators to be able to effectively balance customers'
requirements with the capability of their supply chain.

3. RESEARCH AIM AND OBJECTIVE.

This research aim to evaluate the existing forecasting techniques used by Singapore
Airline Cargo business in order to achieve the efficiency and effectiveness of the services. The
study mainly focus on SIA operation. The study's objective was to recommend a forecasting
method that specifically enhanced precision of forecasting by the SIA Cargo. Air cargo
forecasting is regarded as a key capacity-planning component in air cargo and freight
operations.

4. RESEARCH METHODOLOGY

This study has undertaken qualitative method from secondary data resources to evaluate
the forecasting method used by Singapore Airline Cargo (SIA). The paper focus on Singapore
Airline Cargo as its scope of study. The reason for choosing qualitative method is because the
data contains more description or deep understanding compare to quantitative method (Sechrest
& Sidani, 1995). The secondary data used in this study will provide more information and
better understanding as the sources obtain from past events and new discoveries can be made
from that (Otis College of Arts and Design, n.d.). In this study, the data was collected from
journal, articles, books, and other electronic resources. These data are carefully selected in
order to avoid false interpretation of the original researcher. The data will analyze how
forecasting models works and give more details on the relation between the models and airline
cargo industry. Therefore, comparative analysis was carried out to evaluate current forecasting
method used by SIA in order to achieve effectiveness and efficiency.

5. DATA ANALYSIS AND FINDINGS.

5.1 Time series models

As it has stated earlier to evaluate cargo forecasting in Singapore Cargo Airline time
series analysis used. It is one of the method that has used in to analyze World Cargo Forecast
to provide comprehensive and up to date data for world air cargo. Strategy of time series model
include historical trends into the future using time as the key independent variable. Time series
estimation is one-variable model and it requires data to be forecast. Often, during the
forecasting, the forecaster has interpretations and observations on only a single data series and
it is suggestible to develop forecasts without any shortage other explanatory variables. In this
kind of situations only the past values of this variable are accessible for displaying and
forecasting. Overall, time series data can be represent by trends, seasonal effects and cyclical
effects (Boeing World Air Cargo Forecast Team, 2016).
5.2 Model selection

To analyze time series model, firstly it is necessary bring up together a time series
forecast is to analyze a time series of historical data for the specific airport (in this case
Singapore Airlines Cargo where it operates from Changi International Airport) or market to
determine the growth rate of trend. The simple process includes dividing the trend in a time
series is to plot the historical data in graphic form on an x and y axis. The traffic data will be
present on the vertical (y) axis, while time, as the independent variable, will be plot on the
horizontal (x) axis. Then, can be draw a curve or trend line that reduces the overall distance of
the plotted points. In usual forecasts, it is possible to extend this line into the future to forecast
the future traffic of the airline. The rate of growth either positive or negative, it can be measured
from the slop of the line. It is usually recommended that, stating growth in terms of compound
average growth. Growth rates, useful when it is applied to the base year in order to plan the
future project for the traffic. Base year is the year that used for comparing in the quantity of a
business activity or economic index. Recently to be effective many popular software programs
can be used. For instance, Microsoft Excel, to draw the process of the developing historical
trend line. However, it should be to take account, by using this technique, it does not include
economic, demographics and industry factors during the historical period (Boeing World Air
Cargo Forecast Team, 2016).

5. 3 Findings

Going through in early paragraphs, it has found and evaluated that the chief goal of the
time series method, one of the tool that can be used in making statements about future
outcomes.

Time series method of forecasting, when discovering a broad time period and
information can about demand or forecasting can be extracted by measuring data at various
time intervals, like monthly, quarterly, yearly and any other time interval (in this case annually
and a 3 year time interval.

In addition, data, point’s variances can be calculated and compared from year to year.
As basis server of future forecasts can reveal seasonal fluctuation patterns. This kind of
information is necessary usually when the cargo demand fluctuate seasonally.
Nevertheless, using of time series method, as linear model of trend analysis. It can be useful
for cargo operators, during the measurement show an increase or decrease in demand.

6. CONCLUSION

Nowadays current business environments, organizations will depend extensively on

several management tools and techniques like forecasting in order to make strategic decisions.
Forecasting is a serious business activity in that it allows the organization to align the pace of
resource distribution to changes which are expected within an ever changing business
environment (Makadok & Walker, 2000; Durand, 2003). At the end the outcome is forecasting
enables organizations manage their fixed costs and enhance efficiencies and performance.

It is important for air cargo that forecasting is important. The main challenge for air
cargo operators is not only competition between rivalries, demand management as well which
is with high uncertainty is also crucial. Perhaps there are about 600 active cargo operators
worldwide with cargo capacity. With this knowledge, the study sought to undertake a
commissioned evaluation of current 3 year forecasting utilized by Singapore Airline Cargo. In
conclusion, these are main three findings on the air cargo industry:

 The interpretation of the research through analysis found that theoretical

propositions relates with demand forecasting and operational performance.
 The generation of the outcome of the paper can be applied in business practice
to increase demand forecasting in air cargo.
 The paper is add value to the previous research findings as additional reference

Generally, looking at the future of the industry itself and to how researches and studies
can help to support its growth, a dynamic way forward may be to advance methods to feed
information on forecasting sharpness into cargo pricing mechanisms to reduce them more
clearly. The researchers believe that, this paper may serve to evaluate of SIA Cargo handling
in future.
7. CONTRIBUTION TO THE KNOWLEDGE AND SOCIETY

The evaluation on the forecasting method are useful for academic world. In term of
academic, this evaluation help future study to investigate in depth how the techniques works
and differentiate this method to other exiting technique. Some methods or approach like
economic modelling, judgmental evaluation, trend analysis, and potential analysis are often
being used to forecast the demand in airline cargo services (Boeing World Air Cargo Forecast
Team, 2016). With this study the academician can have more resource to conduct researches
and help widen the knowledge field.

Despite from that, the evaluation also give new benefits for the business environment.
The evaluation help SIA to forecast precisely on the demand trend of its client. The company
can know when the peak season and draw out plans in order to give full service. Any delay
could cause billions dollar lose. Other than that, the evaluation helps to widen its market. SIA
can find new market to expand its market share rather than continue stay in same market.
Sometime saturation in market environment could happen. This will give high competition to
SIA and the business cannot growth.

In conclusion, the evaluation on forecasting method used by Singapore Airline Cargo

give good benefits to academic and business world. From this study, future needs can be fulfill
as the study give guideline to have good opportunity and advantages.