Case Analysis

Case: 4
Singapore International Airlines: Preparing for Turbulence Ahead GROUP: B
Background
International Airline Industry:
For a long time the airline industry was being restricted due to several national and
international regulations. Constrained by landing rights and local ownership
requirements, only the large airline companies had only dominance over their own
regional markets at best. In this case only exception is the United States. United
States- Airlines of the United States had started its journey in 1978. To gain its market
position it was facing tremendous competition and aggressive jockeying since the
beginning. It’s a new era. Europe- Europe joined the field gradually after the creation
of the European Union and started to disband country-specific barriers of free-market
competition among air carriers. Asia- in Asia, deregulation took place after some
major regions allowing greater access to foreign airlines. For example, Japan made
major strides in deregulation after selling off its shares in the then state-owned Japan
Airlines. After such step, it gave permission to All Nippon Airways to serve the
international market. Latin America in Latin America, many of the smaller national
airlines was privatized. Mexico, Argentina and several other countries reduced some
significant levels of market competition in their industrials by removing
anticompetitive barriers and privatized their national flag carriers.
o Open-Sky agreement: With the infusing of national barriers there were several
other changes took place. The major European nations were discussing with the
United States to implement an open transatlantic market area. In such situation,
landing rights would be determined by free-market forces rather than regulatory
policy. These agreements are mainly bilateral agreement between countries that
agree to provide landing and take-off facilities to the airlines of any of the partner
countries. The open-sky policy does not have the typical barriers related to
landing right. For example, Singapore had signed an open-sky agreement with the
U.S. under which a Singapore carrier could travel to any destination city in the
U.S. such right also applicable to U.S. as well.
o The Present Scenario of SIA: After the outbreak of SARS (Severe Acute
Respiratory Syndrome) in Singapore, Hong Kong, China and neighboring
regions the passenger traffic for Singapore International Airlines decreased
suddenly in 2003. At the same time, there were hostile situation in Iraq
which caused the passenger traffic fall even further in the Middle East
market. To minimize the rising breakeven load factors, SIA planned to cut
down its operating cost. At first the company laid off 400 employees and
later another 156 cabin crew staff. Moreover, it went for 22% salary cuts
of its senior managers and negotiated wage reductions for cabin crew and
ground staff. Such steps were considered to have an adverse impact on
employee morale as well as the superior passenger service of the
Singapore Airlines. Singapore Airlines was famous for its superior
strategy of differentiation. Many of its remarkable service innovations
were copied by the competitors which was also creating a problem for the
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company. These airlines were offering choice of meals in economy class,

innovative entertainment options, and other luxurious features in addition
to duplicating SIA’s strategies ranging from recruitment, in-flight service
to fleet management. This added additional pressure for the company to
refine its differentiation strategy. Moreover, many low-cost carriers were
joining the Asian market for the first time. Some local firms like Air Asia
and Virgin Blue had started to become popular in many sectors that were
previously dominated by SIA. To minimize the pressure, the Singaporean
government authorized a new low-cost start-up in Changi, at the heart of
SIA’s empire and suggested to sell 57% of its stake to SIA. Meanwhile,
the company had begun to expand its business to major international
markets and as an attempt of this it acquired the ownership interest in Air
New Zealand and Virgin Atlantic. Unfortunately, both of these
investments were resulted to a big loss for the company.
Singapore International Airlines (SIA) - The Company:
Singapore International Airlines (SIA) was first registered as the Malayan Airways
and the first commercial passenger flight was in May 1947. The Malayan Airways
turned as Singapore International Airlines (SIA) in 1972. At that time the mother
company Malaysia Singapore Airlines was officially divided into two new airline
companies, SIA and Malaysian Airlines System (later called Malaysia Airways).The
long time cooperation with the Malaysian counterparts had proved beneficial for the
new company. The crews had gained significant numbers of flight experiences
operating over rough geographical terrain in Southeast Asia. Their safety records were
flawless. This association also helped SIA’s management to deal with crucial
operating experiences ranging from flight operations to matters of administrative
importance. As part of the division, SIA got half the combined assets, most of the
overseas offices, its headquarters buildings in Singapore and a fairly new computer
reservation system. From the beginning of its journey SIA is legendarily committed to
provide superior service to its customers. It built a network of wholly owned
subsidiaries and joint ventures to operational support in several areas as catering,
terminal management and aircraft maintenance. These subsidies had large
autonomous entities that had to bid for orders from the parent and were in the leading
position in many of its core areas.
o Subsidiaries of SIA-SATS: Singapore Airlines Terminal Services (SATS)

subsidiary was one of the largest in the group. It provided a number of
terminal management services such as catering, passenger, baggage handling,
and ramp operations. One of the world’s largest flight kitchens was run by
SATS at Changi International Airport, producing an average of 45,000 meals a
day. In its client lists there were British Airways, Quantas, Lufthansa, Japan
and more than 70% of all airlines flying into Singapore. SATS was also
famous for its several joint ventures in Beijing, Hong Kong, Ho Chi Minh
City, Chennai, Male, Manila, Osaka and Taipei.
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o Changi International Airport: The Changi International Airport was considered

as a crown jewel for Singapore International Airlines (SIA). As a national flag
carrier SIA occupied a place of pride at Changi. The airport itself was rated
among the best in the world by several global organizations. Other it obtained the
top honors for its people-handling efficiency and cleanliness. Changi was also the
headquarters of SIA Engineering Company. This subsidiary provided aircraft
maintenance and engine overhaul services. As a testament to its engineering
prowess, many global carriers engaged SIA Engineering to service their fleets.
SIA Engineering also had a global presence through joint ventures with reputable
companies such as Rolls-Royce and Pratt & Whitney.
o Customer Service of SIA: Singapore International Airlines (SIA) was the pioneer
of introducing several customer services. It was the first who provided electronic
ticketing through its web site. Online ticketing was being rolled out across all
destinations in its network. For the customer’s convenience the company
introduced automated check-in systems on certain flights that tended to attract a
large number of travelers. It used modern technology in every possible ways,
allowing check-in via e-mail, telephone and fax.
SIA’s first-class and raffles-class (business class) was known as “The Silver Kris
Lounge”. This was considered as “an oasis of peace and quiet” in the noise and
busyness of the airport. The atmosphere was decorated with plush armchair, deep-pile
carpeting, aquariums, tropical gardens and décor that included original paintings by
Singapore artists. Several Top-of-the-line-business equipments were also available
such as computers, fax services, stock ticket etc. it was one of the largest and most
luxurious airport lounges in the world.
A Move toward Fleet Acquisition and Management:
By 2003, Singapore International Airlines (SIA) was operating a fleet of 97 aircraft;
almost all of them were capable of ling-haul, large capability flights. At that time, it
was the first company who brought the 500-plus passenger, double-decker mega liner
of Airbus. It had planned its fleet acquisitions judiciously such that its fleet average
was a little over 5 years old. It was the world’s largest operator of the Boeing 747-400
Megatops, a roomy aircraft capable of long distance flights. Delta Airlines came close
to SIA in terms of fleet age, with an average of roughly 8 years. Most of the other
carriers had large segments of their fleets in the 14+ years range. “Maintaining youth
in its flight operations” is one of SIA’s competition facets that it took very seriously.
Ii had its office in Seattle, Washington just to interface with the Boeing designers and
oversee the development of new additions to the SIA fleet. Generally, newer aircrafts
were more fuel efficient and less maintenance intensive than the older one. In its
purchase policy, SIA used a mixture of leasing and outright primarily during
economic lulls, to manage its demand of new fleets, thus extracting maximum value
for its investment. Singapore International Airlines (SIA) emphasized fleet selection
because of strong signaling value. Newness always attracted new customers as they
always expect top-of-the-line technology, comfortable seating and a sate journey all
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of created a differentiation image of the aircrafts. SIA decorated its aircraft’s interior
with all the latest amenities. For example, it was the first who offered a personal video
screen I every seat, even in its economy class. Its in-flight entertainment system, Kris
World, delivered 22 video channels, 12 audio stereo channels and 10 Nintendo game
channels at every seat, with a Dolby surround-sound system that was designed only
for SIA.
Human Assets (a success factor of SIA):
Singapore Airlines values it employees and consider them as the primary source of
their success. SIA’s human asset was built up with a deft mixture of organizational
culture, indoctrination and ritual that turned as a competitive factor of SIA. A large
number its employees were from Singapore and Malaysia. In 2003, the total number
of employees was 14.000 people worldwide and it was the largest private sector
employer in Singapore.
Recruitment strategy: The Company had a finely tuned recruitment and selection
policy to have exception talents in its stock. Most of the employees arrived at the
company either through a cadetship program that attracted generalists or a specialist
program geared to functional experts in areas such as computer services and finance.
The cadetship is more like an internship. It was an on-the-job training program that
cycled employees through a variety of functions as they moved up the hierarchy.
o Recruitment process of pilots: SIA recruited its pilots globally. It had pilots
from over 50 countries many of which were experts in handling latest
equipments under professional working conditions at every generous levels of
compensation. The company had its own flying colleges in Jandakot, Australia
that focused on improving training efficiency and producing qualified pilots.
The college was continuously developing Singaporean pilots to meet SIA’s
demand.
o Recruitment process of cabin crew: The selection of the SIA’s cabin crews
were a sophisticated process. According to SIA they were the brand
ambassador who reflects its excellent service standards of its passengers
demand. These cabin crews were mainly from South or Southeast Asian
region (Malaysia, India, Japan, Korea, Taiwan and Indonesia). Most of them
were Singaporean. It was one of the main reasons for SIA’s lower labor costs
among leading carriers.
o Training Strategy: SIA was highly committed to employees training and
development and it was reflected in the fact that it spent roughly 14 times
much than any average Singaporean company. It had an extensive Training
Centre in Singapore which served as the focal point for training program
targeted at cabin crew, commercial staff, flight crew and flight operations
personnel. The company set up a system of proven controls and mentoring
guidelines that helped the employees to develop their potential to contribute to
the success of the organization.
o “The Singapore Girl”: The Company carefully developed the image of
Singapore girl. SIA launched it to distinguish itself in the marketplace. The
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Singapore Girl was a symbol of caring, comfortable, hospitable service. It also

played well to the Oriental mystique that was then prevalent in the Western
world where the company sought to establish a footing.
o Employee support system: Once the employee joined the company it was the
management part to guide the staff to perform at his or her best level. Various
practice, such as detailed performance reviews and feedback at all levels,
career counseling and performance based reward system were designed to
support the employees.
New Millennium, New Challenges:

In late 1990s, there was a huge competition among global carriers. In Asia Pacific
several other airlines had entered into the market by offering premium services at
consistently low fares. SIA took several steps to face the challenges. At first it joined
the Star Alliance. It was a powerful network of carriers that included Lufthansa,
United, Ansett, Air New Zealand, All Nippon Airways, South Africa Airways, Air
Canada, Thai, Varig and SAS. This Alliance provided its members with code sharing
services, fine-tune traffic flows to increase revenues and efficiency and combine their
buying power to negotiate favorable terms for securing inputs like food or allied
services. Such joining gave SIA the opportunity to serve many destinations that it did
not serve yet. The alliances had some problems as well. If other network carriers in
the alliance were not performing up to the high standards of SIA then the brand image
of SIA would be tarnished because of joining a network also means handling some of
the brand management to allied companies. Then it might also lead to loss of control
over decisions like flight frequency and schedule. Moreover, SIA’s secret of success
might be finding out by the network partner and it would hamper its performance by
following the same policy.
Equity Partnership:
SIA brought 8.3% equity in Air New Zealand to control the alliance as well as to
balance the potential growth of its business. It had also strengthened the long time
partnership with the New Zealand Airways. For this, Singapore Airlines got some
other benefits as New Zealand carrier already owned 50% of Ansett Airways.
Gradually, there was a negative impact in SIA’s ownership position as the
government of New Zealand poured capital to push up the company. Within very
short time, SIA was left with a big loss as well as lost its control of the key Australia-
Asia routes. In late 1999, Singapore Airlines acquire 49% of the equity of U.K. based
Virgin Atlantic Airways for $ 1.6 billion. By this acquisition, SIA was expecting to
use Virgin’s transatlantic routes which were very lucrative. Virgin’s service standard
was also much like SIA itself. Only problem was that Virgin was against joining the
Star Alliance. It forced SIA into a very turbulent position where to favor Virgin over
the Alliance which would make allies angry. Virgin was famous for its management
policy of breaking traditional barriers and followed swashbuckling management style
while SIA’s management policy was the button-down conservative style. Therefore,
there was a sharp conflict between the two companies. After the partial acquisition,
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Sir Richard Branson, the founder and CEO of Virgin was planning to enter the
Australia market with a low-cost services through a new airlines named Virgin Blue.
Virgin was expecting SIA’s participation in this project while SIA passed on the deal
as it was confident enough about its position in the New Zealand Market. However,
this was a wrong decision for SIA, that cost the company a lot after the failure of the
Air New Zealand deal. Meanwhile, Virgin Blue captured its position in the new
region which left no variable for SIA to capitalize on growth in Australia. Due to post
9/1, both the companies were going through a tough time. As its alliance partner SIA
had to put in more funds into Virgin because it required a capital injection to recover
this hard time.
Low-Cost Competitors (A Threat in Asia):
At that time, there was a trend of the succession of some low cost carriers in several
companies like easy Jet and Ryan air in Europe and Southwest and Jet Blue in the
U.S. In responding this phenomenon, many competitors were planning to enter the
Asian market. Historically, this market was famous for its low-cost approach with
some traditional barriers of longer flight distances, fewer alternative airport options
and lower passenger densities. As of early 2003, there were additional entries using
Singapore as a base and this force SIA to a tremendous pricing pressure. Many of the
joiners were targeting the South Pacific and East Asian routes, which were the prime
territory of SIA.
o Air Asia Vs SIA: At that time, Malaysian Air Asia was operating its flights by
offering high discounted rates to domestic destinations. Using Kuala Lumpur
as its central hub the company was planning to expand into Johor, a location
near to Singapore. By 2004, Air Asia had only 7 Boeing 737s, and was
carrying around 2 million passengers. Air Asia stated that it had the lowest
cost base for any passenger airline in the world at US2.5 c.per kilometer
while SIA was offering US 5.1 c at that time. For its low fare Air Asia was
emerging as a potential competitor of Singapore International Airlines (SIA).
o Virgin Blue Vs SIA: From its entrance to the Australia market, Virgin Blue
gained 30% of the domestic Australian market within 3 years. The company
was gained the control over blocks of gates and terminal space in key airports
such as Sydney. Virgin Blue was also extending services from Australia to
New Zealand and Fiji. All these steps of Virgin Blue blocked SIA’s path to
expand its business any further.
o Qantas Vs SIA: Qantas the national flag carrier of Australia was also trying to
hold some part of its domestic market. But gradually Qantas was also falling
behind Virgin Blue and lost a significant portion of its market share.
Therefore, there was a rival air service networks in that country which was
totally unsuitable for SIA to join into the competition.
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Theme
Singapore International Airlines performance has been satisfactory and successful so

far, but currently it has facing some very serious problems which can endanger its
present position as one of the leading airlines in the industry. First of all, the outbreak
of SARS (Severe Acute Respiratory Syndrome) and the hostilities in Iraq have
contributed to reducing their passenger traffic to a great extent. The significant
increase in operational cost and continues reduction in their profits led them to cut off
salary and lay off the employees which results into a massive distrust and it breaks the
morale of the employees. After that the competitors of SIA was smart enough to copy
their different strategies which have become a cause of huge concern. Also the
government’s consideration to sell of its 57% stake in the company does not promise
well either. In addition, its attempts to spread its reach to international markets
through ownership acquisitions in other airlines have had its share of misfortunes.
Finally, the emergence of low-cost carriers in the region has to be dealt with before it
becomes a major source of threat to the company.
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Main Issue
What strategies should SIA impose to maintain the maturity period with sustainable
development in terms of socio economic perspectives covering the merger and
acquisition current problems and drawback of the company’s economic conditions?
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A SWOT analysis is a strategic balance sheet of an organization; that is the strengths

of the organization, the weakness of the organization, the opportunities of the
organization, and the threats facing the organization. It is one of the cornerstone
analytic tools to help an organization develop a preferred future. It is one of the time
tested tools that have the capacity to enable an organization to understand itself, to
respond effectively to changes in the environment. The purpose of the SWOT analysis
is to provide information on strengths and weaknesses in relation to the opportunities
and threats.
Strengths
Support from Government
Singapore Airlines had the full support from its majority share holder. It is the
government of Singapore. They had the 57% share of the company.
Government is the most powerfull institution of a country. And airline is a big

industry which is heard to run only by the private sector and give a better wide
service. so it is a great support for a company when a company has pertnership with
the government. It get many support from the biggest institute of the country such as
taxation, capital and many more. So, having partnership with the government is the
greatest strenght for a company.
Superior Strategy of differentiation
SIA had build its enviable track record around its superior strategy of
differentiation.Singapore Airlines has differentiated themself in so many ways such
as; superior ground sevice, supreme terminal service and on board service. They have
achived so many business awards because of their versetile differentiation and
service.In the competative market of airline business it is very importent to
differentiate a company properly.
If a company can differentiate themself among the crowd they go half of their way to
the success. In the case we have seen how successful SIA become in a very short
period of time and it has happened because of their successful way of differentiation.
So it is a great strenght of SIA.
Safety Record
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Singapore airlies has the greatest safety record of the industry. SIA emphasized in the
fleet selection very carefully to assure its passanger the greates saftey that can be
given. It maintained a office in Seattle, washington just to just to intreface with
Boeing designers and oversee the development of new addition to the SIA fleet.
Safety is the greatest issue for the airline industry. A history with great safety record
give the pessanger a great assurance to fly accross the world. It surely effect direct to
the sales and revenue of Singapore International airlines. So, which increase sales and
revenue is obviously a great strength for them.
Operational performance and stability
SIA had established an enviable record both in terms of its operational performance
and its profitability history. It was one of the few Asian airlines that had continuously
posted profits even during even years such as the 1990s when economic downturn in
Asia. Its short-term performance record had, however, begun to flag as a result of
SARS, the war in Iraq, and the general economic malaise that had taken hold of most
of its critical markets.
It was against this backdrop that the company had to debate alternative courses of
action. SIA strengthened its position by ensuring higher efficiency in its operation and
performance. Operational efficiency is very important for SIA, which proves that the
company is utilizing all its input resources most effectively and successfully.
Profitability history can construct an immense impact on market and also augment
SIA’s growth in the futures.
Best International Airlines
SIA’s in-cabin service became legendary; the standard that other airlines aspired to
reach. In a recent survey by Condé Nast Traveler, a well-respected travel magazine,
SIA was ranked overall as the “Best International Airline.” This was the tenth time
that SIA was chosen for the prestigious honor in the eleven years that the award had
been given.
The respondents rated SIA’s cabin service as the best in the world, a testament to the
company’s emphasis on excellence in this arena. Such awards were nothing new for
SIA, which had garnered over a hundred from august organizations such as Zagat,
Condé Nast, OAG Worldwide, ASEAN (Association of South East Asian Nations)
Tourism Association, and magazines such as Asia Money and Business Traveler.
Fleet Management
SIA took the management of the fleet very seriously. It maintained a office in Seattle ,
washington just to interface with Boeing designers and overseas the development of
new additions to SIA fleet. Newer aircraft are more fuel efficient and cost less in
management. SIA used a mix leasing and outright purchase, primarily during
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economic illus, to feed its appetite for new fleets, thus extracting maximum value for
its investment.
Managing aircraft is a very critical but significantly importent job for a airline
company. the expence of a new aircraft is so high thaty if it is not properly maintained
the investment of the company might be in risk. SIA has succesfully done the part of
the fleet management and that have bring them success in very short period of time.
Weaknesses
Downsizing and Wage Cutting
Due to the fallout of the SARS (Severe Acute Respiratory Syndrome) outbreak in
Singapore, Hong Kong, China, and other neighboring regions accompanied by the
Iraq War in 2003 decimate passenger traffic. As a result SIA had laid off over 400
employees in June to bring down its operating costs. Additional 156 cabin crew staffs
were laid off in late July. Senior management salary cuts averaging 22% had been
announced, and negotiations were on with cabin and ground staff for further wage
cuts. Analysts feared that these moves could have a negative impact on employee
morale and, consequently, on passenger service, the hallmark of SIA’s business
strategy.
The disaster of SARS and Iraq War has place a direct negative influence on the
employees mind and on the profitability of SIA and SIA didn’t have proper backup to
cope against these situations. SIA had publicly expressed that the reason of lay off
and salary cut, but soon the employees started suspecting that the company making an
issue to make the salary reduction. Employees thought that they were not getting
sufficient compensation comparing to their workload that damages their quality of
work and this mentality also could affect passenger service.
Recruitment of cabin crew
SIA’s aspiration was to recruit employees within their own country. This recruitment
strategy posed a stumbling block since the pool of available talent within Singapore
was insufficient to draw from for long.
To make SIA more successful it is needed to recruit those employees who can work
for a long period of time for the company. But in SIA about 60% of the cabin staff
was female, and it was expected that most of them would only fly for five to ten
years. While male cabin crewmembers were employed as regular employees, female
crew had to work through a system of five-year renewable contracts. Only five such
contract renewals were permitted.
Partnership with New Zealand Air and Virgin Airline
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The SIA had begun to extend its wings into major international markets a few years
earlier with the acquisition of ownership interests in Air New Zealand and Virgin
Atlantic. It was rumored that there were formidable obstacles in architecting a smooth
partnership between the disparate, albeit service-oriented, cultures of Virgin and SIA.
Both the contracts ended up with a massive loss for SIA and created a capital crisis in
the company prior to the incident of SARS and Iraq War. The Air New Zealand deal
turned sour and SIA lost $157 million. Market watchers believed that the 49%
ownership stake in Virgin that had cost SIA $1.6 billion in 1999 had already lost over
60% of its value.
Involved in many Alliance
The brand image that SIA had so carefully nourished could be tarnished, especially
among its loyal first-class and business-class passengers as a result of joining so many
alliances. Joining a network amounted to delegate some aspects of brand management
to the collective group of companies such that the identity of the network would
transcend the individual identities of the members.
Though being a part of alliance can serve as an opportunity, but it is some kind of
weakness also. All the other members of alliance qualities may not as same as SIA.
There were questions related to the level of service across carriers, safety records of
the partners and willingness to control an alliance. Developing an agreement on basic
standards of SIA can be difficult. The loss of control over some key decisions, such as
scheduling and flight frequency, could also pose challenges in the future.
High Expenses
The pool of talent with respect to pilots was indeed global. SIA had pilots from over
fifty countries flying its fleet. Many of these pilots were expatriates drawn by the
allure of flying the latest equipment under professional working conditions at very
generous levels of compensation. Roughly half of SIA’s pilots were expatriates.
The expatriates were more expensive since the company had to bear a variety of
expenses such as housing, traveling, insurance, transportation cost, and schooling for
children and so on in addition to base pay. Moreover the recruitment and training cost
of an expatriate candidate far higher than a local candidate.When SIA is downsizing
and cutting salary they are still spending 14times moren than local companies on
training. Though it is reuired to provide better service, the expense is too much for the
company’s current situation. The expense in all the department becom a weakness for
them in this competative market.
Opportunities
Rise of Alliance
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SIA had joined to the Star alliance, which included ten carriers representing Asia-
Pacific, Latin America and Europe. A similar network of partnership in one world
encompassed eight carriers spanning a similar geographical territory to Star.
Alliances such as these were expected to redirect traffic, increase profitability, help
leverage scale economies in operation and differentiate services in the minds of
consumers who wanted to buy travel services through a single carrier. Entering into
mega alliances like Star was a wonderful strategic option as; it could attract
customers, increase effectiveness and creates a distinctive position in the minds of the
prospect customers.
“Singapore” the country itself
Singapore witnessed bountiful growth in the late 1990s. Its per capita GNP increased
by phenomenal 32% in the 1990s and currently stood at $37.401. The man behind the
success is Mr. Lee Kuan Yew, the Prime Minister of the country. He was able to tap
the patriotic spirit of Singapore people. On his time, education, labor enviornment
and training facilities had improved significantly which lead to skilled human
resource.It had 93.7% litteracy rate on 2002.
Singapore was the best country for human capital on 2004.It si obviously a great
opportunit for Singapore Airlines. They had the best talent within their country of
origin. The people of singapore are skilled and educated. Moreover, they understand
the culture of the country very well. So SIA had a great resource of success on their
hand.
Open-Skies Agreements
Open-skies agreements are bilateral agreements between countries that agree to

provide landing and take-off facilities for air carriers originating in any of the partner
countries. Such an agreement does not have the typical restrictions related to landing
rights that are determined on a city-pair basis.
Singapore and U.S. has signed such an open-skies agreement under which a
Singapore carrier could travel to any destination city in the U.S. and vice versa. This
agreement has further widened the market for Singapore Airlines. Through this
agreement they achieved access to more destinations in U.S. and thus, their business
expanded and they could yield more profit from these new routes.
“Singapore” Asian tourist hub
Tourism played a vital role in the overall development of Singapore. As they had no
natural resources and the size of the country is very small they had to depend on
service industries such as tourism and finance for their growth. Historically, it is
known as a asian tourist hub.
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The tourism is a great oppertunity for Singapore Airlies. The number of traveller is
increasing in asia and singapore is on of their number one priority. Moreover, among
the Europeans and North Americans most of the people are traveller. So it is a great
oppertunity for SIA to increase their revenue by attracting more tourist towards
Singapore.
Threats
Unwanted events like SARS and Iraq war are the real threat of Singapore
international Airlines
SARS and Iraq war was the biggest threat for SIA. When SARS out broke in
Singapore, Hong Kong, china and neighboring regions it totally damaged passenger
traffic, in addition the war in Iraq also dampened traffic through in the Middle East
markets.
To overcome this situations company made a plan to reduce the operating cost. They
started downsizing their employees and also reduce the salary of higher management
22%. They also discharged 400 employees and additional 156 cabin crew staff from
the company. As a result, it faced rising breakeven load factors. This SARS and Iraq
war basically destroy company’s total passenger traffic in Middle East and other
countries. So SIA need to take proper steps to increase the passengers once again.
Price pressure and customers consciousness about cost become a threat for SIA
Day by day airlines business is increasing. During 1990 the airlines business become
global. At that time all the airlines company starter to reduce their ticket fare. They
offered different types of premium package to attract new and old customer at low
cost rate. Even SIA’s partner like Virgin Blue started to reduce the cost. At the result
customers become more price sensitive than any other times.
This low cost strategy becomes a real threat for the company. SIA always focus on
better customer rather than cost. That’s why their ticket price is little bit higher than
its other competitor. To fix this situation SIA need to focus on cost and try to
introduce new low cost package.
Pressure for new differentiation Strategy

SIA mainly focus on customer service. They offered different types of facilities for
different class of passenger. Like- offering choice of meals in the economy class,
entertainment options in the cabins, all the trappings of a luxury flight. These were its
superior strategy of differentiation. These things worked for a long time, but soon it
copied by competitors.
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The entire competitors start these types of facilities for their customer. Soon this
strategy became a norm for airlines business. Like them every big air lines company
offers variety of foods in economy class, entertainment options, comfort which used
to be the only area of SIA. So, SIA must do something to stand out among the crowd.
Singapore Government changed the business policy and also no support for Air
lines business which is a threat for SIA
Singapore Govt. has decided to sell its 57% of stock, if the buyer of the share is not
good than it is a threat for SIA. Also Govt. is not providing subsidies to the airline
industry.
According to case we found Mr. Yew’s government declared that SIA, although the
national carrier, would not receive any subsidies or protection from the government. It
would have to sink or swim based on its own resources and ingenuity. Also there is an
Open skies agreement between countries, which is a threat for SIA. Now, local people
are not bound to fly with SIA only. US flights can travel to any destinations within
Singapore and SIA flight can also travel any destinations within USA. So it is a big
threat for SIA.
Inability to find local and experience employees
To operate airlines business it is essential to recruit experience people. In Singapore it
is very rare to find this type of experience people for job. That’s why SIA hire expert
pilots and staffs for their organization. To hire foreign or expert people they have to
spend huge amount of money with some other facility.
Now-a-days all the airlines company are focusing on cost rather than customer
service and quality. As a result SIA also need to focus on to reduce the cost. But it is
impossible for them to reduce the cost. But without paying high salary they will not
get expert employee. That’s they need to focus on local employee. Arrange some
training program to make them capable to do these types of job. Otherwise this
become a threat for SIA
Narrow SWOT
Strengths:
 Wide range of service

 Own flying school
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Case: 4
 Superior Customer Service
 “Changi” Airport
 Use of Advanced Technology
 Recruitment and Training Process
Weaknesses:
 Job insecurity among employees
 Branding approach “The Singapore Girl”
 Joining “Star Alliance”
 Turning down Mr. Branson’s offer
Opportunities:
 Deregulation and privatization

 Technology Changes
 Globalization
Threats:
 Norm of services
 Strong competitors
 Value air and Mr. Lim Chin Beng
 Partnership with Virgin blue and its CEO Sir Richard Branson
Human Resource Issues

There is no specific HRD so it is difficult for SAI to manage its employees in an
appropriate way
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Case: 4
Human Resource Management department is

important for any organization. Singapore
International Airlines is a service organization so
they must need a specific HR department. According
to the case we found employees are the strength of
this organization. So they must need to have specific
HR department to deal problem like- compensation,
downsizing and the other mentioned problems.
Arrange Training Programs for employees
Singapore Airlines Company always arrange training program to increase the
efficiency and the skill of its employees. These types of training program make
employees so effective to give their best to the
customer. They have their own flying school
where they give training to new employees.
This company spend huge amount of money
for training program. According to the case
where we found, Singapore Airlines Company
spent roughly 14 times as much per employee
as the average of other Singaporean company.
Since SIA has been going through harsh times,
as competition is on the growing edge and
costs are constantly being lowered in terms of air fares by competitors, it is better SIA
takes proper steps to eliminate their problems by making a move in costs.
Total compensation for attracting and also retaining their existing Employees
Singapore International Company believes
employees are key elements for company’s
success. To attract employees they offered
total compensation. Especially in the airline
business it’s the most vital tool to motivate the
employees who are the key of success in such
businesses. They use this tool very effectively.
By providing higher salary and other benefits
this company hired most skilled and
experience employees. According to the case
we found the effect of SARS Iraq war forced
the higher authority of the company took
decision to cut 22% salary of senior management. This Cutting down the salaries will
have a negative impact on the employees and that will lead to a rise in de-motivation
in employee’s mind even as a result some can also leave.
Downsizing results demotivation and job insecurities among the employees
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Case: 4
Singapore international company downsized and

cut the wages of it’s workforce during the period
of Iraq war and SARS outbreak. Company
wanted to reduce its operating cost. But it
affected the productivity of its employees.
Employees were feeling insecure about their
job. That is why they were failed to give their
best performance in their job. According to the
case we found, SIA fired over 400 employees.
Salary of senior management was cut to 22%.
Even negotiation with cabin and ground staff to
cut their salaries were going on. This was
absolutely wrong decision made by the higher
authority of the company. This decision had a
negative impact on employees.
Too many oversee employees in the organization
SIA is the largest airlines company in the world. It has approximately 14,000
employees’ world wide. All of the employees are well trained and experience. Almost
half of the pilots are form different countries. Basically due to unavailability of local
pilots this company hired pilots from abroad. These pilots are charging high salary
and facilities likes- housing, schooling for the children, travel, etc. This problem can
also be removed by the state-of-art flight facility in Singapore which housed eight
flight simulators where pilots were trained. Now- a- days company wanted to cut the
salary of it’s employees. But if they give more focus on their own flying college than
they can easily get trained and expert pilots from their own country. It will be
beneficial for the company. They can save money that they are giving to the
expatriate pilots. In Singapore the labor cost is low. The company must need to take
the advantage of lowest labor cost and should to hire local employees. It will be
beneficial for the company.
Gender discrimination among Employees
Gender discrimination among male and female
employees is seen in the case. Almost sixty
percent (60%) of the total workforce of SIA are
female and most of them are cabin crews. In SIA
basically male employees are recruiting as regular
basis. On the other hand female employees are
doing their job five to ten year contractual basis.
Also they have extension system of their job. In
air-craft most of the time female employees
directly deal with customer. That is why attractive
face and physical fitness is essential but it is a wrong strategy of the company.
Company need to give priority of female employees also. Rather than offering a
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Case: 4
contractual basis employment the SIA can offer the female employees to work in
other sectors of the organization (official job). This will motivate the female
employees and they will feel themselves as a part of the organization.
SIA should maintain friendly relationship with Union
When SARS (Severe Acute Respiratory Syndrome) broke, SIA discharged almost 400
employees from the company. In the meantime, Iraq war broke out which made the
situation so worse. Also they cut the salary of senior managers, cabin and ground
stuff. According to the union of SIA, this decision of SIA’s management was unfair.
Before doing this they must need to think about their employees. They should think
like “What will happen our current employees and discharged employees?” To solve
this problem they need to maintain a good relationship with the union. Union is the
representative of company’s employees. Union can raise voice at any issues which is
related with company’s employees. Before doing these, they should talk with union
leaders for better solution and also SIA should fairly bargained to their union as they
believed their employees are a great resource of their company.
Lack of communication with employees
Employees and top level management of the
company must have to maintain a good
communication. If the employees of the
organization work properly than they need
motivation from their seniors. Motivation can
be any type, not necessary to be always giving
money, bonuses. Employees seek some more
than that like- job satisfaction, job security,
favorable work environment etc. Due to SARS and Iraq war company discharged
many employees from the organization. It has negative impact on the existing
employee’s mind which happened only for lack of communication. Before doing that
the higher authority could take feedback from employees to find the solution. It would
be more secure as well as better way to solve this type of critical situation.
Recommendation
1. What is the problem?
It is a well-known fact that employees need to be highly motivated if they are to
perform well in the workplace and be productive and sincere in their jobs. Motivation
is essential to make sure employees pay attention to what is important to the
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Case: 4
company. Motivation does not come from monetary rewards and benefits only. It also
involves some intangible intrinsic factors like job satisfaction, job security, favorable
work environment, etc. In recent times, Singapore International Airlines has adopted
the approach of lying off significant number of employees in order to control rising
operating costs. However, in their drive to reduce increasing costs, they have
overlooked the negative impact that the layoff is making on the minds of the existing
employees.
What is the solution?
The Singapore Airlines should gain back their employee’s trust and confidence.
Justification
It has been observed that employees of
Singapore International Airlines previously
took pride in their organization and felt an
enormous sense of camaraderie towards their
workplace. They had also been quite
accommodating in negotiating wage cuts
during periods of economic crisis. This time as
well, they might display a compromising
attitude, provided they are given a clear view of
the poor financial condition of the company.
Due to the fallout of the SARS outbreak in
Singapore, Hong Kong, China and the neighboring countries which decimated
passenger traffic, SIA had laid off over 400 in June 2003. Additional 156 cabin crew
staffs were laid off in late July. Senior management salary cuts averaging 22% had
been announced, and negotiations were on with
cabin and ground staff for further wage cuts.
SARS, unfortunately, accompanied the
outbreak of hostilities in Iraq, which itself
dampened traffic through prime Middle East
markets. Faced with rising breakeven load
factors, the company appeared to have no
chance but to trim its operating costs. However,
these moves were viewed with widespread
skepticism since SIA had the full backing of its
major shareholder, the Government of Singapore, a stance that was greatly disliked by
the unions. Some believed that the company was using SARS and the Iraq war as
convenient excuses to downsize. This lack on confidence on the decisions taken by
the company can greatly hamper employee morale. It is very important that
employees feel secure about their employment for them to perform their best at the
workplace.
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Case: 4
The image of the company depends on the employees and customer’s satisfaction
level. SIA is a well reputed airline company whole over the world. But due to reel
from fallout of the SARS (Severe Acute Respiration Syndrome), SIA had laid off 400
employees to bring down the operation costs. But it was hurting the morality of their
employees. Because any company can not layoff employees without any strong issue.
SIA again lay off 156 crew stuff later. In addition, SIA cut senior management salary
averaging 22% and also cut the wages of cabin and ground stuff. All this activities
were creating employees dissatisfaction which results demotivation as well as poor
employee performance.
Salary cut and downsizing should be reduced in SIA by cutting other possible cost.
Justification
It is true that the reasons of dismissal the huge number of employees were SARS and
outbreak of aggression in Iraq are logical. According to the case, SIA had faced with
rising breakeven load factors, the company appeared to have no choice but to trim its
operating costs. But it is not necessary that a company downsize their employees to
reduce their operating costs. The costs can be reduced by minimizing the benefits and
compensations they give to the existing employees. So if SIA wants to reduce the
operating costs, they can do it by discussing with the employees and let them to know
about the situation. Because if a person in a company is satisfied about the response
from his/her company, he/she should try to understand the bad situation of the
company. Moreover, SIA’s commitment to
employee training and development was
reflected in the fact that it spent roughly 14
times as much per employee as the average
Singaporean company. Since SIA has been
going through tough times, as competition is
on the rising brink, and costs are constantly
being lowered in terms of air fares by
competitors, it would be suggested that SIA
takes certain steps to eradicate their problems
by making a shift in costs. SIA executed a
finely tuned recruitment and training strategy to keep its ranks stocked with
exceptional talent. Most of these employees arrived at the company either through a
cadetship program or a specialist program. The cadetship was an intensive on-the-job
training program that cycled employees through a variety of functions as they moved
up the hierarchy. Rather than spending such a high cost on the training and
development program, SIA could perhaps emphasize on lowering their fares to a
substantial amount, so that it would be possible for them to compete in the market
without downsizing and cutting their employees salary.
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Case: 4
The government of Singapore firmly believes that Singapore Airlines would be able
to be more competitive and have a better market if they would be operating without
the governments help. This is why the Government of Singapore suggested selling
57% of their stake away. This situation would make SIA compete on an even more
keen level in the whole competitive market, and with other airlines competing in the
market.
The Government should be discouraged to sell their shares by establishing a strong
partnership between Government of Singapore and SIA.
Justification
It should be understood by SIA that it is important for their own stake to have the
government involved. Since the government of Singapore is a very powerful one,
Singapore being also one of the strongest economies in the World, and in South East
Asia, it would always be a very wise decision to have the government backing on
their side. This would ensure protection from other threats, and would be a favorable
advantage in terms of international negotiations and protections. This would definitely
be the right decision to take as it would make both the government and SIA much
stronger. The Government would protect SIA as long as they have a certain stake in
the organization, and would therefore perhaps also consider providing subsidies to
them. However, it should also be taken into consideration that the government might
not be too keen on this proposition, as they are planning, and have already
authorized , a new low cost start up project which is to be based in Changi, the heart if
SIA’s empire. Since this would be an issue of great concern, they would need to
convince the Government of Singapore thoroughly and thereby try to establish a
stronger partnership.
Singapore International Airlines started its
journey from 1972 being apart from Malaysian
Airways. It was supposed to be grown as an
experienced airlines corporation what ultimately
not happened. The company seems to be very
inefficient in choosing its business partners as
well as in acquiring equity. Their weakness is
shown by the event when SIA began to spread its
wings into major international markets a few
years earlier with the acquisition of ownership
interests in Air New Zealand and Virgin Atlantic.
This was a totally wrong selection of business
interests. Because, deal with Air New Zealand cost a loss of $157 million and
ownership with Virgin Atlantic brought a loss of $960 million. All these mishaps
happened only because of some weak judgments.
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Case: 4
Before taking any crucial step like going for acquisition, SIA should take efficient as
well as effective decision and should focus on long term profits rather then short term
profits.
Justification
SIA should go for careful selection of its business companions. Instead of rushing for
short run opportunities in the industry, it should dig deep into any investment
portfolio as well as the partners who will be implementing those investment options
and earn enough money to cover all its cost as well as acquire a significant margin of
profit. This is a very competitive industry where no one is really agreed on giving a
little space to another competitor. At the time when SIA gone through the loss phase,
the market competition was not that fierce and hence it could survive the massacre.
However, now the situation is completely different. If once again SIA has to face such
a devastating failure, it is for sure that the company’s all the future hope to expand
will be shattered. Contractual relationship with poor organizations will also put a bad
impression on SIA’s hard-built reputation. Failure of those organizations also
necessarily means failure of the parent company, SIA. So, in the long run various
other famous and well established airlines corporations may not be eager to build a
relationship with SIA. Moreover, if the capital lenders in the industry see SIA to be
facing such amount of losses successively, they will not be comfortable in providing
necessary funds when SIA will require it badly. No one in this world is eager to invest
in a loss-prone company. So, capital shortage can also be a potential happening for
Singapore International Airlines in future.

SIA, which has faced a lot of turbulent situations in the last couple of months are
afraid of losing couple of their top management people. A lot of their top notch
management people are dissatisfied with their position and their current situation, for
which they are being considered as a threat by SIA. This is also the case with Mr. Lim
Ching Beng, who is considered to be the inventor, developer and brain father of SIA
and a former SIA Deputy Chairman. Though he has already left the organization, the
others are still being considered as a threat.
The airlines should give effort to retain their top management.
Justification
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Case: 4
These indirect problems included competition and threats from other investors who
had also stakes in SIA before. An example of this is the situation of former SIA
Deputy Chairman Mr. Lim Cheng Ben, who was the brain father of SIA. He was one
of the people who made sure and enabled the great success of SIA initially, but in
later, due to unavoidable circumstances, he was not involved in the project anymore.
Therefore he posed as a considerable threat to them, as he was planning to get
involved into other very successful projects in the near future. Thus, the top
management, and many of the successful crew who were laid off, was definitely a
precious and important possession of SIA, whom they let go, on top of that with
dissatisfactions might perhaps not realize what a loophole this might be causing in the
short run, but it will definitely say that this effect and the heavy impact and necessities
of them will be felt by SIA in the long run. On top of that SIA should remember the
great effort and the pressure former and even recent SIA staff has been going through
and should always consider and remember that it is
only through their perfect and diligent efforts that
they have been as successful as an organization.
Therefore it would be a very important
recommendation to try to motivate and retain their
top management staff, as it would benefit both the
organization, its good will in the market and above
all the management people and the crew staff, who
have been giving their lives away in order to meet
up the high demands and standards, just in order to
make SIA one of the best airlines in the whole
competitive, harsh and difficult to sustain airlines
industry.
Implementation
It is a well-known fact that employees need to be highly motivated if they are to
perform well in the workplace and be productive and sincere in their jobs. Motivation
is essential to make sure employees pay attention to what is important to the
company. Motivation does not come from monetary rewards and benefits only. It also
involves some intangible intrinsic factors like job satisfaction, job security, favorable
work environment, etc. In recent times, Singapore International Airlines has adopted
the approach of lying off significant number of employees in order to control rising
operating costs. However, in their drive to reduce increasing costs, they have
24
Case: 4
overlooked the negative impact that the layoff is making on the minds of the existing
employees.
The Singapore Airlines should gain back their employee’s trust and confidence.
How to implement?
In order to do this, Singapore International
Airlines should communicate their existing
financial conditions to their employees. SIA
claims to have suffered significant financial losses
due to the outbreak of SARS in the Asian
countries and the hostile political conditions in
Iraq which has dampened the traffic in the Asian
and Middle-East countries. The break even load
factor of the aircrafts, an industry measure of
capacity that must be carried by a flight to make
the revenues of that flight equal to the costs, has
risen and this has led to a decrease in the passenger
revenues earned by Singapore International
Airlines. Although SIA has stated these facts as
the reasons behind the layoffs of the employees, this has been met with widespread
skepticism and employees refuse to believe that these reasons are anything more than
convenient excuses to downsize. This, in turn, has greatly affected employee morale
and has had negative impact on passenger service.
In order to bring credibility to their words, SIA should improve communications with
their employees. Managers of the higher hierarchical levels should correspond with
the employees through meetings, conferences, letters and memos where they can
display a vivid description of their current financial position.
It has been observed that employees of Singapore International Airlines previously
took pride in their organization and felt an enormous sense of camaraderie towards
their workplace. They had also been quite accommodating in negotiating wage cuts
during periods of economic crisis. Therefore, if the employees are given a clear view
of the poor financial condition of the company, this might gain back the confidence of
the employees in the organization, which is very important for SIA since its
employees have to maintain a high standard of quality that gives SIA a competitive
edge in the market.
Who will implement?
To add credibility and viability to the words, the top level financial officers should
relay the information to the employees throughout the organization. Since the
employees of the financial department are the people who deal with the budgets and
25
Case: 4
keep account of the revenues and costs of operations, the employees can rely more on
the information if they receive it directly from the chief financial officers.
When to implement?
Since the de-motivation of employees and low employee morale can adversely affect
a company’s performance, productivity and profits, it is recommended that the free
and frank correspondence with the employees should be started as soon as possible.
Singapore International Airlines should not linger any longer if they want to uphold
the excellent service that they aspire to provide to all their customers.
The image of the company depends on the employees and customer’s satisfaction
level. SIA is a well reputed airline company whole over the world. But due to reel
from fallout of the SARS (Severe Acute Respiration Syndrome), SIA had laid off 400
employees to bring down the operation costs. But it was hurting the morality of their
employees. Because any company can not layoff employees without any strong issue.
SIA again lay off 156 crew stuff later. In addition, SIA cut senior management salary
averaging 22% and also cut the wages of cabin and ground stuff. All this activities
were creating employees dissatisfaction which results demotivation as well as poor
employee performance.
Salary cut and downsizing should be reduced in SIA by cutting other possible cost.
How to implement?
Singapore International Airlines employs people not only from Singapore, but also
from other countries such as Malaysia, Indonesia, Japan, Korea, Taiwan and
Indonesia. It also has pilots from over 50 countries flying its fleet. In addition to the
high base salaries that the employees are paid, they are also given various allowances
such a housing, schooling for children, travel, etc. All these expense can increase the
operating costs of the company greatly.
Since the company is now facing increased operating costs due to the lower number
of passengers caused by the outbreak of SARS in Asia and the hostilities in Iraq, they
are struggling to meet the rising operating costs. The layoffs and salary cuts are a
result of this. If the company rather cuts back on the benefits and allowances by a
small percentage, this can significantly lower their operating costs. For example, if the
company currently provides 45% housing allowance to its employees, it can reduce
the percentage to 25%. If it gives 50% of the schooling costs of the children, the
percentage can be reduced to 30%. This way, the operating costs of the company can
be lowered by a greater extent, without bruising the employees’ morale too badly.
However, once again, frank and straightforward communication with the employees is
required once again. They should be clearly explained why the benefits are being
26
Case: 4
lowered and should be ensured that they will be restored to their previous position
once the company regains its strong financial footing. The employees had
accommodated to wage cuts during economic crises in the previous years. This time
around, if they are given solid reasons for the inconveniences and are given credible
proofs, they might show an accommodating attitude once again. Moreover, the
company should reduce their budget on the training of the employees by following
ways-
a. The training budget should be revised: The budget that SIA spends on training
alone is extensive and would therefore need a thorough revision by the human
resource management, Training and Finance department. In doing so certain irrelevant
costs could be cut down on, and a total understanding of the actual money needed
could be calculated.
b. The training budget should be re-calculated: After revising the training budget,
definitely a lot of flaws and corrections could be made, depending on how agreeable
the top management would be regarding this issue. This however would need
extensive time and labor because a lot of things would need to be revised and
recalculated.
c. The Budget should be presented to the SIA top managers: After revising this
budget, it should be made a point to present it to the people at the top. These people
would perhaps be able to give more ideas and suggestions about what they really
think about this budget. However, it has to be noted as well that once flaws or any
kind of objections have been found with this budget, it would be possible to drag this
cut in cost for several months at least.
d. More time should be given to the correction and verification: The top managers
would, as already mentioned above, definitely find some flaws with this, and would
definitely make suggestions about how corrections could be made. This would need
some time and effort.
e. A trial period should be allowed for the budget: Since SIA is reputed for its high
quality and extensive service, we all now that people behind that must have all had
extensive training. Since this organization is used to extensive training, they must
firstly get used to the de-training period. Allowing this budget to take place would
actually hamper a lot of factors. However in a time of need, there should always be a
plan B, and it would be of no harm if that plan B, which would be a little cut in the
training budget, would be enacted, after trial.
f. Implementing this budget after a successful trial period: If the above step, the trial
period is successful in enacting this cost in training, it could be again corrected,
revised and finally implemented for the next couple of years. This would be helpful
for the organization as it could be addressing other recommended issues, like low cost
carriers or recruiting international recruits with this saved money.
Who will implement?

The compensation matters are best dealt by Human Resources Managers. They have
the unique ability to design satisfactory compensation structures that can play a
crucial role in the motivation of employees. The HR managers also know how to
27
Case: 4
communicate good and bad news to the employees very tactfully. Since the reduction
of benefits is unfavorable news to the employees, the HR managers have to apply
sufficient tact and diplomacy while breaking the news to the employees. Although the
reduction of benefits and employees may be slightly de-motivating as well, it is less
de-motivating when compared to layoffs and base salary reductions.
And the implementation regarding the cuts in costs for training should be done by the
Human Resource Management department, as this is the department that handles and
deals with effective training. It should however be notified to the top management,
and also to the finance department, as it would consider revising the training budget
of SIA. Thus this implementation would be a step taken by the top management, the
Human resource department and the finance department.
When to implement?
Since adequate interaction and communication with the employees should be carried
out before putting this policy into effect, we sense that the practical implementation
may take anything between 3 to 6 months to be put into effect. And the budget
regarding the training cost of employees has been set at a very high priority these
years. However, with the ongoing competition, and with the recommendation of the
introduction of low cost carriers, this budget should be implemented as soon as
possible. In doing so, the company could reallocate portions of their training money to
other departments that would be helpful in this ongoing competition in the Airlines
Industry.
The government of Singapore firmly believes that Singapore Airlines would be able
to be more competitive and have a better market if they would be operating without
the governments help. This is why the Government of Singapore suggested selling
57% of their stake away. This situation would make SIA compete on an even more
keen level in the whole competitive market, and with other airlines competing in the
market.
The Government should be discouraged to sell their shares by establishing a strong
partnership between Government of Singapore and SIA.
How to implement?
SIA should firstly make sure that it has a sufficient pool or a group that could be in
charge for negotiating with the government. Probably they could appoint a few
specialists or make sure that a pool of people, one from all respective important
divisions, could represent SIA. Perhaps SIA could also allow some more people from
their HR department to join in, as they are most of the time the ones dealing with
relationships, besides the top manager and the top level officers only.
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Case: 4
Since SIA is the biggest airline carrier and one of the biggest organizations in
Singapore it would definitely be a possibility to negotiate with the government about
their sale. It would be of utmost advantage to have the government as their major
stake holder, and that in respect to many ways, and therefore negotiating could be a
strong step.
The government of Singapore, being the superior party, must first know why it is so
important for SIA to have the on their side. In doing so, SIA should firstly establish
all their points, and should explain why it is important for them to have the
Government have the major stake. Thereby they should also state all their loopholes,
in terms of financial disadvantages or other problems, and should lay all the cards on
the table.
The problems will logically range from specific and general situations which are
causing an increase in cost for the Airlines, and thus should convince the Government
that the subsidy should not be cut. It should also encourage the Government to
provide other helps such the construction of competitive policies which better suit
SIA.
If the government approves of SIA’s plead, then SIA could perhaps award them with
many kind of extra benefits and incentives to government employees. These might
include:
o Lower charges of long haul flights for government employees
o Extra dividends for the government compared to other stake holders
o Extra mileage awards for government officials
o Ensured first class travel allowance for certain high officials of the
Government.
Who will implement?
This implementation, as already stated above should be taken by the top managers and
the CEO, combined with the help of the Government, after convincing them. This
would mean frequent meetings and extensive pressure for both the parties, as they
would be under a frequent debate and negotiations.
When to implement?
This request by SIA to the government of not selling their 57% stake is a very serious
issue, concerning a lot of other factors, advantages, disadvantages and hassles.
Therefore a definite time frame would be difficult to state, however, this
implementation could take two to three years.
Singapore International Airlines started its journey from 1972 being apart from
Malaysian Airways. It was supposed to be grown as an experienced airlines
corporation what ultimately not happened. The company seems to be very inefficient
29
Case: 4
in choosing its business partners as well as in acquiring equity. Their weakness is

shown by the event when SIA began to spread its wings into major international
markets a few years earlier with the acquisition of ownership interests in Air New
Zealand and Virgin Atlantic. This was a totally wrong selection of business interests.
Because, deal with Air New Zealand cost a loss of $157 million and ownership with
Virgin Atlantic brought a loss of $960 million. All these mishaps happened only
because of some weak judgments.
Before taking any crucial step like going for acquisition, SIA should take efficient as
well as effective decision and should focus on long term profits rather then short term
profits.
How to implement?
Singapore International Airlines needs to come up with a survey program to find out
investment prospects and possible markets for it. By market survey programs, SIA
will have a basic idea of different company’s profitability and growth. If can come up
with finding a company which will maximize the values of SIA, they may go ahead
and make further steps in acquisition decisions. Otherwise, SIA should reject it
immediately, no matter how big the company is. SIA can use its employees to
perform the most reliable survey.
After the initial survey program, Singapore International Airlines should gather past
performance reports to do a profound analysis of the selected company’s growth and
efficiency. SIA should also check whether the company handled any difficult
situations like economic fluctuations, political turmoil, employee conflicts and other
aspects to get a clear vision about the company. This will help SIA to choose the most
suitable partner who will ensure utilization of investment.
In the acquisition agreement, Singapore International Airlines needs to specify all the
terms and conditions very thoroughly in order to avoid future conflicts and dilemmas.
The agreement should specifically explain the code sharing, fight frequency,
scheduling, brand management and other partnership terms very thoroughly. This will
help both the companies to get a clear view of their respective roles and positions in
different circumstances.
Who will implement?
The steps suggested above should be carefully taken by Singapore International

Airlines in order to get reap maximum benefit from the acquisition decisions. If SIA
can properly utilize their resources jointly, there shouldn’t be any conflict with the
partner company and this will ensure the expected profit margin regularly.
When to implement?
30
Case: 4
The Acquisition decision should be initiated by

Singapore International Airlines’ experienced and
skilled personnel in administration. All the top
department heads should share their views with the
strategic Managers in making such important and
sensitive decision for SIA. The experienced leaders
should come forward and take wise steps in order to
reform Singapore International Airlines in the near
future.

SIA, which has faced a lot of turbulent situations in the last couple of months are
afraid of losing couple of their top management people. A lot of their top notch
management people are dissatisfied with their position and their current situation, for
which they are being considered as a threat by SIA. This is also the case with Mr. Lim
Ching Beng, who is considered to be the inventor, developer and brain father of SIA
and a former SIA Deputy Chairman. Though he has already left the organization, the
others are still being considered as a threat.
The airlines should give effort to retain their top management. Thus couple of
implementation strategies should be implemented to retain their precious employees,
for which SIA has actually attained its success.
How to implement?
a. Developing special training programs for the experienced executives: The senior
people, or in other words the top management employees would perhaps be benefited
by extra training programs. This would enhance their motivation and would give them
a sense of importance and belongingness, which SIA focuses on so sharply and
attentively when it comes to their cabin crew.
b. Giving the employees special Bonuses: Special bonuses, or performance bonuses,
which are tied directly to their work, would perhaps motivate them again. Even
though SIA already provides a good compensation package to all their employees,
some special or extra bonuses could be given to those which are more important. For
example, perhaps seniority could be rewarded, or new ideas could be proposed and
the employees could be awarded by that.
c. Providing counselling on the basis of importance: Sometimes it is important for
an organization to boost up their employees morale and encourage them in terms of a
lot of issues and concerns. Therefore it is important to provide them with a formal
counseling program. This could be implemented by employing a person who is able to
understand people’s mind, like a psychologist, who would be able to persuade and
convince them when they are in a bad state of mind. This would perhaps make the
31
Case: 4
people think again before leaving the job, as they would have a constant morale
support besides being assured of a safe work place.
Who will implement?

This issue of retaining the top management is definitely an issue that should concern
all the stakeholders of SIA. Therefore the CEO with the help of the HR department
should revise all strategies, salary structures and benefits in order to retain its top
management. This would not be an easy task to do, but with the help of the Human
Resource Management Department, it should be very much possible to carry out.
When to implement
Singapore International Airlines should implement all these mentioned
implementation stages as soon as possible to retain their existing valuable top
management employees.
32

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Case: 4

Singapore International Airlines: Preparing for Turbulence Ahead GROUP: B

company. These airlines were offering choice of meals in economy class,

o Subsidiaries of SIA-SATS: Singapore Airlines Terminal Services (SATS)

o Changi International Airport: The Changi International Airport was considered

Singapore Girl was a symbol of caring, comfortable, hospitable service. It also

New Millennium, New Challenges:

Singapore International Airlines performance has been satisfactory and successful so

A SWOT analysis is a strategic balance sheet of an organization; that is the strengths

Government is the most powerfull institution of a country. And airline is a big

Superior Strategy of differentiation

Involved in many Alliance

“Singapore” the country itself

Open-skies agreements are bilateral agreements between countries that agree to

Pressure for new differentiation Strategy

 Wide range of service

 Superior Customer Service

 Use of Advanced Technology

 Recruitment and Training Process

 Deregulation and privatization

Human Resource Issues

Human Resource Management department is

Singapore international company downsized and

What is the solution?

5. What is the problem?

Who will implement?

in choosing its business partners as well as in acquiring equity. Their weakness is

What is the solution?

Who will implement?

The steps suggested above should be carefully taken by Singapore International

The Acquisition decision should be initiated by

5. What is the problem?

Who will implement?

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