Bargaining of a zero-commission policy by SIA
Bargaining power of Customers (high)Consumers bargaining power is very strong due to they can choose another airline easily because of a lot of airlines in the world. Luxury travellers are willing to pay higher prices in return for excellent services is the main concern.
Common travellers are more demanding about the price than services. Since Kris flyer program had been promoted to retain customer loyalty and in addition should add-on services like sky spa, in-flight massage treatments and jacuzzi in the air will be more attractive.Singapore visitor and tourism arrivals are kept increasing year by year and mostly from China and India. They usually buy air ticket from the travel agency and should change the reward incentive instead of a zero-commission policy by SIA to travel agency to make it full capacity (81.
1% in 2017/18).Bargaining power of Suppliers (high)SIA has two major suppliers of aircraft i.e. Airbus and Boeing which are able to maintain. Currently, SIA has 11 planes on order and should be extended to add extra plane to minimize the rental of leased aircraft cost. Fuel cost is gradually 27% of the airline expenditure between 2016-2018 because of the fuel hedging achieved in FYE 2017/2018.
Staff cost was 16.2% in 2017/18 and 15.6% in 2016/17, increased by 5.4%.SIA Engineering Co., Ltd is a Division of SIA for aircraft safety and servicing and productivity, efficiency, pleasant and more value-added services to create a strong stage of Airline Industry’s dealer power since 1992.Rivalry in the industrySIA fleet average age is approximate 7years with diverse plan services, one of the reasons attracted to the customers.
The customers always compare in term of provided services and prices and are able to have a gorgeous experience in the airline industry. SIA major transformation plan “bold radical measures” which was developed revenue and more passengers to filling up more seat per aircraft to improve SIA processes efficiently and positive impact on the bottom line, as well as enhancing organisational and operational effectiveness.Threat of new entrants (low)The aircraft refurbishing solution mainly in the various parts used for cabin and interior are made from different types of lightweight materials to make it luxury quotient of VIP cabins and commercial cabins.
On the other hand, decreases the gross weight of aircraft, which result in fuel savings. As the airline enterprise, nowadays deregulation of Low-Cost Carrier (LCC) with lower fares and higher load factors. SIA have the strong impact on the customer with their services compare with various existing airlines.
Threat of a substitute products or services (low)SIA had target especially on medium and long-haul flight luxurious traveller that alleviation and time when travelling with less cost. In same time developed to train talent staffs to emerged as expert staffs, so their offerings are higher among than opponent and do not easily to replacement in the same industry. SIA is focusing substantially on the digital realm, to set up an internal digital-innovation unit to increase its digital capabilities and capacity to reclaim world’s No. 1 spot.Conclusion• add extra planes to minimised lease fee and more destinations point • replace some parts of fuel utilization with the solar energy system to decrease dependence on fuels usage.• Substitute with Robot instead of Staffs cabin crews to be vibrant innovation culture in airline industry