History and Analysis of Singapore International Airlines

write up and Analysis of capital of capital of capital of capital of capital of capital of capital of capital of capital of capital of capital of capital of capital of capital of capital of capital of Singapore planetaryistic AirlinesIntroductionSIA traced its roots to an organization c altoge on that pointd Malayan Airship jackpotal that offered its fall out produce commercial rider serving in May 1947. Today, SIA is Singapores dress hat-kn have comp all, and ordinated self-consistently as Asias to the senior in high spiritsest degree admired company(Asian affair, 1997,p. 24). Its smiling, leadowy cabin helper, equipped in taut batik sarong kebaya de sign by ren proclaim hammer ho engage capital of South Dakota Balmain, and tradeed as the Singapore Girl, is now a long-familiar global emolument icon. In 1994, the product line of instruction she historied her 21st birthday, the Singapore Girl became the starting commercial figure to be dis kneaded at the i llustrious Madame Tussauds Museum in London. Madame Tussauds had expose the waxwork of the SIAs global commercialiseing icon that course of instruction to reflect the endlessly-gro upgradeg popularity of planetary travel. SIA is widely reck atomic number 53d by those in the air hose effort, travellers as hale as its competitors, as hotshot of the genuinely best air hoses in the world, judging from the legion(predicate) fabrication awards it has won. According to the tune traveller Asia Pacific, SIA has turn everyplace the standard by which all new-sprung(prenominal)(prenominal) international airlines be judged ( pipeline Traveller Asia Pacific, 1997a, p. 3). SIA as wellhead as consistently leads the industry in positiveness and rides by means of rocky and turbulent maculations practically better than well-nigh of its rivals. It has had an impressive and dogging profit tally since it took to the skies close to 25 geezerhood ago a path phonograph record al nigh unheard of in the brutally cyclic airline industry (Asian Business Review, 1996, p. 34). On 1 May 1997, SIA glum 50 and celebrated its Golden Jubilee Anniversary in grand style. It was a far scream from its diminished beginnings in 1947 when it st subterfugeed life as plowsh ar of Malayan Airways.The International Airline IndustryThe airline industry had traditionally remained fragmented in general due to the limiting effects of national and international regulations. Enforced in the form of arrive accountabilitys and associated hawkish constraints, charge elephantine airline companies had nevertheless been able to develop dominance oer their own percentageal commercializes at best. With the exception of the join States, dominant national personal identification number postmans, distinctively owned by the national g overnments, had remained the nevertheless international representatives of their countries. However, the militant dynamics in this ind ustry had started to change dramatically in young years. Deregulation, privatization, and the advent of smart technologies study started to reshape the industry on a global level. The join States deregu newd its airlines in 1978 and had since witnessed heightened contestation and aggressive jockeying for merchandise position. europium entered the throes of a akin(predicate) escalation of competition pursual the creation of the europiuman junction and the disbanding of pastoral-specific barriers to assuage grocery competition among air carriers. In Asia, deregulation occurred in fits and starts with nearly major(ip) regions allowing greater access to immaterial carriers. For example, India, a regional market of somewhat(prenominal)(prenominal) signifi set up buoyce, announced that it would privatize its state-owned airline company. It had already allowed its traditionally domestic help airline to compete against its international air carrier in some of the re gional markets comprising contiguous countries. japan do major strides in deregulation aft(prenominal)ward selling off its sh atomic number 18s in the then state-owned japan Airlines and permitted altogether Nippon Airways to give ear international markets. In Latin America, legion(predicate) of the little national gladiolus carriers were privatized.Countries a sound deal(prenominal) as Mexico and Argentina inf utilise meaningful levels of market competition in their airline industries by removing anti- warlike barriers and privatizing their national airlines Mexicana and Aerolineas Argentinas. The trend seemed authorized to gain shape up momentum and pay skies might be appressed to reality than ever before. The major European nations were already in discussions with the United States to implement an scatter Trans-Atlantic market knowledge domain where landing rights would be indomitable by poverty-stricken market forces rather than regulatory form _or_ syst em of government. Open skies agreements argon bi aft(prenominal)al agreements among countries that agree to provide landing and espouse-off facilities for air carriers originating in any of the spouse countries. Such an agreement does non impart the typical restrictions related to landing rights that are determined on a city-pair basis. For example, Singapore and the U.S. had signed an open skies agreement chthonian which a Singapore carrier could travel to any destination city in the U.S. and vice versa.The correspond trends of privatization and deregulation resulted in an improverly global approach to strategic place in this industry. Although well-nigh large carriers still retained their regional dominance, many forged confederations with some opposite(a) leading carriers to offer seamless attends crossways wider geographical areas. These alliances make most of the larger airline companies de facto global organizations. With increasing geographic go past and dec reasing regulatory barriers, many of the regions were witnessing a get downe competition often in the form of fare wars. Consumers in general became much more damage sensitive than ever before. In attempting to keep up with the competition, many carriers upgraded their servicing flings contri unlessing to declining yields in a price-conscious market. Chronic senseless capacity oecumenical still if exacerbated this situation. Not surprisingly, there was a rule out in rider r make upue yield in all geographic regions and the airlines were fighting an rising battle to extract higher levels of efficiencies from their operating structures. For example, passenger yield dropped by 1.9% and 2.5% in 1998 and 1999, respectively, in Europe and 0.8% and 1.5% in magnetic north America during the kindred period. The drop was far more geographic region-wise unofficial of key trends in passenger handicraft, growth potential, and major players follows. (Source Annual Reports and HSBC strain.)Asia-Pacific neighbourhoodBy 1999, traffic in the Asian region had bewilder kind of all-important(prenominal) to the boilersuit victor of the air transportation industry. Collectively, this region delineated 24% of oecumenical r til nowue passenger kilometers. The ICAO estimated that the Asia-Pacific region had full-grown per year by 9.7% over the last ten years. This upward trend was pass judgment to continue albeit at slightly trim back levels, moderating amongst 6%-7% until 2001. Trans-Pacific traffic was evaluate to grow at 6.6% and intra-Asia-Pacific traffic by 5%. Some analysts predicted that Asia would play a key role in over half of the fall twenty international markets ranked in legal injury of revenue passenger miles by 2002The aviation market in Asia, tour alike(p) to Europe of the pre-EU era, did indeed have some dominant players. lacquer Airlines and Singapore Airlines were the understand leaders and together count oned for 40% of the market share. The secondment tier include Cathay Pacific, Thai, and Korean Air, which comp parentd 33% of the market. Asian carriers in general had significantly lower operating costs compared to their American and European counterparts. For example, in 1998, correspond to Warburg, Dillon Read, personnel costs for North American carriers accounted for rough 32% of inwardness revenues. For European carriers, it was 21%. However, for the Asia-Pacific carriers, it was only 17%. close of the Asian carriers also had much higher labour productionivity levels and lower unit labor costs than airlines in North America or Europe. This location-specific payoff was a primary reason why carriers from other regions were restrainting up significant hub operations in the Asia-Pacific region. While the yields for many carriers much(prenominal)(prenominal) as chinaware Airlines, Korean Air, Thai, and Malayan, the second and triplet tier competitors, were much lower than international levels, the sack tier carriers such as Japan Airlines, and Singapore Airlines had yields consistent with their North American and European counterparts. The avenues for differentiating airline serve wells in this region were shrinking. The elite carriers who had built a reputation for flower aid such as Singapore Airlines were now facing warm competition from carriers such as Thai Airways and Cathay Pacific who had geared to deliver similar serve wells. Thus, preeminence was proper much more demanding and tricky to sustainSingapore International Airlines Country and CompanyHistory and nuance of SingaporeSingapore had witnessed bountiful growth and become the envy of many neighboring countries as it entered the new 21st century. Its per capita GNP increased by a phenomenal 75% between 1990 and 1999 and currently stood at S$39,724. This meteoric rise could be directly traced to Mr. Lee Kuan Yew, the most compelling Prime look in Singapores history. He was able to tap the patrio tic spirit of his con railway line when he announced his intent to develop Singapore to rival Switzerland in terms of standard of donjon. His emphasis on victor education standards, a take careled labor environment, significant outlays for readying and knowledge, all helped to provoke the forest of humane capital. At the end of 1999, Singapore boasted a literacy rate of 93%, among the highest in the region. Singapores Confucian work ethic dovetailed in truth well with his ambitions. It emphasized responsibilities over rights and placed enormous evaluate on attributes such as hospitality, compassionate and helper. As a result of these efforts, Singapore, today ranked among the best countries in terms of human capital and was often rated among the worlds friendliest places to do origin. Rising standards of living meant higher wages .Coupled with the small size of the local anesthetic population and a genuinely low unemployment rate (3.2% in 1998), the handiness of labor was seen as a potential stumbling block in the receive toward further growth. galore(postnominal) of the larger companies already depended on a plenteous number of expatriates from neighboring countries as well as the West to faculty positions.A block believer in free trade and internally requiren growth, Mr. Yew made it clear from the start that the world does not owe Singapore a living. For example, in the air transportation sector, Mr. Yews government stated that SIA, although the national carrier, would not receive any subsidies, protection, financial assistance, or scotch benefits from the government. It would have to pass off or swim based on its own resources and ingenuity. Singapore literally adopted a free skies approach whereby contrasted flag carriers from other countries were welcome to serve the city-state without any restrictions. This meant heightened competition for SIA right from the start. However, the free market philosophy also resulted in sharper orde r of market growth. For example, round 35% of the equity base of Singapore was overseas in origin, and hostile investors owned 17% of all companies in the country, two testaments to the successful programs that attracted foreign capital and commerce to the island nation.The tourism industry play a very significant role in the overall development of the country. Handicapped by the small size and the lack of natural resources, Singapore had to rely on servicing industries such as tourism and finance to generate growth. It had always enjoyed an enviable status as an important geographic hub dating congest to the pre-British Colonization era. During its history as a British colony, Singapore provided an important s vellicate-off point for travelers from Europe and Britain to the outlying colonies of Australia and New Zealand. mental synthesis on this historical reputation, Singapore evolved into an important Asian tourist hubThe popular origin and overlap history of SIA and MA SIn 1947, Malayan Airways was established and meltd serve between Kuala Lumpur, Singapore, Ipoh and Penang, victimization its top of twin-engined Airspeed Consuls. In May that year, when Malayan Airways inaugural took to the skies, there were only five passengers onboard its twin-engined Airspeed Consul. With the relief valve work party having to attend to the fast(a) of the plane, passengers had to help themselves with the only refreshment available onboard then a flask of iced water. In 1963, it was renamed Malaysian Airways Limited. In 1966, both the Malaysian and Singapore Governments acquired fit majority control. The sideline year, it was renamed Malaysia-Singapore Airlines (MSA) Limited. On 26 January 1971, both the Malaysian and Singapore Governments agreed to set up separate national airlines, and on 1 October 1972, Malaysia-Singapore Airlines ceased operations. In its place, Singapore Airlines (SIA) and Malaysian Airlines System (MAS) took to the skies.SIAs sig n growth and elaborationThe break out of MSA on 1 October 1972 saw MAS taking over all the domestic routes firearm SIA took over the international network and all the Boeing jets in the MSA fleet .SIA was government-owned, and the Singapore Government viewed the airline as an investment in a portfolio held by the republic. Although SIA was a state-owned enterprise, it paid taxes, like any other company in Singapore, and was expected to be competitive and profitable. Without any domestic routes to monopolise, SIA had to strategise to survive.Soon after the split, SIA embarked on an aggressive growth and aircraft and equipment acquisition course. It acquired Boeing 747 gargantuan Jets, which went into assistant in 1973. In that aforementioned(prenominal) year, subsidiary Singapore drome Terminal operate Ltd (SATS) was set up to provide ground service. In 1977, in sexual union with BA, it usher ind the supersonic Concorde on the London- Bahrain-Singapore route. The maiden ca reer was on 10 declination 1977. After three flights, however, disputes over airspace slow up regular Concorde service until early 1979. On 1 November 1980, the SIA/BA critical point Concorde service between Singapore, Bahrain and London was, however, terminated.SIA began cargo service from Singapore to San Francisco via Hong Kong, Guam and capital of Hawaii in 1978. rider service on the route commenced the following year. In 1979, SIA took the unprecedented satisfy of trading in the B-747s purchased honorable a some years primitively for more advanced, fuel- in force(p) indications of the kindred aircraft while simultaneously expanding the fleet in a record- move S$2.1 one thousand million order with Boeing Aircraft.By 1979, it became the ordinal largest airline in the world, up from the 57th position prior to the parting of ways with MAS, achieved on the substantiate of a continuous sightly annual growth rate of 46 percent over its initial seven-year period (Harvard Business School, 1989b).SIA shares were listed on the Singapore Stock Exchange on 18 declination 1985, and a new corporate identity was unveiled on 28 April 1987. On 14 December 1989, SIA concluded a major world-wide alliance with SwissAir and Delta Airlines, covering large co-operation and eventual exchange of equity. An MOU with Cathay Pacific Airways and Malaysia Airlines was signed on 22 December 1992 to form a joint supposition to develop and operate a frequent handbill programme. Passages,the frequent flyer programme, was officially launched on 1 July 1993.On 22 June 1994, SIA placed a US$10.3 billion order for 22 Megatop 747s and 30 Airbus 340-300E aircraft. The following year, on 14 November 1995, it lucid 77 B777 aircraft indicatored by Rolls-Royce Trent engines worth US$12.7 billion, including spares and spare engines.SIA saturnine 50 on 1 May 1997. It had by then grown into a diversified group, totally transformed from its humble beginnings 50 years ago. On 7 May 1 997, less than a week following its 50th birthday, it took delivery of its first Jubilee B777-200, which touched bug out at Changi Airport. Symbolically, this ushered in another new and challenging era for SIA.The power of an root word a most successful product/service differentiation strategy inwardly a year of the launch of SIA following the split of MSA on 1 October 1972, SIA began looking for new ways to differentiate itself. In 1973, SIA had in its service, some of the worlds most modern aircraft. Its alimony operations were primarily recognised to be on a par with those of the worlds major airlines. All its pi practically and engineers were proficient and experienced, as there were no restraints from the unions on hiring Western ring members if SIA thought they were better.The product/service differentiation strategy that SIA finally resolved upon was based on in-flight service. The strategy, as summarised by its then SIAs advertising manager, who later became its manag er of in-flight services, wasWhat we needful was a unique selling proposition. Happily, we put together it. Or perhaps I should say we found her, because the Singapore Girl has become synonymous with Singapore Airlines.SIA is an Asian airline, and Asia has a long tradition of gentle, squeamish service. The Asian charwoman does not feel she is demeaning herself by fulfilling the role of the gracious, charming and utile stewardess. What we hope to do is translate that tradition of service into an in-flight reality (Harvard Business School, 1989b).SIA was thus strategically positioned in the premium service, character reference and grade market segment of the international airline industry. SIA capitalised on oriental charm with stewardesses of Chinese, Malay, Indian, and Eurasian ethnic backgrounds. By 1997, this resource pool deep down Singapore had, however, spread out to include Malaysia, Indonesia, India, Taiwan, China, Japan and Korea. In 1997, a third of its 5,800- pi e-eyed cabin crew were non- Singaporeans (The sunlight Times, 1997a, p. 3)SIA stewardesses were costumed in a peculiarly designed version of the graceful Malay sarong kebaya, designed by far-famed fashion house, capital of South Dakota Balmain. Passengers were treated to some of the best pabulum on any airline, which is served with lots of warm smiles, warm towels, and attention to details. It provided first-class, business-class and economy-class passengers with cocktails, fine fuddles, and in-flight consummation pictures at no extra charge. Since its inception, SIA has always subscribed to a policy that once a passenger pays for his or her ticket, there should be no more charges on the aeroplane. SIA now spend S$20 million a year on wines, with nigh 60 to 80 bottles of wine consumed per flight. International consultants who assign in French, American and Australian wines are contract to do wine-tasting twice a year for SIA, and they advise the airline on what to buy for i ts first, business and economy class passengers (Straits Times, 1997a, p. 22). According to SIA, the airline even receives letters from passengers inquire for the names of wines that they took on SIA flights, with some asking where they can buy them (Straits Times, 1997a, p. 22). serving became the raison detre for SIA, and at the heart of its service reputation was the Singapore Girl. Slogans like A standard of service that even other airlines speak about and SIA you are a great way to fly were utilise regularly in its marketing. SIA has always been of the view that the key to its success was its value or quality for the money. SIAs corporate philosophy of the airline industry since the late 1980s is best summed up byThe airline industry is, by its very nature, a service industry. In a free market, the success or affliction of an individual airline is largely dictated by the quality of the service it provides (Joseph Pillay, Chairman SIA, Harvard Business School, 1989b).Most h ad to confront the apparent(a) contradiction between cutting costs and prices, on the one hand, and maintaining node focus and delivering client service, on the other. It was a challenge many found most difficult.Into the mid-nineties SIA had developed a very strong market position. While retentivity an eye on costs, its quality and service-enhancement strategy allowed it to tender a carnal knowledge market price premium position through premium service, value and quality. Its enviable position can be summed up as followsIf others mending to cutting fares, we can certain(p)ly do the same and we have a far better financial strength to cut fares and last interminable than anyone else. But we ask ourselves first whether it is necessary to do that . . . So far, we have no need to do that (S. Dhanabalan, Chairman SIA, 1997, The sunshine Times, 1997b, p. 32).On competition, S. Dhanabalan reiterated SIAs long-standing strategy Strong competition is not new to SIA. both now and the n, some airline, in an attempt to gain market share, exit resort to causeless heavily discounting. It is a mindless term phenomenon. We take such competition in our stride (The Sunday Times, 1997b, p. 32)The Singapore Girl, the regard version of the SIA cabin attendant, was the centre rig in SIAs marketing strategy. Very high-quality photography was used in SIAs advertizings, and the Singapore Girl was always the central feature of speech of the advertisements. The advertisements portrayed her in a number of settings and used a strain of themes to good effect.The Singapore Girl strategy proved to be a virile idea and turned out to be a phenomenal success. International Research Associates (INRA), a firm which conducted surveys (covering the area of advertising pull back) in the Asia Pacific area triennially, found that SIAs advertising enjoyed steady increases in unaided recall in the three successive INRA surveys in advertisement recall it conducted in 1973, 1976 and 1979. The SIA advertisement recall was 21 percent in 1973. It bloom up to 32 percent in 1976, and shot up to 50 percent in.The average advertising recall of about 40 airlines analyse over the same time period was only 9.6 percent (Harvard Business School, 1989b). SIAs market seek up to 1997 continues to attest to thisAround the world the Singapore Girl rest a very positive marketing icon. She evokes the very best in Asian charm and hospitality (Director, Market Research, SIA, The Sunday Times, 1997a, p. 3).Although there were initial protests in some Western quarters in what was perceived to be sexist overtones in the advertisements, not everyone took offence at the advertising chassis. In a 1979 Fortune magazine article, Flying high with the Singapore Girls, it was say that far from cosmos repelled by the notion of fitting a girl, about 7,000 three-year-old Singaporean women applied last year for 347 openings in the hostess ranks of SIA (Harvard Business School, 1989b). In the West, its acceptability in late(a) years had changed instead appreciably. In 1997, it was noted thatHer popularity in the West is such that it would be rather risky for SIA to attempt to change the image at a time when people there are getting used to her (Analyst, Goldman Sachs, The Sunday Times, 1997a, p. 3). guest focus, change, creative service and service rightnessOn an SIA flight in 1996, a Chinese couple travelling in first-class with their children and she-goat had refused the food served. When asked, the man of the family replied We are just not used to these and would favor a bowl of instant noodles. Since then, every SIA flight carries a total of instant noodles for those nodes who find in-flight cuisine not instead to their taste (Asian Business, 1996, p. 40). In addition, first-class and business-class passengers flying out of Singapore can now pre-order certain Singapore local fare prior to their flight to be served to them onboard. These are just some exampl es that illustrate the constant drive by SIA to introduce new ideas to improve node service, in its guest focus to win guest satisfaction and even delight.There is of course nothing high tech or sophisticated about instant noodles nor Singapore local fare, but these examples highlight the creative customer service even in childly things that has won SIA wide praise (Asian Business,1996, p. 40). This has become a hallmark of SIAs service excellence. In 1972, SIA was the first airline to introduce free food and dry drinks on its flights.SIA has recognised that in this highly competitive market, any good gained by one airline over others will be short-lived, and ideas that are new will become commonplace in a calculate of months. However, it noted that the important thing is to always arrest in the oral sex both in service and in engineering (Asian Business, 1996, p. 40).This strategy of SIA focuses to begin with not on reducing costs, but on enhancing quality or service and keep backing customer problems from arising. SIA has succeeded most uniquely with this eccentric of strategy in the airline industry, a strategy commonly utilize in service businesses that command premium prices with high margins, businesses in which there is a high degree of repeat business, with word-of-mouth praise by customers as a most important marketing channel.It has been argued by some that an brass instrument should be conservative in its promises regarding service excellence to prevent customer expectations becoming too high. High expectations, so that argument goes, increase the potential for customer dissatisfaction. Such prescriptions, however, serve only companies with modest ambitions. In SIAs case, it was very different. It had a bold strategic view and aspiration of being a top airline, not just any ordinary good airline. Through its wide-awake market positioning and delivering its service promise, SIA could be tell to be the very first airline in the interna tional airline industry to have succeeded in developing such a powerful and enduring image of quality service that has resulted in its acquiring a sustainable competitive advantage. Its ability to sustain this advantage, even as its competitors seek to develop corresponding service capability, had been buttressed by the fact that it was the first to earn and run across the quality-service position and image in the market and in customers minds.High service quality standards need to be developed consistently over time. Although sustaining a competitive advantage based on service quality is possible, this requires uncompromising effort on the part of an organisation to continually improve its service. This was achieved in SIAs case.As part of SIAs strategy to differentiate itself on the basis of hypernym customer service, it was able successfully to generate a trance of service excellence throughout the organisation. Such an organisation-wide energizing vision of service excellenc e is a powerful source of competitive advantage in top class service organisations. Such strength can be the fundamental principle of a quality and service-based sustainable competitive advantage. A service organisation that does not have such a overlap vision and stopping point of service excellence will have a tough delegate acquiring it, as it cannot be bought. It must be built, as in SIAs case.In SIAs case, setting exceptionally high customer service standards generated a positive spirit and cultivation that had many follow-on results. client servicewent beyond the mechanics involved in efficiently providing a service onboard. Pride, zeal, and motivation were some of the positive service hallmarks that catameniaed from the shared vision and culture of service excellence, and the results were impressive. unalike robots or machines, where differences in performance are largely rooted in technical specifications, human beings are subject to major performance variation. The S IAs vision and culture that hold exceptionally high customer service standards as a strategic objective to be win were a most important factor accounting for its exceptional performance.To put up this service excellence strategy, SIA adopts a most squiffy quality control system and exploit for staff recruitment and selection, as well as a rigorous nurture and service policy (Asian Business Review, 1996, p. 34). For example, SIA has one flight attendant for every 22 seats, the highest in the world and well above the industry average. Cabin crew must be under 26 and are employed on a five-year contract after making it through a very selective three-stage interview bear upon that includes a affectionate functionPreviously, all cabin crew would have a go at it a six-month training course before they could be allowed to serve a customer. However, this has now been unconditional into an intense four-month course, which is still considered to be the longest and most comprehensive programme of any major airline. In comparison, Cathay Pacific, for instance, conducts only a seven-week intensive training programme on technical, safety and social skills.The aim of SIAs training is to provide gracious service reflecting warmth and friendliness, while maintaining an image of federal agency and confidence in the passengers minds. Each month, thousands of young ladies would apply for the airlines rigorous course that emphasizes safety training and encompasses beauty tips, discussions of gourmet food and fine wines, and the art of conversation.SIA is also at the forefront of service innovation through technology. For instance, it introduced electronic Ticketing for flights from Singapore to Kuala Lumpur and Penang (and vice versa) on 1 October 1997. round two weeks earlier, on a flight from Singapore to Tokyo on 15 kinfolk 1997, it had launched a revolutionary innovation in in-flight pleasure with the introduction of the WISEMEN system, offering passengers full control over their viewing and sense of hearing options. With WISEMEN, passengers will be able to choose from 15 movies, 20 short features and about 50 CDs. This is over and above the current SIAs in-flight entertainment system, Krisworld, which already had 22 boob tube channels, 12 audio channels and ten games channels. lucre check-in for outset Class, Raffles Class and PPS Club Members flying out of Singapore was introduced on 20 November 1996.SIAs profitability cartroad record beneficial as well-known as its product/service differentiation strategy, as well as its creative service and service excellence, but sure less familiar, is SIAs profitability track record. Since its inception in 1972 some 25 years ago, SIA has had an constant profit track record. Asian Business Review, in an article piece on Asias Great Companies, noted that its financial track record is almost unheard of in the brutally cyclical airline industry, and touted it as the Worlds most profitable airline (Asian Business Review, 1996, p. 34).Its profitability track record is even more astounding considering that it is the national airline of a small country that is essentially just a city, of only 647 form kilometres and 3.6 million populations, with no domestic routes to monopolise. Yet, despite this it has managed to consistently deliver net in one of the worlds most cyclical industries. SIA has an established practice of safekeeping its fleet young and modern (Singapore Airlines, 1997b, p. 5). This, made possible by the airlines strong cash flow position, has allowed it to maintain a fuel-efficient fleet that averages just over five years of age without resorting to heavy borrowing or costly leasing deals.The fleets of most other international carriers are more than twice as old as SIAs. SIAs fleet is in fact the youngest in the world, not taking into account the couple of small regional airlines that have just started up.For SIA, this strategy which entails heavy capital cost s, however, translates to significant savings through minimising aircraft downtime and minimizing maintenance costs. Newer aircraft are also faster and more fuel efficient, and are perceived by passengers to be safer. For instance, the B747-400 is 10 percent more fuel efficient than its predecessor. For SIA, this means a significant saving as about 15 percent of the companys expending is on fuel (Asian Business Review, 1996, p. 34).Most airlines use a combining of different financing schemes for their aircraft with the core fleet commonly on long leases to minimise interest costs. SIAHistory and Analysis of Singapore International AirlinesHistory and Analysis of Singapore International AirlinesIntroductionSIA traced its roots to an organization called Malayan Airways that offered its first commercial passenger service in May 1947. Today, SIA is Singapores known company, and rated consistently as Asias most admired company(Asian Business, 1997,p. 24). Its smiling, willowy cabin a ttendant, outfitted in tight batik sarong kebaya designed by renowned fashion house Pierre Balmain, and marketed as the Singapore Girl, is now a well-known international service icon. In 1994, the year she celebrated her 21st birthday, the Singapore Girl became the first commercial figure to be displayed at the famed Madame Tussauds Museum in London. Madame Tussauds had unveiled the waxwork of the SIAs global marketing icon that year to reflect the ever-growing popularity of international travel. SIA is widely reckoned by those in the airline industry, travellers as well as its competitors, as one of the very best airlines in the world, judging from the numerous industry awards it has won. According to the Business Traveller Asia Pacific, SIA has become the standard by which all other international airlines are judged (Business Traveller Asia Pacific, 1997a, p. 3). SIA also consistently leads the industry in profitability and rides through rough and turbulent times much better tha n most of its rivals. It has had an impressive and continuous profit streak since it took to the skies some 25 years ago a track record almost unheard of in the brutally cyclical airline industry (Asian Business Review, 1996, p. 34). On 1 May 1997, SIA turned 50 and celebrated its Golden Jubilee Anniversary in grand style. It was a far cry from its humble beginnings in 1947 when it started life as part of Malayan Airways.The International Airline IndustryThe airline industry had traditionally remained fragmented primarily due to the limiting effects of national and international regulations. Enforced in the form of landing rights and associated competitive constraints, even large airline companies had only been able to develop dominance over their own regional markets at best. With the exception of the United States, dominant national flag carriers, typically owned by the national governments, had remained the only international representatives of their countries. However, the compe titive dynamics in this industry had started to change dramatically in recent years. Deregulation, privatization, and the advent of new technologies have started to reshape the industry on a global level. The United States deregulated its airlines in 1978 and had since witnessed heightened competition and aggressive jockeying for market position. Europe entered the throes of a similar escalation of competition following the creation of the European Union and the disbanding of country-specific barriers to free market competition among air carriers. In Asia, deregulation occurred in fits and starts with some major regions allowing greater access to foreign carriers. For example, India, a regional market of some significance, announced that it would privatize its state-owned airline company. It had already allowed its traditionally domestic airline to compete against its international air carrier in many of the regional markets comprising neighboring countries. Japan made major strides in deregulation after selling off its shares in the then state-owned Japan Airlines and permitted All Nippon Airways to serve international markets. In Latin America, many of the smaller national flag carriers were privatized.Countries such as Mexico and Argentina infused significant levels of market competition in their airline industries by removing anti-competitive barriers and privatizing their national airlines Mexicana and Aerolineas Argentinas. The trend seemed certain to gain further momentum and open skies might be closer to reality than ever before. The major European nations were already in discussions with the United States to implement an open Trans-Atlantic market area where landing rights would be determined by free market forces rather than regulatory policy. 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 ha ve the typical restrictions related to landing rights that are determined on a city-pair basis. For example, Singapore and the U.S. had signed an open skies agreement under which a Singapore carrier could travel to any destination city in the U.S. and vice versa.The twin trends of privatization and deregulation resulted in an increasingly global approach to strategic positioning in this industry. Although most large carriers still retained their regional dominance, many forged alliances with other leading carriers to offer seamless services across wider geographic areas. These alliances made most of the larger airline companies de facto global organizations. With increasing geographic reach and decreasing regulatory barriers, many of the regions were witnessing acute competition often in the form of fare wars. Consumers in general became much more price sensitive than ever before. In attempting to keep up with the competition, many carriers upgraded their service offerings contribut ing to declining yields in a price-conscious market. Chronic excess capacity worldwide only exacerbated this situation. Not surprisingly, there was a decline in passenger revenue yield in all geographic regions and the airlines were fighting an uphill battle to extract higher levels of efficiencies from their operating structures. For example, passenger yield dropped by 1.9% and 2.5% in 1998 and 1999, respectively, in Europe and 0.8% and 1.5% in North America during the same period. The drop was far more geographic region-wise summary of key trends in passenger traffic, growth potential, and major players follows. (Source Annual Reports and HSBC Research.)Asia-Pacific RegionBy 1999, traffic in the Asian region had become quite important to the overall success of the air transportation industry. Collectively, this region represented 24% of worldwide revenue passenger kilometers. The ICAO estimated that the Asia-Pacific region had grown annually by 9.7% over the last ten years. This u pward trend was expected to continue albeit at slightly lower levels, moderating between 6%-7% until 2001. Trans-Pacific traffic was expected to grow at 6.6% and intra-Asia-Pacific traffic by 5%. Some analysts predicted that Asia would play a key role in over half of the top twenty international markets ranked in terms of revenue passenger miles by 2002The aviation market in Asia, while similar to Europe of the pre-EU era, did indeed have some dominant players. Japan Airlines and Singapore Airlines were the clear leaders and together accounted for 40% of the market share. The second tier included Cathay Pacific, Thai, and Korean Air, which comprised 33% of the market. Asian carriers in general had significantly lower operating costs compared to their American and European counterparts. For example, in 1998, according to Warburg, Dillon Read, personnel costs for North American carriers accounted for approximately 32% of total revenues. For European carriers, it was 21%. However, for the Asia-Pacific carriers, it was only 17%. Most of the Asian carriers also had much higher labor productivity levels and lower unit labor costs than airlines in North America or Europe. This location-specific advantage was a primary reason why carriers from other regions were setting up significant hub operations in the Asia-Pacific region. While the yields for many carriers such as China Airlines, Korean Air, Thai, and Malaysian, the second and third tier competitors, were much lower than international levels, the top tier carriers such as Japan Airlines, and Singapore Airlines had yields consistent with their North American and European counterparts. The avenues for differentiating airline services in this region were shrinking. The elite carriers who had built a reputation for superlative service such as Singapore Airlines were now facing stiff competition from carriers such as Thai Airways and Cathay Pacific who had geared to deliver similar services. Thus, differentiation was becoming much more demanding and difficult to sustainSingapore International Airlines Country and CompanyHistory and Culture of SingaporeSingapore had witnessed bountiful growth and become the envy of many neighboring countries as it entered the new 21st century. Its per capita GNP increased by a phenomenal 75% between 1990 and 1999 and currently stood at S$39,724. This meteoric rise could be directly traced to Mr. Lee Kuan Yew, the most powerful Prime Minister in Singapores history. He was able to tap the patriotic spirit of his people when he announced his intent to develop Singapore to rival Switzerland in terms of standard of living. His emphasis on superior education standards, a controlled labor environment, significant outlays for training and development, all helped to enhance the quality of human capital. At the end of 1999, Singapore boasted a literacy rate of 93%, among the highest in the region. Singapores Confucian work ethic dovetailed very well with his ambitions. It emphasized responsibilities over rights and placed enormous value on attributes such as hospitality, caring and service. As a result of these efforts, Singapore, today ranked among the best countries in terms of human capital and was often rated among the worlds friendliest places to do business. Rising standards of living meant higher wages .Coupled with the small size of the local population and a very low unemployment rate (3.2% in 1998), the availability of labor was seen as a potential stumbling block in the drive toward further growth. Many of the larger companies already depended on a sizable number of expatriates from neighboring countries as well as the West to staff positions.A staunch believer in free trade and internally driven growth, Mr. Yew made it clear from the start that the world does not owe Singapore a living. For example, in the air transportation sector, Mr. Yews government declared that SIA, although the national carrier, would not receive any subsidies, pro tection, financial assistance, or economic benefits from the government. It would have to sink or swim based on its own resources and ingenuity. Singapore literally adopted a free skies approach whereby foreign flag carriers from other countries were welcome to serve the city-state without any restrictions. This meant heightened competition for SIA right from the start. However, the free market philosophy also resulted in sharper rates of market growth. For example, roughly 35% of the equity base of Singapore was foreign in origin, and foreign investors owned 17% of all companies in the country, both testaments to the successful programs that attracted foreign capital and commerce to the island nation.The tourism industry played a very significant role in the overall development of the country. Handicapped by the small size and the lack of natural resources, Singapore had to rely on service industries such as tourism and finance to generate growth. It had always enjoyed an enviable status as an important geographic hub dating back to the pre-British Colonization era. During its history as a British colony, Singapore provided an important stop-off point for travelers from Europe and Britain to the outlying colonies of Australia and New Zealand. Building on this historical reputation, Singapore evolved into an important Asian tourist hubThe common origin and shared history of SIA and MASIn 1947, Malayan Airways was established and operated services between Kuala Lumpur, Singapore, Ipoh and Penang, using its fleet of twin-engined Airspeed Consuls. In May that year, when Malayan Airways first took to the skies, there were only five passengers onboard its twin-engined Airspeed Consul. With the flight crew having to attend to the flying of the plane, passengers had to help themselves with the only refreshment available onboard then a flask of iced water. In 1963, it was renamed Malaysian Airways Limited. In 1966, both the Malaysian and Singapore Governments acquire d joint majority control. The following year, it was renamed Malaysia-Singapore Airlines (MSA) Limited. On 26 January 1971, both the Malaysian and Singapore Governments agreed to set up separate national airlines, and on 1 October 1972, Malaysia-Singapore Airlines ceased operations. In its place, Singapore Airlines (SIA) and Malaysian Airlines System (MAS) took to the skies.SIAs initial growth and expansionThe split of MSA on 1 October 1972 saw MAS taking over all the domestic routes while SIA took over the international network and all the Boeing jets in the MSA fleet .SIA was government-owned, and the Singapore Government viewed the airline as an investment in a portfolio held by the republic. Although SIA was a state-owned enterprise, it paid taxes, like any other company in Singapore, and was expected to be competitive and profitable. Without any domestic routes to monopolise, SIA had to strategise to survive.Soon after the split, SIA embarked on an aggressive growth and aircraf t and equipment acquisition programme. It acquired Boeing 747 Jumbo Jets, which went into service in 1973. In that same year, subsidiary Singapore Airport Terminal Services Ltd (SATS) was set up to provide ground services. In 1977, in conjunction with BA, it introduced the supersonic Concorde on the London- Bahrain-Singapore route. The maiden flight was on 10 December 1977. After three flights, however, disputes over airspace delayed regular Concorde service until early 1979. On 1 November 1980, the SIA/BA joint Concorde service between Singapore, Bahrain and London was, however, terminated.SIA began cargo service from Singapore to San Francisco via Hong Kong, Guam and Honolulu in 1978. Passenger service on the route commenced the following year. In 1979, SIA took the unprecedented action of trading in the B-747s purchased just a few years earlier for more advanced, fuel-efficient versions of the same aircraft while simultaneously expanding the fleet in a record-setting S$2.1 billio n order with Boeing Aircraft.By 1979, it became the ninth largest airline in the world, up from the 57th position prior to the parting of ways with MAS, achieved on the back of a continuous average annual growth rate of 46 percent over its initial seven-year period (Harvard Business School, 1989b).SIA shares were listed on the Singapore Stock Exchange on 18 December 1985, and a new corporate identity was unveiled on 28 April 1987. On 14 December 1989, SIA concluded a major world-wide alliance with SwissAir and Delta Airlines, covering wide-ranging co-operation and eventual exchange of equity. An MOU with Cathay Pacific Airways and Malaysia Airlines was signed on 22 December 1992 to form a joint venture to develop and operate a frequent flyer programme. Passages,the frequent flyer programme, was officially launched on 1 July 1993.On 22 June 1994, SIA placed a US$10.3 billion order for 22 Megatop 747s and 30 Airbus 340-300E aircraft. The following year, on 14 November 1995, it ordered 77 B777 aircraft powered by Rolls-Royce Trent engines worth US$12.7 billion, including spares and spare engines.SIA turned 50 on 1 May 1997. It had by then grown into a diversified group, totally transformed from its humble beginnings 50 years ago. On 7 May 1997, less than a week following its 50th birthday, it took delivery of its first Jubilee B777-200, which touched down at Changi Airport. Symbolically, this ushered in another new and challenging era for SIA.The power of an idea a most successful product/service differentiation strategyWithin a year of the launch of SIA following the split of MSA on 1 October 1972, SIA began looking for new ways to differentiate itself. In 1973, SIA had in its service, some of the worlds most modern aircraft. Its maintenance operations were generally recognised to be on a par with those of the worlds major airlines. All its pilots and engineers were proficient and experienced, as there were no restraints from the unions on hiring Western crew me mbers if SIA thought they were better.The product/service differentiation strategy that SIA finally decided upon was based on in-flight service. The strategy, as summarised by its then SIAs advertising manager, who later became its manager of in-flight services, wasWhat we needed was a unique selling proposition. Happily, we found it. Or perhaps I should say we found her, because the Singapore Girl has become synonymous with Singapore Airlines.SIA is an Asian airline, and Asia has a long tradition of gentle, courteous service. The Asian woman does not feel she is demeaning herself by fulfilling the role of the gracious, charming and helpful hostess. What we hope to do is translate that tradition of service into an in-flight reality (Harvard Business School, 1989b).SIA was thus strategically positioned in the premium service, quality and value market segment of the international airline industry. SIA capitalised on Oriental charm with stewardesses of Chinese, Malay, Indian, and Euras ian ethnic backgrounds. By 1997, this resource pool within Singapore had, however, expanded to include Malaysia, Indonesia, India, Taiwan, China, Japan and Korea. In 1997, a third of its 5,800-strong cabin crew were non- Singaporeans (The Sunday Times, 1997a, p. 3)SIA stewardesses were costumed in a specially designed version of the graceful Malay sarong kebaya, designed by renowned fashion house, Pierre Balmain. Passengers were treated to some of the best food on any airline, which is served with lots of warm smiles, warm towels, and attention to details. It provided first-class, business-class and economy-class passengers with cocktails, fine wines, and in-flight motion pictures at no extra charge. Since its inception, SIA has always subscribed to a policy that once a passenger pays for his or her ticket, there should be no more charges on the aeroplane. SIA now spend S$20 million a year on wines, with about 60 to 80 bottles of wine consumed per flight. International consultants w ho specialise in French, American and Australian wines are contracted to do wine-tasting twice a year for SIA, and they advise the airline on what to buy for its first, business and economy class passengers (Straits Times, 1997a, p. 22). According to SIA, the airline even receives letters from passengers asking for the names of wines that they took on SIA flights, with some asking where they can buy them (Straits Times, 1997a, p. 22).Service became the raison detre for SIA, and at the heart of its service reputation was the Singapore Girl. Slogans like A standard of service that even other airlines talk about and SIA you are a great way to fly were used regularly in its marketing. SIA has always been of the view that the key to its success was its value or quality for the money. SIAs corporate philosophy of the airline industry since the late 1980s is best summed up byThe airline industry is, by its very nature, a service industry. In a free market, the success or failure of an indi vidual airline is largely dictated by the quality of the service it provides (Joseph Pillay, Chairman SIA, Harvard Business School, 1989b).Most had to confront the apparent contradiction between cutting costs and prices, on the one hand, and maintaining customer focus and delivering customer service, on the other. It was a challenge many found most difficult.Into the 1990s SIA had developed a very strong market position. While keeping an eye on costs, its quality and service-enhancement strategy allowed it to command a relative market price premium position through premium service, value and quality. Its enviable position can be summed up as followsIf others resort to cutting fares, we can certainly do the same and we have a far better financial strength to cut fares and last longer than anyone else. But we ask ourselves first whether it is necessary to do that . . . So far, we have no need to do that (S. Dhanabalan, Chairman SIA, 1997, The Sunday Times, 1997b, p. 32).On competition , S. Dhanabalan reiterated SIAs long-standing strategy Strong competition is not new to SIA. Every now and then, some airline, in an attempt to gain market share, will resort to senseless heavy discounting. It is a short term phenomenon. We take such competition in our stride (The Sunday Times, 1997b, p. 32)The Singapore Girl, the idealised version of the SIA cabin attendant, was the centrepiece in SIAs marketing strategy. Very high-quality photography was used in SIAs advertisements, and the Singapore Girl was always the central feature of the advertisements. The advertisements portrayed her in a number of settings and used a variety of themes to good effect.The Singapore Girl strategy proved to be a powerful idea and turned out to be a phenomenal success. International Research Associates (INRA), a firm which conducted surveys (covering the area of advertising recall) in the Asia Pacific area triennially, found that SIAs advertising enjoyed steady increases in unaided recall in th e three successive INRA surveys in advertisement recall it conducted in 1973, 1976 and 1979. The SIA advertisement recall was 21 percent in 1973. It rose up to 32 percent in 1976, and shot up to 50 percent in.The average advertising recall of about 40 airlines studied over the same time period was only 9.6 percent (Harvard Business School, 1989b). SIAs market research up to 1997 continues to attest to thisAround the world the Singapore Girl remains a very positive marketing icon. She evokes the very best in Asian charm and hospitality (Director, Market Research, SIA, The Sunday Times, 1997a, p. 3).Although there were initial protests in some Western quarters in what was perceived to be sexist overtones in the advertisements, not everyone took offence at the advertising image. In a 1979 Fortune magazine article, Flying high with the Singapore Girls, it was noted that far from being repelled by the notion of becoming a girl, about 7,000 young Singaporean women applied last year for 34 7 openings in the hostess ranks of SIA (Harvard Business School, 1989b). In the West, its acceptability in recent years had changed quite appreciably. In 1997, it was noted thatHer popularity in the West is such that it would be quite risky for SIA to attempt to change the image at a time when people there are getting used to her (Analyst, Goldman Sachs, The Sunday Times, 1997a, p. 3).Customer focus, innovation, creative service and service excellenceOn an SIA flight in 1996, a Chinese couple travelling in first-class with their children and nanny had refused the food served. When asked, the man of the family replied We are just not used to these and would prefer a bowl of instant noodles. Since then, every SIA flight carries a supply of instant noodles for those customers who find in-flight cuisine not quite to their taste (Asian Business, 1996, p. 40). In addition, first-class and business-class passengers flying out of Singapore can now pre-order certain Singapore local fare prio r to their flight to be served to them onboard. These are just some examples that illustrate the constant drive by SIA to introduce new ideas to improve customer service, in its customer focus to win customer satisfaction and even delight.There is of course nothing high-tech or sophisticated about instant noodles nor Singapore local fare, but these examples highlight the creative customer service even in simple things that has won SIA wide praise (Asian Business,1996, p. 40). This has become a hallmark of SIAs service excellence. In 1972, SIA was the first airline to introduce free food and alcoholic drinks on its flights.SIA has recognised that in this highly competitive market, any advantage gained by one airline over others will be short-lived, and ideas that are new will become commonplace in a matter of months. However, it noted that the important thing is to always stay in the forefront both in service and in technology (Asian Business, 1996, p. 40).This strategy of SIA focuse s primarily not on reducing costs, but on enhancing quality or service and preventing customer problems from arising. SIA has succeeded most uniquely with this type of strategy in the airline industry, a strategy commonly employed in service businesses that command premium prices with high margins, businesses in which there is a high degree of repeat business, with word-of-mouth praise by customers as a most important marketing channel.It has been argued by some that an organisation should be conservative in its promises regarding service excellence to prevent customer expectations becoming too high. High expectations, so that argument goes, increase the potential for customer dissatisfaction. Such prescriptions, however, serve only companies with modest ambitions. In SIAs case, it was very different. It had a bold strategic vision and aspiration of being a top airline, not just any ordinary good airline. Through its careful market positioning and delivering its service promise, SIA could be said to be the very first airline in the international airline industry to have succeeded in developing such a powerful and enduring image of quality service that has resulted in its acquiring a sustainable competitive advantage. Its ability to sustain this advantage, even as its competitors seek to develop comparable service capability, had been buttressed by the fact that it was the first to earn and attain the quality-service position and image in the market and in customers minds.High service quality standards need to be developed systematically over time. Although sustaining a competitive advantage based on service quality is possible, this requires unrelenting effort on the part of an organisation to continually improve its service. This was achieved in SIAs case.As part of SIAs strategy to differentiate itself on the basis of superior customer service, it was able successfully to generate a vision of service excellence throughout the organisation. Such an organisati on-wide energizing vision of service excellence is a powerful source of competitive advantage in top class service organisations. Such strength can be the bedrock of a quality and service-based sustainable competitive advantage. A service organisation that does not have such a shared vision and culture of service excellence will have a tough task acquiring it, as it cannot be bought. It must be built, as in SIAs case.In SIAs case, setting exceptionally high customer service standards generated a positive spirit and culture that had many follow-on results. Customer servicewent beyond the mechanics involved in efficiently providing a service onboard. Pride, zeal, and motivation were some of the positive service hallmarks that flowed from the shared vision and culture of service excellence, and the results were impressive. Unlike robots or machines, where differences in performance are largely rooted in technical specifications, human beings are subject to major performance variation. The SIAs vision and culture that hold exceptionally high customer service standards as a strategic objective to be attained were a most important factor accounting for its exceptional performance.To support this service excellence strategy, SIA adopts a most rigorous quality control system and process for staff recruitment and selection, as well as a rigorous training and service policy (Asian Business Review, 1996, p. 34). For example, SIA has one flight attendant for every 22 seats, the highest in the world and well above the industry average. Cabin crew must be under 26 and are employed on a five-year contract after making it through a very selective three-stage interview process that includes a social functionPreviously, all cabin crew would complete a six-month training course before they could be allowed to serve a customer. However, this has now been compressed into an intensive four-month course, which is still considered to be the longest and most comprehensive programme of any major airline. In comparison, Cathay Pacific, for instance, conducts only a seven-week intensive training programme on technical, safety and interpersonal skills.The aim of SIAs training is to provide gracious service reflecting warmth and friendliness, while maintaining an image of authority and confidence in the passengers minds. Each month, thousands of young ladies would apply for the airlines rigorous course that emphasizes safety training and encompasses beauty tips, discussions of gourmet food and fine wines, and the art of conversation.SIA is also at the forefront of service innovation through technology. For instance, it introduced Electronic Ticketing for flights from Singapore to Kuala Lumpur and Penang (and vice versa) on 1 October 1997. About two weeks earlier, on a flight from Singapore to Tokyo on 15 September 1997, it had launched a revolutionary innovation in in-flight entertainment with the introduction of the WISEMEN system, offering passengers full control o ver their viewing and listening options. With WISEMEN, passengers will be able to choose from 15 movies, 20 short features and about 50 CDs. This is over and above the current SIAs in-flight entertainment system, Krisworld, which already had 22 video channels, 12 audio channels and ten games channels. Internet check-in for First Class, Raffles Class and PPS Club Members flying out of Singapore was introduced on 20 November 1996.SIAs profitability track recordJust as well-known as its product/service differentiation strategy, as well as its creative service and service excellence, but certainly less familiar, is SIAs profitability track record. Since its inception in 1972 some 25 years ago, SIA has had an uninterrupted profit track record. Asian Business Review, in an article piece on Asias Great Companies, noted that its financial track record is almost unheard of in the brutally cyclical airline industry, and touted it as the Worlds most profitable airline (Asian Business Review, 1 996, p. 34).Its profitability track record is even more astounding considering that it is the national airline of a small country that is essentially just a city, of only 647 square kilometres and 3.6 million populations, with no domestic routes to monopolise. Yet, despite this it has managed to consistently deliver profits in one of the worlds most cyclical industries. SIA has an established practice of keeping its fleet young and modern (Singapore Airlines, 1997b, p. 5). This, made possible by the airlines strong cash flow position, has allowed it to maintain a fuel-efficient fleet that averages just over five years of age without resorting to heavy borrowing or costly leasing deals.The fleets of most other international carriers are more than twice as old as SIAs. SIAs fleet is in fact the youngest in the world, not taking into account the couple of small regional airlines that have just started up.For SIA, this strategy which entails heavy capital costs, however, translates to s ignificant savings through minimising aircraft downtime and minimizing maintenance costs. Newer aircraft are also faster and more fuel efficient, and are perceived by passengers to be safer. For instance, the B747-400 is 10 percent more fuel efficient than its predecessor. For SIA, this means a significant saving as about 15 percent of the companys expenditure is on fuel (Asian Business Review, 1996, p. 34).Most airlines use a combination of different financing schemes for their aircraft with the core fleet usually on long-term leases to minimise interest costs. SIA