Can Singapore Airlines continue leveraging Pareto Principle?

Most commercial airlines use the Pareto Principle in their revenue generation structure. Singapore Airlines is not an exception. But the critical fact is that she relies more and more on this business strategy ignoring future risks from geoeconomics.

Revenue from First and Business classes, known as Premium Seats, account for more than 75% of the operating revenue whereas economy class on average ranges between 12 to 20 %. This is reflected in the seating arrangement.

Typical A380 seating is split across two decks. The upper deck contains all First Class and Business Class cabins, along with some Premium Economy numbering into 6 First Class suites, 78 Business Class seats, and 44 Premium Economy seats. Lower desk has mainly 343 Economy seats totalling 471 seats.

Ticket prices for Singapore Airlines A380 flight from Singapore to London is as follows: First class suites priced between S$ 10,000 to S$38,000 for a one-way ticket. Business class at S$2,771 (round-trip) and Economy starting at S$796 (round-trip) completes the list price. However, these figures are just estimates and subject to change depending on booking time, season and demand.

For the financial year 2024/25 the airlines rerecorded an operating profit of S$ 1.7 Billion amid heightened competition and the record level of passengers carried. Surprisingly the airlines scored about 15% operating margin closely followed by Emirates around 14% whereas the industry average hovers around 6%.

Here is the nutshell of Singapore Airlines business strategy:

a) Leveraging Pareto Principle by concentrating upon the premium customers

b) Service excellence as the prime mover in delivering the product of flying across the continents

c) Demonstrating the concept “luxury pays for the cost of delivery” by pampering the premium classes with hard product such as suite, seats and the environs and soft products such as gourmet dishes and high-end spirits along with expensive disposables

d) Projecting the impression that Singapore Airlines is indeed a flying five star hotel.

Yet the airlines continue to wrestle with declining operational profit on one hand and heightened completion from Emirates on the other.

Where the airlines has failed, is in assessing the geoeconomics risk that could thrash her in future years. Rising China is only one of these risks and there are several other too. Navigating strategy amid geoeconomics is sine quo non for this Asian Airlines.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist

 

 

 

EU strategy on Chinese tech shows Dracula Teeth

In Dracula films it is his teeth that shakes the audience off their seats. So frightful is the blood sucking dentitions that the sight of it gives two kind of feelings: fear and loss. Recent Nexperia takeover by Netherlands is only the tip of the iceberg. Expect more showing of Dracula Teeth: 

The EU is trying to alter her domestic investment policy whereby foreign companies who intend to set up or already are operating tech companies within EU have to part with their IP or key technology behind their operation to the EU authorities.

Once the key technologies are so handed over to EU authorities investing companies would tend to lose their techno edge in promoting their business within EU. These key technologies then would be made available to companies that are domestically incorporated fully owned by EU citizens, who receive highly valuable assets in the form of software and hardware without spending a cent.

On the other hand the foreign investor get fixed in a situation where he has to compete with his domestic rivals only at the labour cost and nothing else.

This manoeuvre in the EU business strategy smacks not only of thievery on their part but hypocrisy too. All these years EU companies made it a condition while investing abroad that their key technologies including IPR would be held close to their chest and states where factories or assembly lines are located are forbidden to request any details of these.

Recent occurrence was in the case of Rafale Aircraft assembly in India where Dassault Aviation the manufacturer of the jet fighters would not part with their IPR even in the worst case scenario where several Rafale fighters were shot down in the air battle between India & Pakistan.

The two lessons to be drawn is as follows:

a) China being the leading investor in EU as far as manufacturing is concerned should produce low techy items within EU and transport to a Non-EU state inside or outside European Continent for assembly lines where high tech components could be fitted in before re-exporting back to EU countries.

b) As a reciprocal measure China should ask automobile companies such as Mercedes Benz who have assembly or full manufacturing plants in China to hand over their technologies and IPR  in order to be allowed to produce their vehicles inside China.

Navigating strategy amid geoeconomics mandates this measure be followed by China until such time EU returns to status quo ante.

 

Cheers!

 

Muthu Ashraff Rajulu

Business Strategist

Mobile: + 94 777 265677

E-mail: cosmicgems@gmail.com

Blog:   Business Strategist