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
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