Porters’ 5 Forces for Sia
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Five Forces Model (MAS & Tiger Airway and SIA)
New Entrants
Deregulation results in lower fares and higher load factors, revolving lesser around service quality.
A major upgrade to SIA in-flight service and cabins where the various newer airline class with an improved facilities and features such as higher exclusivity and more spacious which the older class already leave a good positive image to customers in the past.
Supplier Power
As of date, MAS is working with aircraft manufacturers like Airbus, Boeing, and Fokker and Tiger Airways with Airbus with regards to its supply of aircrafts and electrical parts. Being major suppliers that cater to the international market, these companies relatively hold more power than the airline itself. SIA who adopts the policy of maintaining a young fleet has Boeing and Air bus as their two major suppliers of aircraft and constant renewal is seen. This leads to a great supplier power by Boeing and Air Bus as they are the largest suppliers which have the youngest and performance fleet that SIA will need.
With the recent increase of oil prices to $100 per barrel, fuel cost is expected to rise as well, indirectly affecting the rate of fuel levy for passengers. With limited global supply but an accelerating demand for fuel, costs of operation is greatly increased, as fuel supply holds a 15 to 20% in operation costs.
Tiger Airways in August 2004 flew into a difficult period and also for the aviation industry due to rising oil prices and intense competition from other airlines. Tiger Airways then held off imposing fuel surcharges as its competitors have done to minimize the suppliers power.
Rivalry in the Industry
Malaysia Airlines (MAS) currently flies to a total of 86 international destinations from Asia to Europe, excluding 32 domestic routes operated within the country itself. Being the national airline of Malaysia, it is supported by the government with regards to traffic and landing rights.
As of 31st March 2005, MAS has a total fleet of 90 aircrafts, with 3 Airbus A380 on order. Its huge fleet is almost twice of that of Air Asia, which only has 50 aircrafts in service, and 2 Airbus A320 on order.
Tiger Airways flies to 31 destinations within Asia and Australia regions, and has a single-class configuration of 180 seats and a maximum take-off weight of 77,000kg. As of 19th December 2007, the airline has a fleet of 12 aircrafts, with 58 Airbus A320 on order.
The differentiated total plane experience of SIA has appeal strongly to their many loyal customers which allows them to offset the price competition issue to go for premium quality services and experiences. Great in-flight service of their Singapore girl as a strong niche where many competitors especially budget airlines are unable to fight against and SIA ability to gain competitive advantage.
Buyer Power