At the end of the financial year 2013, the Singapore Airlines Group achieved a net profit attributable to equity shareholders of $379 million for the financial year. Even despite recording lower operating profits that arrives from high Jet fuel prices and lower returns due to weak global economy.
Fig 1.1 Financial review of FY13 (taken from SIA FY2013 report)
Based on the FY2013 report, SIA (2013) reported that:
“During the financial year, air travel and freighter demand continued to be affected by the ongoing weakness in the Eurozone and sluggish recovery in the United States. Yields were diluted as tactical promotions were launched to boost loads amid intense competition and key revenue-generating currencies depreciated against SGD. Fuel prices remained high despite the weak global economic conditions. This had negatively impacted the Group’s operating performance as fuel cost is the largest cost component, constituting about 40 per cent of the Group’s operating expenditure.
Group revenue grew $240 million (+1.6 per cent) to $15,098 million, mainly from airline operations, as a result of stronger passenger carriage, albeit at lower yields. This was partially offset by lower cargo revenue from a contraction in both loads and yields.”
With reference to Fig 1.1, despite the improvement of revenue compared to FY12, the core business operating profits has dropped 19.8% comparatively. Yields and loads from both passenger and cargo businesses were weaker than expected even though attempts to boost traffic were made. With SIA highlighting that, the core business are expected to remain under pressure. Moreover, with the addition of rival airlines and the depreciation of revenue-generating currencies against the SGD, this is a concern to SIA as it would greatly impact the future of the company.
Problem Statement
Since 2012, SIA faced intense competition from the rise of Gulf carriers at the premium market and budget airline rivals at the