Unformatted text preview: 1 Problem Statement Go Global, SingAir
Emerging Markets Presentation
Nov.10th , 2007 2 3 Situation Analysis Alternatives 4 Recommendations 5 What Happened Problem Statement
Problem Statement Situation Analysis Alternatives Recommendations What Happened The corporate strategy challenge is how Singapore Airlines should position itself in order to achieve growth as it evolves from a Singapore centric company into a global airline. 2 3 4 5 SIA
Very strong market position and reputation Economy of scale and scope Well positioned to leverage expertise into other markets and industries Diversity Debt ratio Airline Industry
Open skies agreement Government issues in different regions Impact of terrorism Oil prices 2004 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary. Ansoff Grid Matrix
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New Market Existing product to new market. Purchase Foreign Carrier Situation Analysis To diversify into a new business in new market Alternatives
Existing Market Recommendations Strengthen existing business. Organic Growth New products to existing market Start low cost airline What Happened Existing Products New Products Organic Growth
Open market, open skies Growth through acquisitions
Purchase a foreign local carrier in in a high growth market to capture domestic market share Plan Continually expand network where demand arises Increase frequency where needed China, India, Middle East, Russia Leverage SIA brand Plan High demand in domestic market Identify high growth market Growth in markets 20% Analyze political and legal situation - India Disadvantages Limited growth potential Competition from other hub-and-spoke hub- andcarriers Capacity constraints with delay of A380 Advantages Disadvantages Government regulations Hard to identify a suitable partner Considerable risk large Growth Through Low Cost Carrier
Enter the low cost carrier market 1 Plan
Develop a new brand for low cost market Copy Ryanair and Southwest model Target middle size cities, expand the network throughout SE Asia ` Growing the pie' Price conscious leisure market pie' Problem Statement 2 3 4 Situation Analysis Alternatives Recommendations What Happened Disadvantage Government regulations Hard to identify a good location Local competition - AirAsia 5 2004 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary. Go into China: Acquire China Eastern Airlines
Identify a market
Identify a Partner Enter the market Why China?
Booming Civil Aviation Market
2nd largest in the world after U.S. Highest Growth:
14+% growth per year between 2005-2010 700+ new airliners added between 2005-2010 40+ new airports added between 2005-2010 China
India? South America? China Eastern
China Southern? Air China? Domestic International Increasing int'l air traffic:
20+% int'l passenger growth in 1st half,2007 16+% average growth between 2005-2010 Stable strong demand:
Constant 10% annual growth in GDP, stable income growth for residents becoming the largest destination for world travels Why China?
Releasing government control Opening skies Enhancing competition Willing to implant int'l standard into national airlines Improving infrastructure: CNY140B spending in airport construction in next 5 years Why China?
Low Cost Labor Market
Well educated new labor force Much lower wage level compared to Singapore Upcoming Global Events
2008 Beijing Olympics 2010 Shanghai EXPO Why China Eastern?
It is a large national carrier
3th largest airlines in China 30% market share, covering all the major airports in China Fleet size: 211 Destinations: 103 Why China Eastern?
It is the only possible target among the 3 national airlines
Air China is the flag carrier of China, impossible to be sold to a foreign company China Southern is largest carrier in China, on its way to join Sky Team, a rival of Singapore Air's Star Alliance China Eastern is mainly owned by Chinese government (62%) and Air China (11%) (Star Alliance Member), not a member of any major alliance China Eastern has the worst management performance and reputation among the big 3, making it more likely for Chinese government to sell a stake and bring in better management 2004 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary. Why China Eastern?
China Eastern's base Shanghai: Best new hub candidate for SIA in Asia
The location: Center of East Asia
A bridge: connecting int'l routes with major cities in China A transfer point: close to South Korea, Japan, SE Asia as well as most cities in China Shanghai The capacity: China Eastern dominates the two int'l airport in Shanghai
Pudong (PVG): focusing on int'l traffic Hongqiao (SHA): focusing on domestic traffic Shanghai The market: largest business market
Shanghai captures most business travelers in China due to its financial center status What to do after acquisition?
Inject management expertise Introduce new culture and new service standard Integrate China Eastern with Singapore Airlines to optimize the route map and share the resources Create new routes and new destinations Thank you! Q&A Outcome - 2007
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Problem Statement SIA has recorded steady organic growth SIA is 49% owner of Tiger Airways set up 2003 Situation Analysis Alternatives Recommendations What Happened SIA recently purchased 25% stake in China Eastern Airlines Tiger has set up local subsidiaries in Australia, and in talks for Korean offshoot 2004 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary. Back up
SIA SE Asia route map SilkAir SE Asia route map Ryanair
Low cost airline features
Quick turnaround High utilization Ancillary revenues Secondary airports Non unionized labor Single aircraft type Growth 2004 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary. ...
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- Fall '06
- Shanghai Pudong International Airport, Situation Analysis Alternatives, China Eastern