Singapore Airlines (SIA) is Singapore’s flag carrier and one of the most successful airlines in the world. To date, SIA has never posted an annual loss and is a consistent industry leader in service, innovation, efficiency and branding. Listed on the Singapore Exchange in 1985, SIA’s majority shareholder is Temasek Holdings. The airline has received numerous accolades and awards, and was ranked 33rd in Fortune magazine’s list of most-admired companies in 2009.
Background
SIA’s origins lie in the formation of Malayan Airways on 21 October 1937. The airline was incorporated by British Imperial Airways (later British Overseas Airways Corporation), Straits Steamship Company and Ocean Steamship Company of Liverpool. With doubts over the commercial viability of a Singapore-Malaya air-route at the time, Malayan Airways lay dormant and was revived only after World War II. BOAC transferred its shareholding to Straits Steamship, and provided technical advice for the new airline.
On 2 April 1947, five businessmen chartered a Malayan Airways flight from Singapore’s Kallang Airport to Kuala Lumpur. A month later, the same plane was put into use on a thrice-weekly schedule, from Singapore to Kuala Lumpur and then on to Ipoh and Penang. Kuantan and Kota Bahru were added to the route network a few months later.
Malayan Airways continued to acquire more planes and add more routes. In line with political developments, the airline changed its name to Malaysian Airways in September 1963 and then to Malaysia-Singapore Airlines (MSA) in May 1966. That month, the Singapore and Malaysia governments injected fresh capital into the carrier, bringing their shareholdings to 42.79% each. The rest of the shares were held by the Brunei government, BOAC, Qantas, the Straits Steamship Company and the Ocean Steamship Company.
The airline was profitable, but by 1971 there were differences between the Singapore and Malaysia governments over MSA’s corporate direction. In April 1971, the Malaysian government announced the end of the MSA alliance. The company’s assets were divided, with Singapore receiving all the Boeing aircraft, airline headquarters building, aircraft hangars and maintenance facilities at Paya Lebar Airport, computer reservation system and most of the overseas offices. Malaysia received the Friendship Fleet, Britten-Norman aircraft, equipment in Malaysia and some overseas offices, and Singapore paid compensation for the imbalance in the divided assets.
Formation of SIA
The newly named Singapore Airlines became Singapore’s flag carrier and inherited MSA’s international route network, which connected over 20 airports across 18 destinations including Europe, the Middle East, Australia and parts of South, Southeast and North Asia. The new company’s chairman was J. Y. Pillay, formerly the joint chief of MSA, and the first managing director was Lim Chin Beng, also from MSA. SIA started with 6,200 staff and its first flight departed from Paya Lebar Airport.
Within months of its formation, SIA became the first airline in Southeast Asia to order jumbo jets when it placed an order for two Boeing 747-200 aircraft. The airline’s senior management anticipated losses in its first year and commenced a cost-cutting programme, even as they invested in modern aircraft and embarked on aggressive branding and advertising campaigns. However, against expectations, SIA recorded a profit of around S$15.5 million in its first year.
Expansion and strategies
The lack of a domestic air-travel market meant that from the start, SIA and the Singapore government had to focus on the expansion of the airline’s international route network. Between 1973 and 1997, the government signed air services agreements with the governments of Australia, New Zealand, Indonesia, Malaysia, Japan, India, Taiwan, Korea and the Philippines. These agreements helped pave the way for future negotiations for air traffic rights. Other routes were added via code-sharing agreements and strategic alliances. By 1999, SIA had operations in 110 cities across 42 countries.
Other facets of SIA’s strategy included the growth of a modern aircraft fleet, the development of Changi Airport as an air traffic hub, and the promotion of Singapore as a travel destination. A key factor in SIA’s growth was Singapore’s development as a hub for Southeast Asian business. SIA experienced growth of 20% to 30% in the 1970s, 10% to 20% in the 1980s, and around 8% per annum in the 1990s.
Service culture
MSA had been a member of the International Air Travel Association (IATA) but SIA chose not to join the association in its early years so as to form a distinct service identity. SIA’s service features included offering economy class passengers a choice of meals, complimentary drinks and headphone sets, which were business class privileges with most other airlines at the time. These were seen as innovative offerings during the 1970s and eventually became standard service offerings across the industry. SIA has continued to work at differentiating itself by developing and investing in service innovations and in-flight offerings.
To develop its service culture, SIA opened seven schools to train staff in the core functional areas of cabin crew, flight operations, commercial training, information technology, security, airport services and engineering. An SIA Management Development Centre also exists. The company benchmarks its customer service not only against other airlines, but also against those in other industries such as hotels, restaurants and car rental companies. These measures have helped SIA receive a long list of awards for service from various publications and surveys.
Branding
From its inception, SIA has invested substantially in its brand. In 1972, SIA worked with an advertising agency to “present Singapore Airlines as a competent, modern, international airline of Asian origin, offering the best in-flight service in the world”. During its initial drive to penetrate the United States market, SIA invested up to 10% of its projected revenue on advertising, compared to the industry average of between 2% to 3%. On average, SIA spent S$35 million per year on advertising during its first 21 years.
In its early days, the airline would run between three to four commercials per year based on the Singapore Girl concept of a stewardess-driven service culture. Genuine SIA cabin crew were used in advertisements to promote the Singapore Girl’s carefully defined set of aesthetic and warm personality traits as being representative of SIA’s style of service. The Singapore Girl is now one of the airline’s most recognisable trademarks despite some criticisms of sexism and subservience in the image.
Investments, alliances and subsidiaries
During the 1990s, SIA sought to acquire stakes in other airlines to increase capacity and explore new opportunities. SIA’s first attempt was a failed bid in 1992 to take a stake in Qantas. Following this, potential investments in several airlines reached varying stages but none came to fruition. SIA’s first two major investments were completed between 1999 and 2000 when it took a 25% stake in Air New Zealand and a 49% share of Virgin Atlantic. In 2003, SIA took a 49% stake as one of the co-founders of budget airline Tiger Airways.
Strategic alliances were one way of bypassing regulatory constraints and SIA entered into equity-based alliances with Delta and Swissair in 1989, as well as a joint marketing agreement with Air Canada. This was followed by link-ups with Air New Zealand and Ansett, and with Lufthansa between 1997 and 1999. SIA then joined the Star Alliance in 2000.
SIA has a range of subsidiaries and associate companies in diverse fields of the aviation industry. Subsidiary Silkair is its regional and leisure arm, while various companies are involved in ground handling services, tour operations, catering, aviation engineering and air cargo services. Many of these companies were previously operational units for the airline that were hived off to become subsidiaries.
Author
Alvin Chua
References
Allen, R. (1990). SIA: Take-off to success. Singapore: Singapore Airlines.
(Call no.: RSING 387.70605957 ALL)
Batey, I. (2002). Asian branding: A great way to fly. Singapore: Prentice Hill.
(Call no.: RSING 658.827 BAT)
Chang, Z. Y., Yeong, W. Y. & Loh, L. (1996). The quest for global quality: A manifestation of total quality management by Singapore Airlines. Reading, Mass.: Addison-Wesley Pub.
(Call no.: RSING 387.70655957 CHA)
Heracleous, L, Wirtz, J. & Pangarkar, N. (2009). Flying High in a competitive industry: Secrets of the world’s leading airline. Singapore: McGraw Hill.
(Call no.: RSING 387.70655957 HER)
Huang, W. X & Ang, T. (Producers). (2007). A Few Good Men: Episode 2, J. Y. Pillay [Television series]. Singapore: MediaCorp News.
(Call no.: RSING 354.095957 FEW)
Lim, S. (Producer). (1996). In Conversation: Episode 16, Cheong Choong Koong [Television series]. Singapore: Television Corporation of Singapore.
(Call no.: RSING 080.95957 IN)
Singapore: The Encyclopedia (2006). Singapore Airlines (p. 479). Singapore: Editions Didier Millet.
(Call no.: RSING 959.57003 SIN - [HIS])
Tham, P.C, Lee C. Y. & Koh, A. (Eds.). (2004). Singapore enterprises in China: 14 success stories on Temasek-linked companies (pp. 243-249). Singapore: IE Singapore, Lianhe Zaobao & Lingzi Media.
(Call no.: RSING 332.6735957051 SIN)
Wee, B.G. (Ed.) (2004). Government-linked companies and other organisations in Singapore (pp. 1-37). Singapore: Nanyang Technological University.
(Call no.: RSING 352.266095957 GOV)
The information in this article is valid as at 2010 and correct as far as we are able to ascertain from our sources. It is not intended to be an exhaustive or complete history of the subject. Please contact the Library for further reading materials on the topic.
