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Get the Real Deal! Fly Cheaper!
BSP3001 Business Policy and Strategy

Submitted by: Meenakshi Muthuraman (U098249W) Duong Huyen Trang (U098850B) Pham Yen Thanh (U098338L) Kwan Kin Weng (U090381H)
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Gopal Kumar (U081791R)

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Table of Contents
1. Introduction 1.1 Background 1.2 Business Model 1.3 Financial Information 2.Internal Environment Analysis 2.1 Strengths 2.2 Weaknesses 3. External Environment Analysis 3.1 Opportunities 3.2 Threats 3.3 Evaluation of SWOT 4. Industry Analysis 5. Competitor Analysis 6. Business Level Strategy 7. Corporate and Global Strategy 8. Governance and Ethics 9. Future Strategies and Evaluation 9.1 Acquisition of Tiger Airways by Singapore Airlines 9.2 Loyalty Program 9.3 Improving Customer Satisfaction and Safety 9.4 Expansion 10. Conclusion 11. References 12. Appendix 3 3 3 3 5 5 5 8 8 9 10 12 13 15 17 21 21 22 24 25 27 28 29

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1. Introduction
1.1 Background
Tiger Airways Holdings Limited is a holding company formed in 2007 and based in Singapore. It was formed for the purpose of easier management and control of its 2 wholly owned subsidiaries – Tiger Airways Singapore and Tiger Airways Australia. As of February 2010, Tiger Airways Holdings Limited (“Tiger Airways”) is listed in the Singapore Stock Exchange (SGX). Its major shareholders are Singapore Airlines Ltd which has a stake of 32.84%, and Dahlia Investments Pte Ltd which has a stake of 7.37%. Tiger Airways believes that its focus on providing customers with affordable air travel positions it well for growth, as Asia and Australia are the world's most populous regions, with the fastest growing aviation market in the world, and the low-fare, low-cost model remains under-developed in the majority of countries in the region.

Tiger Airways Holdings Ltd

Tiger Airways Singapore
•Incorporated in 2003 •Commenced flight services in 2005 •Low cost airline serving Southeast Asian market (25 destinations in 9 countries)

Tiger Airways Australia
•Incorporated in 2007 •Commenced flight services in 2009 •Low cost airline serving Australian domestic market

1.2 Business Model
Tiger Airways’ business model is based on that of other successful low-cost airlines, such as Europe's Ryanair. This model involves scrutinizing every single aspect of the business to remove non-essential costs without compromising passenger safety, security or punctuality. Its objective is to maximize profitability by developing a portfolio of routes with consistently high passenger load factors and carefully managing capacity. This allows Tiger Airways to offer its passengers competitive low fares on a consistent and sustainable basis, while enabling it to maintain low cost base, thus improving profitability.

1.3 Financial Information
Page Tiger Airways Holdings reported strong financial result for the financial year ended 31 March 2011. Profit before tax was $57.0 million, almost tripling the $19.9 million recorded for the financial year

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ended 31 March 2010. Profit before tax margin for the financial year 2011 was 9.2%. Profit after tax for the year was $39.9 million, an increase of 41.5% versus the prior year. Tiger Airways Singapore delivered an operating profit of $53.8 million for the financial year ended 31 March 2011, which can be attributed to solid demand and robust economic conditions in Asia. Tiger Airways Singapore increased its fleet by four aircraft during the financial year to end the year with 14 Airbus A320 aircrafts. In contrast, Tiger Airways Australia delivered an operating loss of $9.0 million for the financial year ended 31 March 2011. Challenging operating conditions in the financial year dampened Tiger Airways Australia result, especially with the adverse weather condition in the fourth quarter. Some snippets of Tiger Airways’ financial performance over the last 5 years can be seen through the graphs below (LCC = Low-cost Carrier):

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Tiger Airways FY2011 Full Year Result Presentation,http://www.tigerairways.com/news/20110520a.pdf

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Figure 1: Financial Performance1

From the figure above, we can see that there have been huge increases in load factors and revenues over the last 5 years. This has been supported by reduction in costs and thus, improving Tiger Airways overall profitability. However, it must be noted that Tiger Airways Singapore has been the significant contributor to these profits and Tiger Airways Australia has been facing a troubled time for the year ended March 2011. Its problems have continued into this financial year as well and this would be explored in the later sections.

2. Internal Environment Analysis
2.1 Strengths
Expertise Having operated its low cost business model for 6 years, Tiger Airways Singapore has gained much experience in the airlines industry. It has developed sufficient expertise to continue meeting the needs of price sensitive consumers while simultaneously ensuring that the company remains profitable. Tiger Airways has been operating profitably for years as observed earlier in Figure 1. The ability to maintain a positive cash balance in the balance sheet is testament to their capability in generating internal funding while the ability to operate profitably implies that the company will be able to secure external funding easily should there be a need in times of expansion. Tiger Airways currently flies to 28 destinations in 10 countries. It aims to create a profitable portfolio of routes to capitalize on the growth rate of Asia and Australia which would fuel the growth of tourism. Being able to transport passengers to so many destinations will serve the company well at present and in future. There is a positive relation between the number of routes served and potential income. Singapore Airlines (SIA) has a major stake in Tiger Airways and this acts as an important source of support for the low cost carrier. As the major shareholder, SIA would be concerned with the profitability and sustainability of Tiger Airways. SIA is a well known airline, famed for its excellent services and has constantly been voted as the best airline in the world. In hard times, the expertise that SIA has gained through its experience in outperforming its rivals can be used to assist Tiger Airways. For example, in July 2011, Tiger Airways Australia had its flights grounded due to regulatory reasons and suffered operating losses of SGD 12 million during the six-week ban. Subsequently, Mr Chin Yau Seng, member of the SIA group since 1995 and former Chief Executive Officer of SilkAir, was tasked to replace Tony Davis as the CEO of Tiger Airways Holdings. Such a move sends an important signal to investors that SIA will not let Tiger Airways falter. Therefore, Tiger Airways has the backing of SIA in times of crisis.

Financial Resources

Portfolio of Routes

Support and Expertise of Singapore Airlines

2.2 Weaknesses
Affected Reputation The decision to ground all flights of Tiger Airways Australia by the Civil Aviation Safety Authority (CASA) affected its brand reputation. The statement issued stated that ‘CASA believes permitting the airline to continue to fly poses a serious and imminent risk to

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Low Customer Satisfaction

air safety’. It was the first mainstream airline to be grounded for safety reasons in Australia. It is important to note that the tarnished reputation could have led to an unfavorable impact on its business in Singapore as well. This is because, in an industry where safety is of utmost importance to all travelers, a tarnished reputation will lead to consumers less willing to travel with Tiger Airways. Tiger Airways has been at the receiving end of a number of complaints pertaining to flight delays and last minute flight cancellations. In 2010, a survey on the domestic airline satisfaction in Australia, conducted by CHOICE, an independent body advocating consumer rights, ranked Tiger Airways the lowest, having garnered only a 56% overall satisfaction score. Their rival, Jetstar, was ranked the second lowest with an overall satisfaction score 5% higher than that of Tiger Airways. Greater details on the survey can be seen in the table shown in Figure 2 below. Also, as shown in Figure 3 below, statistics released by the Bureau of Infrastructure, Transport and Regional Economics (BITRE) in Australia indicated that for the year of July 2011, Tiger Airways has the lowest percentage of on-time departures and on-time arrivals as compared to their rivals. Their 3% flight cancellation rate is also the highest among the airlines for that year.

Figure 2: Domestic Airline Satisfaction Results

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Figure 3: On-time Performance for 2011

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Source: CHOICE Domestic Airline Satisfaction survey 2010 results Source: Bureau of Infrastructure, Transport and Regional Economics

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The analysis of the internal environment highlights various strengths and weaknesses of Tiger Airways. Notably, Tiger Airway’s years of operations in the industry has allowed it to build a profitable business model and the expertise and experiences gained has allowed it to garner a significant share of the market in this industry. An equally important fact is that Singapore Airlines is highly likely to provide expertise to Tiger Airways in times of needs since they have a huge stake in the budget carrier and this transfer of expertise will greatly benefit Tiger Airways and can help boost consumer confidence in the budget airline as well. However, there are weaknesses within Tiger Airways as well. Reputation will definitely be affected as a result of their infamous incident with the Australian authorities resulting in the grounding of their flights. Also, survey indicates that in terms of customer satisfaction, Tiger Airways has a huge room for improvement. In Australia particularly, flight delays and cancellations would possibly have affected the image that consumers have of the airline. From this analysis, we can make some preliminary conclusions that possible reasons for Tiger Airways Australia’s operating losses are poor customer services and low satisfaction as compared to its competitors. These issues do not seem prevalent in Tiger Airways Singapore although there may be a spillover effect in terms of poor reputation. However, one essential thing to note from Figure 2 is that although the overall score and the individual scores for certain sections rank Tiger Airways Australia poorly with respect to its competitors, Tiger Airways generally has the lowest cost among its competitors. This can really be a sustainable competitive advantage as the ability to operate at lower cost than its competitors is a very valuable core competency to possess in the budget airlines industry where costs have to be low to offer competitive ticket prices. Additionally, this ability may be argued to be rare as none of its other competitors seem to have achieved similar ratings for the cost component. Whether the low cost model used by Tiger Airways is costly to imitate is unclear. However, we can infer from the fact that others haven’t been able to copy the model yet, that it may not be possible yet to imitate in terms of the expertise and knowledge required to operate at such low cost. The last factor required to make it a sustainable competitive advantage is substitutability. In this aspect, this model seems to be substitutable because all the other competitors appear to have achieved a higher overall rating than Tiger Airways Australia. It may be that customer service and the low cost model is a trade off to each other. Nonetheless, if Tiger Airways is able to achieve the tricky strategy of improving their customer service with only a marginal increase in cost, the low cost model would really be unsubstitutable and become a sustainable competitive advantage for Tiger Airways.

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http://www.bitre.gov.au/publications/17/Files/BITRE%20OTP%20Report%202010-11.pdf

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3. External Environment Analysis
3.1 Opportunities
Economical Unstable global economy The current uncertain state of the economy will lead to a reduction in consumer spending as well as tourism revenue. However, this presents an opportunity for low cost carriers since travelers on tight budgets will shift their attention towards these carriers. An additional point to note is that oil prices are traditionally lower in economical downturn due to a reduction in global demand. The decline in oil prices will lead to massive cost savings for low cost carriers as well. In 2009, when the global economy was greatly affected by the sub-prime crisis, the European Low Fares Airlines Association (ELFAA) actually recorded an increase of 8.7% in passenger volume. Such a result was very significant considering the fact that the overall drop in passenger volume was 5% and the major carriers lost about 20 million customers. Thus, at present, with the debt issues surrounding a large part of Europe as well as economical issues facing the United States, this unstable global economy might lead to more profitable opportunities for budget carriers such as Tiger Airways. The increase in GDP within Asia, where Tiger Airways is based in, may lead to stronger growth in tourism and travelling within this region. In fact, the decision to focus their business in this region was in part due to the growth of Asian countries. A large number of these groups of consumers are also price conscious and would consider taking the low cost airlines over other national airlines. Globalization ensures that countries are more highly connected and the increase in cross-border activities would lead to an increase in travelling across countries. The growth and emergence of Asia, where Tiger Airways is based, implies an increase in business opportunities existing in Asia and such activities will have a positive impact on budget carriers. The fast pace of technological advancement and innovation would help to significantly reduce cost for low cost carriers in the future. Unlike major or national airlines, budget carriers have a low focus on customer service and many of them attempt to provide simply an adequate level of service with a key focus on reducing cost. Cost reduction can lead to an increased profit margin or an increase in passenger volume through a reduction in ticket prices. This is definitely feasible considering the fact that the target market comprises consumers who are extremely price sensitive. The increased usage of the internet provides an easy and viable mean for Tiger Airways to market its services as well as to execute transactions with customers. As of March 2011, the number of

Rise in income level

Globalization

Technological Innovation and technological advancement

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Accessibility of internet

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Social

Asia’s population size

internet users in Asia represents 44% of total internet users in the world. The growth in internet usage in the developing countries in Asia increases the reach of Tiger Airways to its target market without the company having to incur much additional cost. Furthermore, this means that more and more people would resort to booking tickets online which results in reduced administrative expenses for Tiger Airways. China and India are the two most populated countries in the world at present and it would probably remain that way in the foreseeable future. With a population of an estimated 1.33 billion in China and 1.17 billion in India, these two countries alone represent 37% of the global population. Their presence in Asia would provide Tiger Airways with a large market potential.

3.2 Threats
Economical Oil prices The rise of oil prices will constantly be a threat to Tiger Airways. Due to the nature of their business, a large portion of their operational expenses comes from fuel costs. An increase in oil prices can be due to many factors. This includes a surge in demand for oil as well as political unrest such as those seen in the middle-east region recently. The increased usage and accessibility of the internet can be a doubleedged sword. Negative experiences encountered by customers of Tiger Airways will have a highly probable chance of being aired in online forums and such criticisms would have a wide audience as well. This remains a threat to Tiger Airways and the airline has to ensure it reacts to feedbacks and complaints in a positive way in order not to place its reputation at risk. Having been cast in the spotlight in Australia for failing to meet safety requirements and subsequently having their flights grounded for five weeks, Tiger Airways faces the threat of having their operations being more heavily scrutinized by other aviation authorities. Apart from that, failure to satisfy the conditions laid down by the relevant authorities might lead to further grounding of flights in the future and these may lead to huge losses similar to the SGD12 million incurred by the ban in Australia. The intensity of rivalry in the industry is high. This is due to the number of existing rivals that Tiger Airways is competing against such as Jetstar and AirAsia. Any strategic actions taken by these competitors will have an impact on Tiger Airways and retaliation is expected. Also, in an industry which is cost driven, level of brand loyalty is non-existent. The airline has to ensure its pricing remains competitive with that of its rivals to prevent losing market share. Apart from budget airlines potentially snatching revenue away from Tiger Airways, major airlines also present a threat to Tiger Airways. Just recently, SIA revealed plans to compete in this low cost industry

Technological Accessibility of internet

Legal

Further sanctions by flight authorities

Others

Current competitors

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Future competitors

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Natural events

as well. SIA’s new wholly owned subsidiary will cater to medium and long haul routes, and is expected to begin operations within a year. This will prove worrying for the other low cost carriers since such major airlines might attempt to compete in the Asian region as well. Established brands like SIA has the financial resources to engage in price wars with low cost carriers and apart from that, such established brands definitely have better expertise in the airline industry as well as better knowledge on consumer needs and wants. Natural events will be a constant threat to Tiger Airways at the present and in the future. Natural events like volcanic eruptions can affect visibility and result in flight cancellations. Such events will have an impact on revenue. In June 2011, numerous flights were disrupted due to an ash cloud from a Chilean volcanic eruption.

Analysis of the external environment highlights the profitability of operating in Asia. Apart from the sheer population size of both China and India, globalization has ensured that income levels within the region are rising. Also, the current global issues, such as the dismal employment outlook in the United States as well as the debt crisis in Europe, will lead to slower growth in this region for the near future and low cost carriers can gain from it as travelers attempt to travel in an economical way. Technological advances have enhanced communication via the internet and marketing efforts can be made more cost efficient through this medium. Looming threats include strategic actions taken by their current competitors as well as the possibility of having new players in the industry, some of which might be wholly owned by major airlines. Uncertainty in oil prices as well as unpredictable natural events can have an impact on the business of Tiger Airways as well. Having analysed the opportunities and threats we can match them with the strengths and weaknesses to evaluate the possible strategies that Tiger Airways can adopt in the future for have better growth.

3.3 Evaluation of SWOT Analysis
O P P O R T U N I T I E S Strengths From the external analysis, it can be seen that the rise of Asia due to population growth and rising income levels presents a huge profit opportunity for budget airlines if they can capitalize on it. Tiger Airways can work on its strengths to tap on these opportunities. It is clear that Tiger Airways has the expertise and experience to identify and predict consumer trends and preferences at the present and in the future respectively. Thus, Tiger Airways will definitely be able to tap on this increasing consumer base by delivering what consumers want at Weaknesses The current weaknesses of Tiger Airways might affect its ability to tap on the profit opportunities that arise from the growth of Asia. A tarnished reputation as well as a perceived low level of consumer satisfaction in Australia can affect their ability to entice travelers to travel with them. Profits for Tiger Airways will definitely be in a positive relation with the growth of Asia. However, it must be noted that a perceived low level of consumer satisfaction might mean that Tiger Airways is not utilizing its profit making

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competitive prices. Given that Tiger Airways currently has an impressive portfolio of routes, tapping on the increasing consumer base will mean that Tiger Airways has to expand its services. This could be done by serving more destinations and by increasing the frequency to the present destinations. Looking at its current financials, Tiger Airways definitely has the ability to engage in such an expansion.

opportunities to its full extent. Profits may rise but foregone profits due to lower brand image may occur. Also, in an interconnected world, negative words of mouth can spread easily via the internet and this is something that Tiger Airways has to take note of. Thus, in order to fully tap on the opportunities, Tiger Airways must work on its weaknesses and improve its services to effectively deliver what is expected by their consumers.

T H R E A T S

Actions for the future: Improving on Actions for the future: Expansion services and safety The threats facing Tiger Airways include Looking at the current weaknesses, certain uncertain oil prices and natural events. It is threats prove to be of likely significance in noted that despite the possibility to hedge the future. against price risk through its experience gained, it would be hard to completely With a perceived low consumer satisfaction eliminate all risks. Being able to mitigate the level in Australia and noting the fact that risk of oil price fluctuations will enable prices negative words of mouth can be easily spread to be made more competitive. via the internet, rivals can have an advantage over Tiger Airways as a result. Competitors For the threats posed by its current rivals, might attempt to leverage on this and try to Tiger Airways has to once again rely on its snatch market share away from Tiger expertise and experience to compete against Airways. A possible solution to protect them by ensuring that they implement the against that is to improve on its existing correct strategies, both at a business and service levels. Tiger Airways definitely has corporate level, to diminish the threats posed the ability to do so. by their rivals. Also, in the event that major airlines enter With the possibility that more major airlines the low cost industry, consumers will most will enter the low cost carrier industry, Tiger likely switch to these new airlines due to a Airways can look towards being acquired by higher perceived brand value. This threat is a reputable and major player in the airlines extremely worrying for Tiger Airways since it industry. Given its available strengths and would be hard to compete with major profitability, acquisition is viable since Tiger airlines due to the difference in financial Airways presents a good target for acquirers. resources. Acquisition by a major airline might mitigate the threat. Actions for the reduction of risks future: Acquisition, Actions for the future: improving on services Acquisition,

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The evaluation of the SWOT Analysis has revealed the 3 future actions that have to be taken. They are acquisition, improving customer service and expansion. These actions for the future are elaborated in detail under section 9, future strategies.

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4. Industry Analysis
Bargaining Power of Suppliers Although there are only two suppliers of aircrafts in the world, Boeing and Airbus, the bargaining power of suppliers in the industry is low. This is due primarily to the intense competition between the Boeing and Airbus, in which both companies actively compete for businesses with the various airlines in order to secure the deals. This significantly increases the power of the airlines in negotiations. Rivalry among competing firms The intensity of rivalry among competitors is extremely high in this industry. The firms are similar in size and power and as such, an action undertaken by one firm would lead to swift and prompt responses from the other firms. High fixed costs ensure that these airlines do their utmost to minimize any excess capacity, often by offering discounts to customers to fill up seats at the last minute. Low switching cost implies that budget airlines are competing over the same target market and as such, there can never be a win-win situation between airlines when it comes to gaining customers. High exit barriers within the industry further ensures that firms will expand all options to stay in the business, further increasing the rivalry among firms.

Threat of Substitute Products The threat of substitute products is low in this industry. For travelers, a flight is the quickest and most convenient way to get to another country. While getting to a destination by land or sea transport is possible, the time taken would be longer and air transport is a more convenient mode of transportation. It is safe to conclude that flight remains the most common mode of transport for travelers going overseas.

Bargaining Power of Buyers

Competitive Rivalry in Budget Airlines Industry

The bargaining power of buyers is high in the budget airlines industry due mainly to the fact that switching cost is almost non-existent and that the services offered by these low cost carriers are similar and undifferentiated. The budget airlines in general do not have means to ‘lock in’ their customers.

Threats of new entrants In determining the threats of new entrants, two factors, barriers to entry and expected retaliation, has to be examined. In the budget airlines industry, the barriers to entry are low. This is due mainly to the fact that there is little product differentiation as well as low switching cost. Aiming to be a cost leader, budget airlines have to keep expenses low and cannot afford to spend much on differentiating their services. Switching cost is low because customer loyalty in this industry is insignificant since the target market is highly price sensitive. Despite the fact that there is high capital requirements needed to enter the industry, it would not deter new players from entering the industry. In fact, established major and national airlines can simply decide to operate a low cost carrier in addition to their current business operations and these big players would not only have the necessary resources to do so, but also the expertise needed to profit in the industry. In May 2011, in the face of competition for premier long haul passengers from other airlines, SIA announced that it will launch a new budget airline. In November 2011, it was announced that the new carrier, Scoot, will be serving destinations including Australia and China with plans to fly to Europe, Middle East and India in time to come. It is foreseeable that there will be other big players venturing into this area given the high potential source of revenue that can be tapped from this industry. Retaliation against new entrants might not be that effective in the budget airline industry. Firstly, engaging in price wars is not only unsustainable but also not feasible given that most of the prices offered are already at its lowest. Secondly, retaliating by aggressive marketing is not cost effective and it is hard to recoup the cost given the low cost business model. Thirdly, attempting to differentiate their services in response to rival entrance is counter-productive as the excess cost has to be passed on to customers eventually while these customers are highly price conscious.

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The industry analysis reveals a high level of intensity and rivalry among firms in the industry. The high bargaining power of customers imply that firms will have to actively outsmart their rivals in the pricing strategies and these airlines have to constantly monitor their supply chain so as to eliminate excess costs. The relative ease of entrance as well as the possibility that more major airlines will enter the industry mean that the number of players will expand in the future and at some stage, consolidation will take place. While an intensely competitive industry implies that abnormal profits are hard to achieve, it has to be noted that a firm can still make abnormal profits if it utilises its compentencies more efficiently than its rivals and engages in the right business strategies. In fact, the intense rilvary in the industry today can be attributed to the highly sustainable profit-making opportunities that is recognised by the various airlines. Thus, Tiger Airways has to continously improve on its efficiency while keeping a close watch on strategic actions taken by its rivals.

5. Competitor Analysis
Jetstar Group and AirAsia have been identified as the main competitors of Tiger Airways Holdings Limited. This is due to three distinct similarities shared between the three companies. Firstly, these airlines cater greater to the Asian region with many flights catering to the same Asian destinations and revenue from these destinations make up a huge portion of their annual revenue. Secondly, these airlines have their business models revolving around being the cost leader in the industry and striving towards delivering competitive prices to the consumers. Thirdly, these airlines are purely budget carriers and are not national airlines. While Jetstar Group is wholly owned by Qantas, it is necessary to note that Qantas is the national airline for Australia and not Jetstar. This competitor analysis is done with more focus on Tiger Airways Singapore than Tiger Airways Australia as the latter’s performance in relation to its competitors has been explored earlier in the internal enevironment analysis. Tiger Airways Holdings Ltd Jetstar Group AirAsia

Destinations served Company history and structure

  

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10 countries, 28 destinations Tiger Airways Holdings Limited established in 2007 Parent company of Tiger Airways Singapore and Tiger Airways Australia Major shareholder  SIA (32.84%)  Dahlia Investments Pte Ltd 7.37%

    

17 countries, 56 destinations Jetstar group launched its operations in 2004 Jetstar Group comprises Jetstar Airways, Jetstar Asia and Jetstar Pacific Jetstar Airways  Wholly owned by Qantas Jetstar Asia  Westbrook Investments (51%)  Qantas (49%) Jetstar Pacific

 

18 countries, 65 destinations AirAsia was established in 1993 and began operations in 1996 Major shareholders  Tune Air Sdn Bhd (26.28%)  Employees Provident Fund Board (8.06%)

Awards and recognitions

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CAPA Low Cost Airline of the Year Award 2010 Top Airline by Growth in Passenger Carriage 2010 (Singapore) In-flight catering (available for purchase) Onboard sales of gifts and merchandise

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In-flight services

 

   

  Ground services   Hotel booking services Car rental services at discounted rates (partnership with Hertz, world’s largest car rental company) Sale of travel insurance
30 25 20 15 10 5 0 Tiger Airways

    

 Financial Performance

 Qantas (27%) Best Low Cost Airline – Australia / Pacific 2011 (SkyTrax) Largest Growth in Passenger Traffic from Singapore (Changi Airline Awards 2011) Business and economy class In-flight catering (available for purchase) Onboard merchandise In-flight entertainment (long flights)  Video and movie entertainment  Audio entertainment Jetstar magazine Comfort pack available for purchase Hotel booking services Car rental services Sale of travel insurance Tie-ups with travel agencies Tour booking services

 

World’s Best Low Cost Airline 2011 (SkyTrax) Best Low Cost Airline – Asia 2011 (SkyTrax) In-flight catering (available for purchase) Onboard sales of gifts and merchandise Video and audio entertainment

  

  

Hotel booking services Car rental services Tour booking services

Price to Earnings Ratio Net Profit Margin Return on Equity

Jetstar

Air Asia
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Figure 4: Financial Performance

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Calculated from Individual Annual Reports

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The competitor analysis indicates a high degree of similarities in the services provided by the three airlines. Given that these airlines are striving to be cost leaders, services are generally undifferentiated to keep cost low. Also, the fact that these services are highly similar affirms that the ability to provide the services listed in the table above merely provides the airlines competitive parity and not competitive advantage. Having these services might not lead to greater ticket sales or market share but not having them might lead to a fall in sales revenue. It is noted that the wider range of in-flight services provided by Jetstar are mainly to cater to long haul flights. A visible difference would be the fact that the number of destinations served by Tiger Airways is lagging a fair bit behind that of their rivals. The financial highlights seem to indicate that Tiger Airways is operating more efficiently than Jetstar but not as well as AirAsia. Additionally, the survey that we conducted among 100 people between the age of 20 and 40 seems to indicate that Tiger Airways is lagging slightly behind its competitors as more people have ranked its competitors in the number one position ahead of Tiger Airways.5

6. Business Level Strategy

Figure 5: Low Cost Carrier’s Position in relation to other airlines

The purpose of business-level strategies is to create differences between the firm’s position and those of its competitors. To position itself differently from competitors, a firm must decide whether it intends to “perform activities differently” or to “perform different activities”. Cost Leadership Strategy

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Survey Results, See Appendix Question 4

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Tiger Airways has chosen the former and is exploiting a cost leadership strategy. It has an integrated set of actions taken to produce services with features that are acceptable to customers at the lowest cost

relative to that of competitors. Tiger’s costs structure follows the short-haul low-cost model of Ryanair. It targets a broad customer segment and concentrates on finding ways to lower its costs relative to competitors by constantly rethinking how to complete its primary (inbound and outbound logistics) and support activities to reduce costs even further. Like most other carriers, Tiger Airways uses a number of methods to reduce costs. Keeping operating expenses low In Singapore, Tiger Airways’ hub is at the Budget Terminal in Changi Airport. It is a single-storey terminal with no travellators, escalators and aerobridges. The operating costs at Budget terminal are lower than others. In general, low cost carriers always tries to look out for secondary airports with lower fees and less traffic where aircrafts find it easier to get landing priority and terminal space and the ground operations tend to be more efficient. Tiger Airways is also a typical no-frill airline. Its fleet consists of 26 A320 – 200 aircrafts with narrow bodies and the ability to turn around fast. Each aircraft offers 180 single-class economy seats with small leg room, which is 20% more than a typical dual-class model. By using single aircraft type from the A320 family, Tiger Airways can enjoy economies of scale in areas such as pilot training and maintenance costs via greater commonality of parts and spares. All non-core activities, such as maintenance, ground handling and parts of administration are outsourced. At the same time, it insists on the strategy to fly within a five-hour radius from Singapore. In this way, Tiger Airways can have the same cabin crew to fly back the same day, which allows Tiger Airways to hire fewer staff and avoid significant expenses on overnight accommodation for crew members. Tiger Airways is also a strictly point-to-point carrier, with no connecting flights offered, hence no interlining and connecting services. Keeping labour cost low Tiger Airways does not spend much on advertising or marketing. Its flight booking is all through its online portal or call centre. It does not engage agency in ticket distribution in order to minimize the cost especially that of labour. Tiger Airways also reduces labour costs by using a streamline fleet that reduces the training and retraining expenses. Employees are generally paid according to their performance and generally less than traditional airlines. Tiger Airways also tries to keep its employee size at a minimum requirement. Retraining opportunities are limited. This leads to shortage of qualified pilots in high-demand periods. Moreover, the company does not have a “cadet pilot programme” (CPP) like many other airlines such as SIA; thus Tiger Airways does not have pipeline of pilots for the near future. No frills services and revenues Tiger Airways has managed to price its tickets at competitive prices by providing no frills services. That said, Tiger Airways also recognizes that the willingness to spend might vary among its consumer base and actively tap onto that. In the financial year ended 31 March 2011, 26% of Tiger Airways group’s revenue comes from ancillary revenue, which was at $127.6 million as compared to the total revenue of $494.6 million. Tiger Airways charges for many optional extras. These extras can be related to alternative services like method of payment when buying tickets. It also charges for extra services like luggage fee (several weight ranges with different fees, and Different charges for special types of luggage like sports equipment) and seat fee (charge incurred if passengers opt to select their preferred seat).

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Tiger Airways also offers food and beverage for purchase as part of the “Tiger bites” buy-on-board programme at above-market prices. Business Level Strategy for the Future General observation reveals that the current cost leadership strategy is working well for Tiger Airways in certain aspects and Tiger Airways might stick to them in the near future. However, with the rise in demand, some of these strategies may pose certain risks to operations, such as the shortage of qualified pilots. In addition, with the average fare being derived from air ticket fare and ancillary charges, an increasing price competition or slower-than-expected economic growth could result in lower-thanexpected average fares, which has a profound impact on the net profit. On the other hand, switching to a differentiated strategy is not practical because it would mean that Tiger Airways will be competing with major airlines. As brand loyalty might exist within such major airlines, it is hard to wrestle market share away from them. Also, consumers perceive Tiger Airways as a low cost airline and it will be hard to change the brand image in the minds of consumers should they decide to compete on differentiation strategy. That said, Tiger Airways still has to constantly adapt to changes in industry trends and consumer preferences in the future. In the near future, it is foreseeable that many services, both ground and inflight, will be provided by most airlines. Ability to provide such services will lead to competitive parity but the inability to do so will severely affect their profits. It can be seen that many airlines, with similar cost leadership strategy, are attempting to deliver better consumer satisfaction through additional services and also better services such as reduction of flight delays and cancellations. Thus, in the future, simply providing competitive prices is not sufficient. Tiger Airways have to improve on its existing services, increase customer satisfaction and also pre-empt its rivals in introducing new and practical services so as to stay ahead of competition. A more detailed evaluation on its possible solutions and strategies for the future will be discussed in the later sections.

7. Cooperative and Global Strategies
Cooperation with Southeast Asian Airlines Stake in PT Mandala Airlines of Indonesia Incheon Tiger Airways

Joint Venture with Thai Airways

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Tiger Airways Australia

Cooperative and Global Strategies

Possible Partnerships to Enter North Asian Markets

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Tiger Airways Australia Tiger Airways entered the Australian market in a hope to become Australia’s third full-scale domestic airline to compete directly with Virgin Australia and Qantas. Tiger Airways Australia was established as a subsidiary of Tiger Airways Holdings on 16 March 2007 immediately after obtaining approval from Australian authorities. The Australian domestic network is used to support an expanded international presence through Perth and Melbourne. The entry of Tiger Airways Australia into the Australian market created significant pressure on the existing airlines to compete efficiently. There is a huge opportunity for growth and expansion for Tiger Airways in Australia. Being established in Australia also helps Tiger Airways to explore routes within a five-hour flying range from Australia for its ten A320 aircraft to destinations in Indonesia, New Zealand and the Pacific Islands.

Purchase of stake in PT Mandala Airlines of Indonesia Tiger Airways finalised a share subscription agreement to purchase 33 percent stake in PT Mandala Airlines of Indonesia in September 2011. This investment is to be held through Roar Aviation, Tiger Airways’ wholly-owned subsidiary in Singapore. Flight operations are expected to commence after around 90 days, when Mandala’s financial restructuring process in accordance with Indonesian laws is completed. The restructured airline will adopt Tiger Airways business model, and through Mandala, Tiger Airways hope to compete with Malaysia’s AirAsia for budget passengers in Southeast Asia.

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Cooperation with South East Asian Airlines (SEAir) Tiger Airways secured a marketing agreement with South East Asian Airlines (SEAir), a low-cost carrier based in Manila, the Philippines. SEAir is the first Tiger Airways Partner Airline. This is less risky than Tiger Airways’ earlier intention to create a subsidiary at Clark Airport near Manila, which was not approved by Filipino authorities. According to the agreement, Tiger Airways initially leased two aircraft Airbus A320 to SEAir, which flies from Clark Airport to Singapore twice daily, while tickets and ancillary services are sold through Tiger Airways’ official website. As more routes are open to Hong Kong and Macau from Clark Airport, two more aircraft are to be delivered during 2011. SEAir also launched domestic flights connecting Manila with Cebu and Davao in May 2011. Similar to the international flights, tickets are marketed and sold on Tiger Airways’ official website, but customers have the option to book their flights using pesos. Tiger Airways has also signed a term sheet for the purchase of a 32.5 percent stake in SEAir for USD6 million but the majority of 60 percent stake is still held by local investors. The partnership agreement between Tiger Airways and SEAir helps Tiger Airways to reach more customers, especially those in the Philippines, while keeping fares low. It also increases the number of value-for-money routes and destinations for customers to choose from. Moreover, as Tiger Airways was not very well-known in the Philippines, the agreement is essential in establishing brand recognition for Tiger Airways there. The expansion into the Philippines’ domestic market is Tiger Airways’ strategic competitive move against the country’s existing low-cost carriers such as Cebu Pacific and AirAsia. Tiger Airways’ partnership with SEAir is not entirely stress-free. Airlines, Cebu Pacific, Zest Airways, and Air Philippines protested against the allegedly illegal partnership on the ground that it infringed a constitutional restriction on the foreign ownership of companies in vital industries. Accordingly, the Civil Aeronautics Board issued a cease-and-desist order against the partnership’s domestic expansion and ordered their sales of domestic flights to be suspended on May 20, 2011. However, in July 2011, the local court junked the petition and ruled in favour of Tiger Airways and SEAir.

Incheon Tiger Airways In 2007, Tiger Airways announced a joint venture project, called Incheon Tiger Airways, between Tiger Aviation and Incheon Metropolitan City, flying to domestic routes and to destinations in Japan, China, Mongolia and the Russian far East. The budget airline was to be based in South Korea’s Incheon Airport. However, the project was abandoned in December 2008 due to the global economic downturn and continued regulatory uncertainty (protectionism) in Korea, as well as widespread negative opinions about the project. Similar to the partnership with SEAir, Tiger Airways faced strong protests from budget domestic carriers, Jeju Air, Jin Air, Yeongnam Air and Air Busan, who claimed that the joint venture was illegal as the venture would be effectively controlled by Tiger Airways since Incheon City lacked the expertise.

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Joint venture with Thai Airlines

Tiger Airways signed a Memorandum of Understanding with Thai Airways on August 2, 2010 to create a new low-cost airline called Thai Tiger Airways, which will operate from Bangkok Suvarnabhumi International Airport. The joint venture will be 51 percent owned by Thai Airways while Tiger Airways will hold the remaining 49 percent. The project is considered profitable for both parties, as Thai Airways can take advantage of Tiger Airways’ expertise in the low-cost market, while Tiger Airways benefits by strengthening its presence in Thailand, one of the best growth potential in Asia for tourism. Bangkok not only acts as a natural gateway from Europe and Middle East to Southeast Asia but also remain a major tourist destination in the region. Spreading “paw-print” in Thailand will help Tiger Airways to achieve greater economies of scale, thus lowering costs and enable Tiger Airways to keep its fares low. Moreover, establishment of a new base provides Tiger Airways with more options in allocating its A320 aircraft that will be delivered over the next few years, hence spreading its risk better as it can allocate aircraft according to market variations in opportunities and growth. However, the plan to form Thai Tiger Airways has been delayed, pending approval from the Thai transport ministry, and by 20 September 2011, there has been news that Thai Airways might just let the memorandum of understanding between the two airlines expire. To replace the joint venture, Thai Airways is already planning Thai Smile, a new regional airline, while Tiger Airways is still optimistic that the project will go on as intended.

Possible partnership to enter North Asian market Despite the failure of the joint venture plan in Incheon, Tiger Airways plans to again try to access the North Asian market, possibly in a similar manner to the Thai Tiger Airways partnership with an established North Asian carrier.

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These cooperative and global strategies help Tiger Airways to expand to growing markets. The purchase of stakes in SEAir and PT Mandala Airlines, in particular, can also be argued to be a direct response by Tiger Airways towards the merger betweent Jetstar and Valuair in 2005. After the merger, Valuair and Jetstar continued to operate under their own brands, with little or no change to the services offered. Valuair only flies to Indonesian destinations such as Jakarta, Medan, Surabaya and Denpasar. As Jetstar Asia had not yet established routes into Indonesia, the merger is seen as Jetstar's strategy to get an early entrance into Indonesia despite the strict protectionism policies there. Thus, Tiger Airways’ purchase of stakes in PT Mandala Airlines is most likely a strategy to catch up with Jetstar’s presence in this lucrative Indonesian market.

8. Governance and Ethics
The Civil Aviation Safety Authority (CASA) suspended the operations of Tiger Airways Australia on 2nd July 2011 as it believed that Tiger Airways posed a significant threat to air safety. This suspension followed the issuance of a show cause notice in March 2011 when a Tiger Airways plane flew too close to a smaller aircraft. Certain conditions were to be met as part of the notice as illustrated below:

Proficiency of Tiger Airways’ Australia pilots

Pilot training and checking processes

Fatigue management

Maintenance control and air worthiness systems

Credibility of the people occupying management and operational positions

However, Tiger Airways Australia did not respond well to meet this conditions. On 20 April 2011 and 7 June 2011, 2 Tiger Airways planes flew below the miniumum altitude near Melbourne and Avalon airport respectively. On 1 July 2011, another aircraft of Tiger Airways flew too close to a Boeing747 plane. Following this, the suspension was given. As this coincided with school holidays, around 35,000 passengers were affected and Tiger Airways Australia lost about SGD 12 million. After a ban of 5 weeks where Tiger Airways cooperated with CASA, the ban was lifted and Tiger Airways Australia resumed operations. However, it reduced fleet size, suspended operations at the Avalon Airport and closed operations at the Adelaide Airport to better manage its services. The carelessness of Tiger Airways Australia in handling the safety of their passengers needs to be crtiqued. In the airlines industry, safety of passengers is of the utmost importance. Any damage to this reputation of an airlines can severely and negatively affect its profitability. Apart from the profitability issue, it is unethical for Tiger Airways to not take into consideration the safety of its customers. The above issue of a suspension has resulted in negative reputation for Tiger Airways and it has to work hard to overcome this problem and establish itself as a reliable airlines again to retain the existing customers and attract new ones. Tiger Airways Australia should pay more attention to the safety aspect of flying and take more precaustions in keeping to the regulations set by the various aviation authorities.

9. Future Strategies and Evaluation
From the earlier analysis, we have established 3 main problems that Tiger Airways should look into addressing so as to improve its profitability. The first one is that of high competition within the industry. Tiger Airways Australia is clearly lagging behind its competitors while Tiger Airways Singapore is

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struggling to outperform AirAsia. The next issue is that of low customer satisfaction and safety of Tiger Airways that has affected its reputation and possibly its customer volume. The last one is low customer loyalty among customers in the airlines industry and especially to Tiger Airways. These three issues are highly interconnected as well. Improving customer satisfaction and safety would definitely improve Tiger Airway’s performance in relation to its competitors and the loyalty of its consumers. The reverse is also true. Thus, we suggest the following strategies to address these 3 problems together.

9.1 Acquisition of Tiger Airways by Singapore Airlines
An acquisition of Tiger Airways by Singapore Airlines would be a beneficial arrangement for both companies. Currently, SIA is the largest shareholder of Tiger Airways Holdings Limited with 32.84% of ownership. Strong and healthy financials on the part of SIA definitely makes acquisition a viable option for the airlines. Tiger Airways should look into implementing this strategy within the next 3 years. Benefits to Tiger Airways More efficient transfer of expertise and brand name As highlighted under the internal analysis, one of the strengths of Tiger Airways lies in its ability to tap on SIA’s expertise in times of crisis. Being a wholly owned subsidiary of SIA allows for a more efficient and effective transfer of skills and expertise between the two companies. With the expertise of SIA that has consistently made it one of the most profitable airlines in the world annually, Tiger Airways will greatly benefit from it. As such, Tiger Airways can leverage on this expertise to compete better and more profitably in the industry. As discussed earlier, Tiger Airways can especially use SIA’s expertise on employees training to provide better customer services and pilot trainings to provide safe journeys. As a wholly owned subsidiary of SIA, Tiger Airways may also be able to leverage on the SIA brand name to attract more customers. This would position Tiger Airways better to compete with its competitors. Goal congruence Secondly, the fact that SIA has total control over Tiger Airways ensures total goal congruence between the two companies. This will maximize profit making opportunities between both companies. The ability to prevent any form of cannibalism between SIA and Tiger Airways, as would be elaborated in the later section, provides benefits to not just SIA but Tiger Airways as well. Strategies can be implemented in a way where all subsidiaries can benefit collectively. Prevent competition from SIA’s low cost carrier SIA has recently announced its intention to start a new low cost carrier that would cater to medium and long distance flights. Although SIA has stated that its new low cost carrier will not be competing directly with Tiger Airways, in the future the stance of SIA might change and the airline might decide to compete in this Asian region as well. It is noted that once SIA has acquired the necessary infrastructure and planes to operate its low cost carrier, there is nothing to stop them from competing in this region. In

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fact, in a survey that we conducted among 100 participants between the ages of 20 and 40, for the same cost and same destination, 87% of the respondents indicated that they would prefer to travel with SIA’s new low cost carrier than with Tiger Airways. This is attributed mainly to the brand value of SIA. Thus, it can be seen that Tiger Airways will only lose out should there be a need to compete with the new low cost carrier.

Which airline would you prefer to travel with?
Tiger Airways 13%

SIA Subsidiary 87% Figure 6: Preference of Airlines
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As such, this strategy of Tiger Airways to be completely acquired by SIA seems to have many benefits for Tiger Airways as it would be better positioned to compete with its competitors. However, it is necessary to evaluate if this strategy is feasible, that is, how likely it would be for SIA to acquire Tiger Airways. With the recent hit to the reputation of Tiger Airways, SIA may not be completely inclined to associate itself with the low cost carrier. However, we feel that SIA also stands to gain much out of this acquisition and thus, it would be a feasible strategy. This is further explained below. Benefits to SIA Market power In light of the fact that SIA has recently announced its intention to start a low cost carrier to cater to medium and long haul flights, it is believed that the ability to have full control over a low cost carrier catering to short distances will provide SIA with greater dominance and higher profits in the airline industry. SIA stated that its venture into low cost industry for the medium and long haul distances was in response to competition posed by Middle Eastern airlines providing cheaper long haul flights. For short distances, given that SIA will potentially lose revenue to current low cost carriers like Jetstar and AirAsia as travelers seek to cut cost, acquisition of Tiger Airways further helps to mitigate against the loss. Furthermore, having the complete control of Tiger Airways and this new low cost carrier for medium and long distances may seem as a good diversification strategy for SIA when there is recession in the economy and the demand for high end travelling is low. Page

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From Survey Results, See Appendix Question 3

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Prevention of route cannibalism SIA has stressed that the new low cost carrier will not lead to any form of cannibalism with its subsidiary, Tiger Airways. However, that cannot be guaranteed unless SIA has full ownership of Tiger Airways and hence can dictate the routes that the various subsidiaries will serve as well as the marketing strategies of the various subsidiaries to ensure that these airlines are catering to different sets of consumers. Also, Tiger Airways might have plans to expand in the future and places which they might venture into might be routes already served by SilkAir or the new low cost carrier. It is noted there are already similar routes which are being served by both SilkAir and Tiger Airways. This would mean that marketing cost and efforts have to be incurred by both airlines to entice consumers travelling to the same destinations. The ability to have full control over the various subsidiaries will minimize such problems and the integration of the various airlines will increase the competitiveness and profits for SIA.

9.2 Loyalty Program
Once acquired by SIA, Tiger Airways can have a joint rewards and loyalty system with SIA, similar to the system implemented between Qantas and Jetstar earlier this year. The joint Frequent Flyer Point and Status Credit Earning means that all of the points a passenger earns through the rewards program are interchangeable as either Jetstar or Qantas rewards points, making this one of the most flexible frequent flyer programs available. At the same time, passengers with frequent flyer points are granted access to the Qantas Club before Jetstar flights, and are qualified for many different special offers that are parts of the Qantas and Jetstar rewards program. This is an excellent system that can be adopted by Tiger Airways in order to avoid lagging behind its competitors and to encourage passengers to stay loyal. Moreover, although Tiger Airways is a low cost carrier instead of a business airline, the joint rewards program with SIA would make it more appealing to business passengers who would be able to use the SIA lounge before their Tiger Airways flights, while earning and redeeming miles towards SIA’s KrisFlyer frequent flyer program. However, SIA may oppose to this joint reward system as the target passengers on SIA flights differ significantly from the target passengers on Tiger Airways flights. Having Tiger Airways’ budget-conscious passengers mingling with SIA’s high-net-worth customers in the exclusive SIA lounge might be perceived as negatively affecting SIA’s brand image as a premium airline. Therefore, if the joint rewards system is not approved by SIA, Tiger Airways should still try to establish its own loyalty program in place of its current membership program called Stripes. We believe that Stripes is not sufficient in retaining customers as Stripes members only get priority in booking tickets and in promotions rather than earning frequent flyer points. As such, a proper loyalty program with more perks and benefits will help Tiger Airways to compete more effectively with Jetstar for customer loyalty. This is especially necessary in the low cost airlines industry where customer loyalty is low. As such having loyalty programs where customers can collect points and redeem it for rewards will

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encourage them to continue patronizing the same airline. This is a strategy that Tiger Airways must look into doing immediately.

9.3 Improving Customer Satisfaction and Safety
As explored in the earlier sections, Tiger Airways had been receiving a lot of customer complaints and dissatisfaction. This is detrimental for the company in the long run. Additionally, marketing theories have explained that it is less costly and more advisable to retain 100 existing customers instead of looking at 100 new ones. As such, Tiger Airways should look into strategies immediately to improve customer satisfaction. Flight Delays and Cancellations One main issue regarding customer service is flight delays. Earlier in the internal environment analysis, Figure 3, we saw that Tiger Airways Australia is the airline having the highest percentage of flight delays. This clearly indicates that flight delay is an issue that has to be addressed. Flight delays can be caused by a variety of reasons such as poor weather conditions, security or technology problems, air clearance issues, delays in incoming flights, delays due to passengers and delays in cleaning the airplanes. Tiger Airways has to explore which of these factors contribute significantly to their current situation and see if it is a factor within its control. Then, Tiger Airways could take appropriate measures to address the issues. Meanwhile, there are other ways to address this problem without incurring too much cost. The survey that we conducted among 100 people between the age of 20 and 40 indicated the following results.

How do you rate Tiger Airways for each of the following scenarios?
80% 60% 40% 20% 0% Departs and arrives per schedule If there is delay, If there is delay or there is cancellation, there immediate is a quick refund notification

No Yes Unsure/No Response

Figure 7: Customers’ Response to Tiger Airways Way of Dealing with Flight Delays

7

7

Survey Results, See Appendix Question 5

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From the survey results, we can clearly see that the respondents are not happy with the way that Tiger Airways currently deals with the delayed flights situation. Most customers would like to be informed as soon as possible when there are flight delays. Therefore, Tiger Airways can adopt the system of informing their customers quickly about any flight delays or cancellations and providing them the reason so that customers’ disappointment maybe somewhat reduced. Furthermore, for flight cancellations, Tiger Airways should refund their customers quickly. The average time taken currently is about 6 months and this is way too long. It creates uncertainty among customers as to whether they will receive their money back and this contributes to further unhappiness. Tiger Airways should try and adopt a system of refunding within 20 to 30 days and sending an email to customers once it is done. These solutions can directly address the issues mentioned by our survey respondents. Additionally, Tiger Airways can consider offering some benefits during the delays. These benefits may be:    Free meals or simple refreshments Free telephone usage to local places Clean places to spend the time with simple amenities such as television or newspapers

These services would surely increase Tiger Airways’ cost by some amount although by not much. However, the possible benefits to be gained by Tiger Airways such as an increase in customer retention and possibly new customers would help to offset the increase in cost. Customer Service Customer services within aircrafts may be improved significantly with almost negligible increases in cost. The pleasantness in how the air stewardesses serve customers can go a long way in improving customers’ journey experience. The staff should make it a policy to do simple things such as directing the passengers to their seats, offering assistance to elderly and those with young children and using the right tone and language when communicating with customers. Such things may be improved by Tiger Airways with staff training that focuses on these aspects. Customer services within airports are also important. On issue that causes much distress among customers is that of baggage damage. Tiger Airways staff should take the initiative to help locate the baggage for customers quickly and aid them in solving cases of missing or damaged baggage. Customer services outside airports are essential as well. Ideally, customer service offices should be set up in major cities to answer queries from customers and to serve as a venue for manual ticket bookings and claiming of refunds. However, given the high operating costs involved in establishing physical offices, we suggest that Tiger Airways should have more calling help lines which customers can call to make such queries. Therefore, to improve customer services, constant training of the staff is needed to improve their communication skills when attending to customers and problem solving skills when entertaining customer complaints.

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9.4 Expansion
Cooperative and Global Strategies and the Need for Continual Expansion Analyzing current cooperative and global strategies can help Tiger Airways to derive valuable lessons in expansion. Continual expansion is definitely important for Tiger Airways as it increases Tiger Airways’ presence globally which in turn amplifies demand for the services offered by Tiger Airways. Moreover, without cooperative and global strategies, Tiger Airways would lose out to its competitors such as AirAsia and Jetstar which serve more locations. The Australian Expansion Experience and Lessons Learnt It can be seen that Tiger Airways’ singlehanded venture into Australia has led to more losses than profits, despite the huge opportunity for growth there. The strong presence of Virgin Australia and Qantas might be one of the reasons for Tiger Airways’ problems in Australia, and Tiger Airways, being a new kid on the block, might not be very familiar with the aviation regulations in Australia, leading to possible violation of rules. Moreover, looking at the past and current cooperative and global strategies by Tiger Airways, it is clear that a common problem with many of these projects is protectionism and the protest of domestic airlines against Tiger Airways’ presence in their markets. Protectionism in some markets makes it very difficult for Tiger Airways to obtain clearance for its activities there, as seen in the case of Thai Tiger Airways and Incheon Tiger Airways projects described in section 7. Even when the foreign government gives the green light and court rules in favour of Tiger Airways, the negative publicity, legal cost and possible suspension of operations (as in the case of the marketing agreement with SEAir) as a result of these protests are costly. The need for Intensive Market Research To reduce the risk of possible protests from domestic airlines, Tiger Airways should do more thorough market research before entering into any agreement or joint venture with another airline. More care must be placed into understanding the aviation regulations and protectionism in foreign markets to avoid unknowingly violating those regulations, and to direct its focus to other potential markets which are easier to enter with relatively lower regulations like the U.S. and Australia, and to a lesser extent Brazil, Mexico, India, the United Kingdom and Japan. Nonetheless, it is probably still better for Tiger Airways to enter new markets through joint ventures or marketing agreements similar to its projects with Thai Airways or SEAir instead of singlehanded venture to take advantage of the partner airlines’ experiences in the foreign markets. This will also help Tiger Airways to adapt faster and reduce the initial cost outlay for its expansion, since the partner airlines should already have certain number of aircraft and necessary equipments. Limitation of Prospective Expansion Plans However, due to the intense competition in the airlines industry and the urge of governments in general to protect the domestic airlines, it would be very difficult for Tiger Airways to identify a market that is not heavily guarded by protectionism measures. If such market presents itself, other airlines will be also

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attracted to it, making it very diluted and depressing profits. Moreover, Tiger Airways’ strictly point-topoint carrier, five-hour radius flight policy will also limit its choice of potential market. For example, Tiger Airways does not serve Beijing market because it exceeds the five-hour radius from Singapore or Australia. As such, Tiger Airways has to either modify its policy to allow for more flexibility in the selection of potential markets, or be contented with the current markets that it is serving.

10. Conclusion
In conclusion, our analysis presents considerable insight into the low-cost no-frills airline business, the strategic opportunities present for Tiger Airways in the industry and the steps the airline should take to make the best of such opportunities. As we have seen, the business model which the industry operates on involves intensive scrutiny of the costs accompanying the different aspects of operation and related aggressive cost cutting to reach a lean and no-frills state. Care needs to be taken to ensure that fundamental points of parity including passenger safety, security and punctuality are not compromised given the critical sensitivity of consumer perception and demand to such factors. As seen from the most recent financial information, the airline stands on strong footing in profitability terms, well positioned to feed into the virtuous cycle from profit growth to revenue growth to capacity growth which then feeds back into the loop. An internal analysis of the company reveals its expertise, financial resources, portfolio of routes and backing in terms of stake-holding by SIA as key strengths while compromised reputation and lower levels of customer satisfaction emerge to be the key weaknesses. The external analysis points to, as we saw in details in the report, opportunities and threats relating to economic, technological, social and other related aspects. Furthermore, industry analysis through the eyes of the 5 forces framework and competitive analysis in relation to the related competing firms in the industry reveals further strategic levers available to Tiger Airways to pursue appropriate steps for strategic growth into the future. Cost leadership is very visibly at the core of the overall idea of the low-cost airline business model. At the same time, Tiger Airways is also actively pursuing global and cooperative strategies, including a jointventure with Thai Airways, marketing agreement with Southeast Asian Airlines, purchase of stake in PT Mandala Airlines and the like for future growth and expansion. Having established that Tiger Airways is doing reasonably well now, we also see that there are great scopes for improvement. To tap on the expertise and financial resources of SIA while avoiding cannibalism, Tiger Airways can offer to be wholly acquired by SIA. As stated earlier, this transaction would be beneficial for both SIA and Tiger Airways. Executing the expansion strategy effectively while improving customer satisfaction in a sustainable way are also proposed to be two fundamental ways for Tiger Airways to strategically sustain its competitiveness in the fast-growing low-cost airline business.

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11. References
Changi Airport, “Our terminals”, retrieved October 28, 2011 http://www.changiairport.com/our-business/our-terminals Damuri, Y and Anas, T; Strategic Directions for ASEAN Airlines in a Globalizing World: The Emergence of Low Cost Carriers in South East Asia, p.7,8 Internet World Stats, “Internet Users in Asia, March 31, 2011”, retrieved October 19, 2011 http://www.internetworldstats.com/stats3.htm Geohive, “Population of the most populous countries”, retrieved October 19, 2011 http://www.geohive.com/earth/pop_graph1.aspx Kelly, “Tiger Airways gets new CEO”, retrieved October 19, 2011 http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1149762/1/.html Koh, “Qantas, Tiger Airways and Virgin suspend Australia service”, retrieved October 19, 2011 http://www.flightglobal.com/news/articles/qantas-tiger-airways-and-virgin-suspend-australia-services-358347/ McDonald and Aquino, “Tiger Airways’ Australian flights grounded by Regulators on safety concerns”, retrieved October 19, 2011 http://www.bloomberg.com/news/2011-07-02/tiger-airways-australian-flights-grounded-by-regulator-on-safetyconcerns.html Marilyn, “Low-cost airlines reaped reward in 2009 recession”, retrieved October 19, 2011 http://news.holidayhypermarket.co.uk/Low-Cost-Airlines-Reaped-Reward-in-2009-Recession-933202755734.html Ngo Thi Kim Cuong, Improving Customer Satisfaction, Case of Tiger Airways, retrieved October 31, 2011 https://publications.theseus.fi/bitstream/handle/10024/32445/Ngo_Thi.pdf?sequence=1 Peter Gibson, “Tiger Airways Australia Suspended”, retrieved October 20, 2011 http://www.casa.gov.au/scripts/nc.dll?WCMS:STANDARD::pc=PC_100504 SIA, SIA Awards, retrieved October 19, 2011 http://www.singaporeair.com/en_UK/about-us/sia-history/sia-awards/#accord_1_1 Thai Airways mulls forming LCC without Tiger Airways, 20 September 2011 http://www.flightglobal.com/news/articles/thai-airways-mulls-forming-lcc-without-tiger-airways-362277/ Tiger Airways, Media Release, 29 August 2011 http://www.tigerairways.com/news/20110829.pdf Tiger Airways, Annual Report 2011, retrieved October 19, 2011 http://www.tigerairways.com/news/Annual_Report_2011.pdf Tiger Airways, Wikipedia, retrieved October 20, 2011 http://en.wikipedia.org/wiki/Tiger_Airways

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12. Appendix
Survey Results
We conducted a survey among 100 participants within the age of 20 to 40 about the Budget Airlines Industry and Tiger Airways in specific. The details are as follows.

1. Have you travelled with Tiger Airways before?

2. Did you enjoy your experience with Tiger Airways?
No Yes 41% 32%

No 38% Yes 62%

Neutral 27%

3. Which airline would you prefer to travel with?
Tiger Airways 13% SIA
Subsidiary

4. How would you rank Tiger Airways with its competitors?
60.00% 40.00% 20.00% 0.00% Number 1 Number 2 Number 3

87%

5. How do you rate Tiger Airways for each of the following scenarios?
80% 60% 40% 20% 0% Departs and arrives If there is delay, there If there is delay or per schedule is immediate cancellation, there is notification a quick refund

No Yes Unsure/No Response

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