SilkAir’s Business Model
SilkAir (Singapore) is the regional airline and a subsidiary of the Singapore Airlines, operating in various cities in China, Australia, Southeastern Asia and India. SilkAir is one of the success stories in the Asian airline industry, owing to the growth in terms of the fleet and annual passengers served. As at present, the airline has 53 destinations across 15 countries within the regions aforementioned. One of the reasons for the success comes from the excellent business model that the airline has put in place in order to be competitive in the market. Full Service Network Carriers (FSNC) is one of the models that SilkAir adopts in the operations across the region. With this, the airline has come up with various business packages that have made it attractive to the many customers within the region (Toh, M. 2012, 10). The airline’s operations are within the government and the international regulations of the industry, ensuring that they follow all laws. SilkAir has become another success when it comes to the regional destinations because it is a branch of the successful Singapore Airline,
Full Service Network Carriers (FSNC) is the type of airline model that seeks to provide a number of services to the satisfaction of the customers. The system has different packages that cover the pre-flight and on bought services to those traveling. FSNC is a different model from the point-to-point model that offers direct flights from destination to another (Wensveen, J. 2007, 23). The main part of this model is in the comprehensive package that ensures proper follow-up and satisfaction of all clients. The different products entail different classes that customers can choose. On the same note, the cargo department also helps in providing transport services to the different destinations (Flight Global, 2014, 16). The cost of the model depends on the type of service in demand. SilkAir uses Full Service Network Carriers (FSNC) model in its daily operations. It means that the airline can handle all the services requested from the origin to the destination. Another pillar of the model is in the fact that it works from a common point, where connection flights are managed. Therefore, SilkAir operates with other connection services from designated points.
SilkAir operates this model; a system referred to as hub-and-spoke model. This airline has a fleet of various aircraft that range from smaller feeder aircraft to some of the largest aircraft that help offer comprehensive travel packages to customers (Fichert, F. & Klophaus, R. 2016, 4). This model also ensures a wide geographical network range, which is based on a region. Schedules are also important aspects of the FSNC, allowing for a wide range of the origin and destinations managed from a specific hub, which is Singapore Changi Airport. Other than the different classes for the passengers, SilkAir also offers pricing mechanism that depends on the type of service offered. The model has enabled SilkAir become an important airline within the region, offering different services (Wensveen, J. 2007, 25).
Full Service Network Carriers has enabled SilkAir register impressive growth in terms of operations, fleet numbers and related revenue (Fichert, F. & Klophaus, R. 2016, 4) According to the company reports, total revenue increased from $550 million in 2009 to $970 million in 2016, translating to a profit of $91 million from $34 million during the same period. On the same note, the number of passengers served increased from 1.9 million in 2009 to 3.9 million in 2016. The number of fleet has also increased from 16 to 29 between 2009 and 2016, leading to an increase of staff from 800 to 1600 over the same period (Civil Aviation Authority of Singapore, 2017, 23). Partnership with other airlines has worked towards the growth of SilkAir, making it easier for the airline to operate to major airports within the region. Therefore, this model opens the airline to various options of providing service to the satisfaction of customers.
At present, SilkAir operates from Singapore to other 53 destinations internationally, spread within 14 countries. All these destinations are within a six-hour distance from Singapore to Asian countries and Australia. The main hub or the center of operation is Singapore Changi Airport, the point from which all connections are planned and executed. The main destinations are in the following countries; Australia, Cambodia, China, India, East Timor, Nepal, Brunei, Indonesia, Japan, Laos, Macau, Malaysia, Myanmar, Thailand and Vietnam. From April 2017, the airline plans to launch a new destination to Bandaranaike International Airport, Colombo in Sri Lanka to add to the existing ones (Civil Aviation Authority of Singapore, 2017, 23).
SilkAir has also signed codeshare agreements with a number of airlines in order to bring efficiency in the Full Service Network Carriers model in place. This airline has the permission to operate over the local, national, regional and international routes in order to use the existing systems. On the same note, SilkAir focuses its business operations on the carriage of passengers only cargo only and a combination of both.
SilkAir remains one of the success stories in the airline industry, having started its operations with only two McDonnell Douglas MD-87 aircraft, leased in 1989. Later, the airline bought six Boeing 737-300s, using them to expand their business operations in major cities within the region. In 1998, SilkAir started replacement of all the Boeing aircraft with the Airbus A310-200s, an exercise that was completed in 1999, a year later. At present, the airline uses the A319 model on some routes in SouthEast Asia, while the A310s are used in some of the major destinations within the region. With time, SilkAir has also ordered 23 Boeing 737-800s some of which have been delivered and 31 Boeing 737 MAX 8 aircraft, all of which are yet to be delivered. These orders are to replace operations of some of the old Airbus A310-200s (Chew, V. 2010, 11). In summary, SilkAir has the following number of aircraft; 3 Airbus A319-100 that can handle up to 128 passengers and crew, 11 Airbus A320-200 with a capacity of 150 passengers and crew and 17 Boeing 737-800 with a capacity of 164 passengers and crew. 31 Boeing 737 MAX 8 are yet to be delivered from 2017 onwards (Civil Aviation Authority of Singapore, 2017, 11).
The airline uses Singapore Changi Airport as the main hub where all the flights are routed, the place where all the flights are routed. From the hub airport, the airline uses different flights to ensure all passengers all other destinations (Fichert, F. & Klophaus, R. 2016, 4). This system helps the airline serve more passengers in a given time, rather than using the point-to-point system those forces to aircraft to travel half-empty.
All SilkAir aircraft have two cabin classes to offer to the customers, business and economy classes. Business cabin classes are available in all the SilkAir aircraft, designed to offer comfort to customers. This category of cabin class has a seat peach of between 39 and 40 inches and legroom of 19.3 inches. The company works tirelessly towards improving the different services at the business cabin class; fixing all the Boeing and Airbus aircrafts with leather seats to add comfort to the customers. The economy cabin class is another category that offers cheaper prices to the customers while providing comparatively better services by offering seats with a seat pitch of 31 inches and legroom of 12 inches. The airline has changed the color theme in the economy cabins to show the autumn scheme. Business class travelers are allowed to carry up to 40 kg of luggage while economy class attracts up to 30 kg of luggage. However, cabin bags must be 7 kg or less for each passenger, especially for the business class. Higher classes allow for two bags per passenger (Choi, K. 2017, 18).
|Cabin Class||Business class||Economy Class|
|Seat peach||39 – 40 inches||31 inches|
|Legroom||19.3 inches||12 inches|
|Baggage allowance||Up to 40kg||up to 30kg|
Table 1: SilkAir Cabin Classes
SilkAir only accepts payments for tickets and other services through credit/debit cards, no cash payments allowed for any services offered. The major cards accepted today include Visa, American Express, Diners Club and MasterCard. Airline’s system allows customers to make online reservations, a process that prompts the applicant to use the appropriate card number for billing. All prices shown during the purchase include costs for making appropriate reservations. However, the airline may impose certain charges depending on the adjustments by the travelers before the departure. Making changes very close to the departure time, in most of the times, lead to charging a certain amount of fees. Failure to appear for the flight also may lead to imposing of what is known as “no-show fees”.
SilkAir provides tour and travel services to add comfort and convenience to the travelers. Tradewinds Tours and Travel Private Limited are a subsidiary and fully owned branch of SilkAir, having been incorporated in 1975. The company was later given the license to operate as a tour agent in 1984. Tradewinds Tours and Travel provides different tour packages to the airline passengers to the destinations (Wensveen, J. 2007, 23). At the same time, the tour company helps in planning for chartered flights within Asia. Therefore, customers get subsidized services that make traveling hustle-free. Travelers do not have to get services from different providers because the airline has the full package. This tour and travel company ensures that the travelers are picked and dropped at the designated destinations. At the same time, it works with a number of hotels within the airline destinations to ensure proper accommodation bookings.
Travelers have different options of checking in, before the scheduled flight. They can check-in in person at the kiosks located at airports or online. Online check-in requires a 48-hour prior arrangement, before the flight time. The airline does not allow for the online check-in for travelers below 17 years old. For those who plan to check-in in person, they are needed to appear two to three hours before flight departure.
The airline offers a number of onboard amenities like dining, entertainment and SilkAir studio. During the flight, SilkAir offers dining services that depend on the duration of the flight. Customers are free to choose from the oriental and western menus available for the long flights; however, short journeys also have snacks options. For special meals during the flight, the airline requires a request 24 hours before the scheduled time to help make necessary arrangements. On board, travelers have access to the SilkAir entertainment system that allows them to watch Hollywood movies, TV shows as well as other types of music. However, all the channels are streamed live into the traveler gadgets during the flights. The unaccompanied minor service is another important onboard service that makes SilkAir stand out. Children of ages 5 to 18 years of age can use this product to ensure safety and monitoring throughout the journey. However, the product is mandatory for all children from 5 to 12 years old, not accompanied by adults. Adults must accompany children under 5 years of age during the flight (Choi, K. 2017, 18).
Civil Aviation Authority of Singapore (CAAS) regulates the aviation activities in Singapore. CAAS has favorable policies that make it easy for other regional airlines to operate within the major airports. In the recent past, Singapore has become a regional hub to major airlines within the region, providing business opportunities for other domestic airlines like SilkAir to flourish (Doganis, R. 2002, 34). CAAS provide all necessary certifications to operators within the country. Changi Airport is an important hub for SilkAir and other regional airlines and CAAS determines operations in this place because it does the allocation of space. The authority works closely with other global industry regulators to ensure efficiency and standardization of facilities. Global Aviation Industry provides certain regulations that guide business operations of all airlines from different countries. Commercial airlines are allowed to operate the scheduled and non-scheduled flights to different destinations. Global aviation industry also regulates the different routes, whether, local, national, regional and international routes, in order to have a proper playing ground (Flight Global, 2014, 16). Air transport remains an important part of today’s economic and social
SilkAir (Singapore) is a success in the air transportation industry, owing to the growth the company has experienced in the last few decades. From only two leased aircraft to 31 Boeing and Airbus aircraft. 38 more have been ordered and expected to arrive soon. One of the successes can be attributed to the Full Service Network Carriers (FSNC) business model the company uses. This model enables SilkAir to provide various products to customers, rising up the profits. The hub and spoke model also helps in ensuring that the aircraft do not operate at a loss. Participation of all stakeholders in the global aviation industry has contributed to the growth of the airline company. For instance, the airline has the license to ply various international and regional routes from the hub, making traveling easier. On the same note, the full packages of the services ensure that travelers get value for their money.
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