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Historical Development of Low-Cost Airlines in Singapore

Discuss about the Low Cost Airline in Singapore.

The development of low-cost airlines can be traced back to its origin in the United States of America. This development leads to improvement of operations linked to airports, and the associated financial activities carried out by organizations that use this transport means. The same concepts were incorporated by South Asian countries like Singapore. The low-cost airlines implement point to point carrier services which ensure that fleet use is optimized. Similarly, the carriers have made unconventional innovations like SMS booking, booking of reservations through call centers and paying through ATMs, facilitating reimbursements in installments, and the use of network which belong to convenience stores to help reduce the overall costs. The development has attracted more people to use air transport because of the reduced costs. In addition, the improvement has significantly influenced tourism in the country. This essay summarizes the advancements and operations of low costs airlines in Singapore and the resultant effects on the tourism industry.

Before addressing the advancement in this field, it is imperative to review its historical background. Southwest Airlines was the first carrier that was built using the concept of low-cost flights in June 1971; it was a local flight in America (DAMURI & ANAS, 2005). The primary objective of this advancement was to provide consumers with an affordable means of air transport. Many consumers were intrigued by this development and as a result airline transport became a popular thing in the country. However, the advancement threatened the premium airlines since its counterparts started providing cheaper tickets.

The Southwest Airline implemented a unique marketing strategy that saw its stewardesses put on white boots and hot pants. This branding concept proved to be effective, and after a short period, it was copied by other airlines. The low-cost airlines grew in popularity at a faster rate, and hence its market size also expanded considerably. Over the past ten years, this industry has developed significantly. A survey done in 2011 regarding the Airline business revealed that low-cost airlines carried approximately 640 million people in 2010.

Before this development, the South East Asian countries were dominated by flag carriers that from the 70s until the 90s. The airlines were responsible for domestic travels, international travels, and short-haul regional travels. An economic crisis swept the flag carriers and as a result, paved the way for the emergence of low-cost airlines. Apart from Singapore, other countries that embraced this advancement included Malaysia and Thailand. The low fares have significantly benefited the economy of this region both in the transport sector and tourism. The low rates and convenient operations in the airports have attracted many international tourists to visit Singapore.

The Current Low-Cost Airline Sector

Singapore has three airlines that implement the low-cost concept and six additional carriers that operate in the nation. Tigerair, previously referred to as Tiger Airways was the first company to apply the low cost concept in Singapore (DAMURI & ANAS, 2005). The budget Airline was developed in the year 2004 and has advanced to become the largest low-cost airline in the nation, and the second largest carrier in the country. Jetstar Asia is a carrier based in Singapore. It was established immediately after Tigerair in the year 2004. The low-cost airlines have put pressure on the traditional carriers to reduce their cost of transportation in order to cope up with the competitors. This is because the current carriers have resulted in the emergence of new markets in the region and hence the other airlines have to adjust their prices if they wish even to taste a share of the market. Consequently, some airlines like Scoot were established. Scoot was developed by Singapore airlines to provide low-fare flights for long-haul and medium routes and offer no-frills. Generally, low-cost airlines have positively impacted the transport industry but negatively affected the premium airlines. Similarly, the tourism industry has accrued additional profits as a result of low-cost airlines.

The low-cost carrier industry in Singapore has grown significantly since its realization. A budget terminal was built specifically to facilitate these airlines. There is still potential for advancement of this industry. The government of Singapore even decided to demolish the budget terminal and replace it with terminal 4, for the purpose of providing customers with a higher quality experience. This shows that even the government acknowledges the significance of the low-cost carriers to the economy of the nation. In 2013, Singapore Changi International Airport was ranked 15th in the busiest airports in the world with a total of approximately 51million passengers. The high rate of airline transport in the country is due to the reduced costs.

The low-cost airlines have resulted in significant changes in the tourism industry in terms of the tourism product and demand of the sector. Tourism product can be described as a comprehensive package that is meant to impress the clients when they visit the nation. It encompasses accommodation, meals, tourism, transport, and entertainment. It can be grouped into the international package, which is meant for collecting revenue and domestic product that is used in promoting local tourism. Some of the benefits of tourism product are discussed below. The first advantage is convenience; travelers are presented with the best facilities, and hence it saves them time in deciding the supplier to go with. When the industry has services that are packaged to fit the clients needs it is easier to attract new clients and maintain those who are already using the services they provide. Secondly, low-cost airlines are one-stop shopping for passengers. Payment of one service saves paperwork and cost of other related services and thus makes the process of buying much more comfortable. Paperless payment is where customers don’t need to have receipts and don’t have to queue at the tellers to be able to be served. It could be via the internet, mobile banking or the use of cards either credit cards, prepaid cards or debit cards at their point of need. The tourist can predict how much the trip might cost all the inclusive services are virtually free. Another benefit is cost saving. The packages would cost more if they were to be bought separately. Buying a whole package attracts a discount that reduces the overall cost of the tour. Discounts and give aways are always used to attract and encourage the new and old clients. Tourists also receive special treatment such as exemptions from long queues, pre-check-in hotel services, instant room services etcetera. Finally, the tourists can stay free from worry since the tour guides handle all the processes on their behalf. These changes in the tourism industry due to low-cost airlines have increased the demand, and as a result, it has attracted more international tourists in the country.

Impact of Low-Cost Airlines in the Tourism Industry

Apart from tourism products, there are several economic implications in the tourism industry that come about as a result of low-cost airlines. When these tourists buy commodities in Singapore, they act as export services and hence increase revenues. Similarly, tourists’ expenditure in the nation increases economic activity in the country both directly and indirectly. This creates job opportunities and increases income accrued by the government through taxation.

The low-cost airlines have incorporated significant changes in their operations (Macário, Viegas & Reis, 2007). The first changes are seen in the marketing strategy and distribution channel. Ticket arrangements and simple booking characterize the carriers. The changes in these services have made sure that passengers can make reservations through the internet, use ticketless processes, and make payments through credit cards. Singapore has broad internet coverage, and hence it has embraced these new changes. However, the use of credit cards is not common in the south-east Asia region. Singapore carriers have implemented the use of ATMs to make payments as a means to deal with the credit card issue.

Another change has been seen in airport choice and route selection. Since the low-cost airlines operate on a point to point mechanism, the new operations have led to the emergence of new hubs in the region. Other advancements have seen the rise of secondary airports to serve the growing demand for airline travels. These secondary airports are located in capital cities.

Fleet utilization has also undergone significant changes. The business model for low-cost carriers has seen an increase in the rates of utilizing fleets and load factors. The primary objective of this change is to reduce the intervals between the flights. The operations should be done at a faster rate to support the handling of the flight procedures in the short period that is scheduled. Most of these carriers also use leased airplanes to reduce the cost. However, this strategy may be costly in the long run. The changes described in this section are just a few; there are more changes in both local and international airline industry.

According to the research conducted by Sarker, Hossan and Zaman (2012) about the insights of people regarding the future of low-cost carriers, there are mixed feelings about the concept. 51% of the participants did not like the idea, not because of the economic implications but due to its impact on the environment. They claimed that the concept was not good for the surrounding. A small percentage (6%) claimed that it was not as safe as full cost airlines. However, the majority of the participants supported the concept because of its impact on the economy (Henderson, 2006). Therefore, the industry has a bright future in these countries including Singapore.

The industry is predicted to improve considering the constant development of technology such as mobile phones, internet availability and increased online business activity in the region. The government has also come up with initiatives to support the low-cost airline concept in the region through building new terminals (terminal 4), refurbishing old airports among other measures. Finally, the international market provides a wide market for the for the transport services and thereby increasing the demand.

Conclusion

In conclusion, the development of low-cost airline in Singapore has led to positive effects in the country. The transport industry has seen advancement in the technology and efficiency of its operations. Currently, passengers can make flight reservation at their convenience since the new development supports internet booking and booking through SMS. It also allows payment through credit cards and ATMs. The tourism industry has also benefited significantly from the improvements in terms of the tourism product and demand. The airlines have been forced to make changes in their operations to cope up with the new development. There is a bright future for low-cost airlines in Singapore characterized by technological advancement and government intervention.

Further, we cannot forget the impacts of low-cost airlines on the economy of Singapore. It has increased the number of flights in and out of the country there by affecting the tourism industry. Its also generated more income for the companies managing the airlines. Technology improvement of internet ticketing has also improved the services provided by the airlines in Singapore. Though technology for the use of credit cards is not prominent it is advisable and recommended for them to encourage the users.

References

DAMURI, Y. R., & ANAS, T. (2005). The Emergence of Low Cost Carriers in South East Asia. Strategic Directions for ASEAN Airlines in a Globalizing World, (4), 1-32.

Henderson, J. C. (2006). LOW COST AIRLINES IN SOUTH EAST ASIA: A VIEW FROM SINGAPORE. ASEAN Journal on Hospitality and Tourism, 5(2), 77-87.

Macário, R., Viegas, J., & Reis, V. (2007). Impact of low cost operation in the development of Airports and Local Economies.

Sarker, M. A. R., Hossan, C. G., & Zaman, L. (2012). Sustainability and growth of low cost airlines: an industry analysis in global perspective. American Journal of Business and Management, 1(3), 162-171.

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