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How does the level of competition within an OD (Origin Destination) market shape airlines route and scheduling decisions?

Discover Changi Airport

Changi Airport is the major airport of the Singapore and is also considered as one of the largest transportation hub in the Southeast Asia. According to the Skytrax this airport is rated as World’s best Airport for the constant six years from 2013. In terms of the international passenger and cargo traffic this airport also falls under the category of the world’s busiest airport. The exact location of the Changi Airport is towards the eastern end of the Singapore which is approximately 17.2 kilometres northeast from Marina Bay. Changi airport serves more than 100 airlines flying across 400 cities in around 100 countries and territories serving worldwide (Changi Airport, 2018).

The Singapore Airlines and the Changi Airport both are dependent on the international air traffic and there are lot of challenges emerging for both in the coming years.

(Source: Researchgate, 2017)

The four main terminals to carry the passengers are presented in the elongated inverted U shape which can handle 85 million passengers all along the way in a go.

The terminal one is located at the northern end and was established in the year 1981. The second terminal which was opened in the year 1990 is situated at the eastern end. The third and the fourth terminal were opened in 2008 and 2017 respectively (Researchgate, 2017).

Talking about the routes and scheduling of the flights from the Changi Airport the new LOT polish Airlines new Warsaw Singapore Services, the travellers can avail the benefit to explore the cities which are situated in Central and Eastern Europe via Warsaw Chopin Airport.

The flight and the departures can be observed in the table below.

(Source: Researchgate, 2017).

Perfect competition

A perfect market is determined on the basis of the several idealizing conditions which is called the perfect competition. Under the perfect competition the products are the perfect substitutes for each other. There are no barriers to the entry and exit and the information is totally disclosed to all the consumers. A large number of the buyers and the sellers have the ability to buy the product at a particular price. Under the perfect market the sellers are operating at a zero economic surplus and sellers make profits through the level of return on investments. In the long run the factors of production are quite volatile which allows the free term adjustments with respect to the changes in the market conditions.

The Perfect Competition in the Airline Market

Under this type of market there are few features of the competitive market yet not all. The imperfect competition market includes lots of market condition within itself such as monopolistic competition, oligopoly, monopsony and a lot more. Under this market the authority is with individual buyers as they can influence the prices and the production which is hidden from other players of the market.

Under the monopolistic competition there is only single seller which rules the market and the other sellers are not able to make an entry easily. The seller decides the price according to the quantity and he has the power to change the same according to his own wish.  Whereas under the oligopoly the market is dominated by the small number of sellers that can result from the cluster and reduces the competition and leads to the higher prices for the consumers. The barriers to entry are definitely high and in long run the oligopoly partners cab retain high profits.

After keenly observing the markets it can be concluded that the Singapore Airport definitely falls under the category of the perfect competition. According to the news the 7 new direct routes have been found at the Changi Airport. This facility provides the travellers to book the weekly direct budget flights to London Gatwick Airport. The air Mauritius is now offering direct budgeted flights to Sir Seewoosagur Ramgoolam international Airport and which is made easier with the help of the Changi Airport as Mauritius is 7 hours away (Cadarso & de Celis, 2017).

Earlier United States suffered a lot but now they have a new nonstop service from the Changi Airport to the United States’ City on the Bay (Cadarso, Vaze, Barnhart & Marín, 2016). Changi airport has also given a paradise feeling to its customers by introducing a flight to the Golden Temple.

The competition that has been prevailing in the airline market is the perfect competition. The main winning strategy of the Singapore Airlines is to focus on passengers instead of the price content (Fu, Lei, Wang & Yan, 2015). To give the comfort to the passengers is the ultimate goal of the company and this can be achieved through the constant satisfaction of the customers. The airline is the commoditized industry and majorly the airlines use the same equipment. The competition is generally in the same routes and especially on international, long distance. Therefore there is a lot of scope for the Singapore Airlines in terms of the level of the competition in the in terms of the objective factors.

Winning Strategies: Singapore Airlines and Changi Airport

What Changi Airport has done is change in the concept and the focus is on subjective issues. The first way of variation is to mainly keep the focus on the in-flight service. They have the gold standard in the inflight service (Ivaldi, Sokullu & Toru, 2015). They have acquired special skill and art to capture the process of recruiting in flight personnel and attendants.

The other factor of the competition is the scheduling of the flights on time. The front part of the cabin is what they look for which tends to be the first class and business class passengers. The art of keeping the super database of their frequent flyers is what gives them an edge over the other competitors (Kang & Hansen, 2017).

Price is the core factor of the competition and all the airlines play on the same front. The Airports in comparison to the Singapore Airport has focused on the in-flight services yet they are not just cost competitive (Lurkin, et al 2017). On the contrary the Singapore Airport focuses more over the scheduling and the routing of the Airlines to give the benefits to its customers.

(Source: Airline Route maps, 2018)

The above image depicts the direct routes that are located from the Changi Airport. It covers the European and South American cities which are far more and it makes easy for the traveller to travel.

(Source: Sky scanner, 2017).

The routes and the scheduling decisions are affected in by the competition in the airline industry due to following reasons.

From a worldwide business explorer magazine back cover, Singapore Airlines, Silk Air and Changi Airport provides the easy connections from Manila to Male, Denspasar to Delhi. While the other routes also account for mainland and offshore China. The links in India can also be found. Further, Indonesia and Southeast Asia are served by SilkAir (Sky scanner, 2017).

When talking about the long routes the cities covered are San Francisco, Houston, Los Angeles and New York. While every one of the four urban communities is served from Singapore, none are relentless these days, as the ultra-whole deal A340 flights were stopped toward the finish of 2013. Today they are matched Houston-Moscow, Los Angeles-Tokyo, New York-Frankfurt, and San Francisco with both Seoul and Hong Kong (The independent, 2018).

Similar Route: There are certain routes which all the Airlines follows depending upon the halt timings and therefore the major reason is that they have to keep the flights accordingly (Kanki, 2017). Following the similar route gives the choice to the customers to choose the destination from where they want to fly and therefore it creates a huge competition among the airports.

Direct Routes from Changi Airport

Air traffic: The traffic is also one of the reasons that the competition is there among the different airports. The flights running at the same time from the near buy countries have a liability to reach on time to satisfy the customers. Moreover most of the passengers travel on the daily basis for work purposes and therefore, it become the duty right from the airport to provide the customers with benefits (Bubalo & Gaggero, 2015).

The battle for air service has become the subject of intense political and legal pressures from cities, local airports, politicians and businesses (Helmreich & Merritt, 2017).

This is the situation on its prized European and U.S. courses, where the discounts are offered heavily bearers have taken away recreation voyagers on shorter courses inside Asia. In any case, these are by all account not the only difficulties looked by the aircraft.

Singapore Airlines told that the on-going fuel costs unpredictability represents another test. The aircraft fuel charge ascended by 9.2% in the year 2017 to S$1.02 billion in the December month (The independent, 2018).

The price of the fuel are rising and are relied upon to stay unstable, Singapore Airlines stated, majorly supported 41% of its fly fuel necessities at a weighted cost of US$65 per barrel in the present quarter (The independent, 2018).

In case of the European and the US routes, which describes the aggressive carriers have taken away the leisure of the travels on the shorter routes within the scope of Asia. There are certain challenges which are faced by the Airlines (Diels & Schindler, 2016).

The recent hike in the prices of the fuel is another breaking challenge that created heavy competition. The fuel rate increased in the year 2017 as compared to the year 2016 by 9.3%. They are expected to remain volatile and the sources confirmed that the Singapore Airlines has hedged 42% of its own jet fuel requirements at a weighted cost of US$ 65 per barrel (The independent, 2018).

Scheduling the flights on time and keeping a database of the same is the ultimate goal to reach the customer satisfaction. The schedules are the consistent database and gives ease to the customers. Moreover nowadays the schedules are available in the digital form and therefore the customer can access the flights easily and can book the seats accordingly.

Therefore, from the above analysis it can be concluded that the competition can be influenced even in the form of the routes and the scheduling of the flights and the Airports need to be consistent to grab a greater market share.

References

Airline Route maps, (2018) Retrieved from https://www.airlineroutemaps.com/maps/Singapore_Airlines_europe_south_america

Bubalo, B., & Gaggero, A. A. (2015). Low-cost carrier competition and airline service quality in Europe. Transport Policy, 43, 23-31.

Cadarso, L., & de Celis, R. (2017). Integrated airline planning: Robust update of scheduling and fleet balancing under demand uncertainty. Transportation Research Part C: Emerging Technologies, 81, 227-245.

Cadarso, L., Vaze, V., Barnhart, C., & Marín, Á. (2016). Integrated airline scheduling: considering competition effects and the entry of the high speed rail. Transportation Science, 51(1), 132-154.

Changi Airport, (2018). History and overview. Retrieved From https://in.changiairport.com/

Diels, E. A., & Schindler, C. (2016). Early Morning Concurrent Session: Aviation Management and Operations: Presentation: Analysis of Factors Related to True Airspeed (TAS) Calculation Utilizing the Handicap Procedure for the 2015 Women's Air Race Classic.

Fu, X., Lei, Z., Wang, K., & Yan, J. (2015). Low cost carrier competition and route entry in an emerging but regulated aviation market–The case of China. Transportation Research Part A: Policy and Practice, 79, 3-16.

Helmreich, R. L., & Merritt, A. C. (2017). Culture at work in aviation and medicine: National, organizational and professional influences. California: Routledge.

Ivaldi, M., Sokullu, S., & Toru, T. (2015). Airport prices in a two-sided market setting: major US airports.

Kang, L., & Hansen, M. (2017). Behavioral analysis of airline scheduled block time adjustment. Transportation Research Part E: Logistics and Transportation Review, 103, 56-68.

Kanki, B. G. (2017). Aviation information management: From documents to data. California: Routledge.

Lurkin, V., Garrow, L. A., Higgins, M. J., Newman, J. P., & Schyns, M. (2017). Accounting for price endogeneity in airline itinerary choice models: An application to Continental US markets. Transportation Research Part A: Policy and Practice, 100, 228-246.

Researchgate. (2017). Modeling Airline Frequency Competition for Airport Congestion Mitigation. Retrievedfrom  https://www.researchgate.net/publication/228893875_Modeling_Airline_Frequency_Competition_for_Airport_Congestion_Mitigation

Skyscanner, (2017) Retrieved from https://www.skyscanner.com.sg/news/airports/7-new-direct-routes-from-changi-airport

The independent, (2018) Singapore Airlines facing tougher competition on prized routes: WSJ Retrieved from https://theindependent.sg/singapore-airlines-facing-tougher-competition-on-prized-routes-wsj/

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