PESTLE Analysis for Singapore Airlines
Every industry bets heavily on legislative and regulatory changes, so does airline industry. Even though the airline industry has become deregulated but it’s still heavily controlled by the authorities. Hence we may still expect sometimes government policy plays a significant role in the development of the industry and may impact industry profitability and competition landscape. Therefore, when the airline industry is embracing the market liberalisation, each player in the industry should be clearly aware of the political force or policy makers due to their constant, lasting influence on this industry. For instance, because of the oil price slump in past two years, the airline industry has been facing mounting pressure from the government to unwind fuel surcharges. Another example is
ASEAN‘s recent move to open its air space to all its members, meaning airlines of ASEAN’s member country will face new opportunity and freedom to fly within this region. However, the competition level will increase.
Economic factors affect airline industry to a great extent because the aviation sector is closely linked to national, regional and international economic development. Gross domestic product (GDP) growth, interest rates, business cycle’s and crude oil prices always have a significant impact on almost every industry, including airline industry. Research conducted by the International Air Transport Association (or IATA) revealed that disposable incomes growth which closely follows GDP growth is the primary demand driver for the travel by air. A forecast released by the International Monetary Fund (IMF) suggests that world GDP will grow 3.4% (inflation-adjusted) in 2016, higher than the 3.1% growth estimated for2015. On top of that, IATA forecasts passenger travel demand will continue to grow6.9% in 2016 compared to 6.7% growth projected for 2015.
Social environment also has a significant impact on the airline industry. Because every consumer is a social human being, whose behaviour is influenced by social norms and unspoken rules of a particular group. Studies have suggested different demographic groups tend to have different consumer habits. For example, millennial generation behaves quite differently from baby boomers. With millennial generation entering their peak income stage, studying their travel preferences will help airlines pinpoint their particular demand and develop appropriate product and service for them.So categorising different generations, examining demographic and sociological attributes are of important significance for airlines.SIA needs proactively review the social attributes as it may present future opportunities.
Technological advancements could be a double-edged sword. On the one hand, technology advancement is a major driver in improving airline efficiency, lowering operation costs, enhancing overall customer experience, personalising customer service. On the contrary, the technology could pose a threat to airlines which could change the way how we live, work and interact with people. For example, Skype web-meeting is becoming prevalent now which could potentially lower the demand for a face-to-face meeting, meaning business travel demand could be reduced.
Due to low significance in Legal and Environmental factors, the author opts to skip the discussion on them.
Limitation of the PESTLE
PESTLE is a comprehensive tool that helps the author to understand the external environment that Singapore Airlines is operating in, but like many other models, it has limitations.Because the external environment is fluid, data mining is very time-consuming and subjective, and because of author’s limited ability and resources constraints, the data collected may not be updated, and relevant, which could cause the analysis is not accurate