LOG355e Air Freight: SIA Cargo's Management Strategies & Profitability

This report provides an analysis of Singapore Airlines (SIA) Cargo's air freight management strategies and profitability. It discusses the types of cargo carried by SIA Cargo, including pharmaceutical logistics, racing equipment, and concert equipment, highlighting the importance of air transport for time-sensitive deliveries. The report uses a profitability model to relate cargo load, cargo yield, and cargo unit cost, revealing operational losses in the 2017 financial year. It appraises three strategies adopted by the president to increase return on profitability, focusing on right-sizing the freighter fleet, focusing on cargo that generates the highest returns, and implementing adequate IT software like SAP to support core systems and strategic decision-making. The report concludes by emphasizing the need for competitiveness and effective pricing structures for market penetration and revenue generation.

Running head: AIR FREIGHT MANAGEMENT
Air Freight Management
Name of the Student:
Name of the University:
Authors Note:

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Table of Contents
Question 1:.................................................................................................................................2
a) Discussing the three types of cargo carried by SIA Cargo, while stating why air transport is
the most desirable for these cargo:.............................................................................................2
b.i) Using the profitability model to relate these three variables:..............................................2
b.ii) Appraising three strategies and corresponding initiatives that the president had adopted
to increase return on profitability:..............................................................................................3
Reference and Bibliography:......................................................................................................6

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Question 1:
a) Discussing the three types of cargo carried by SIA Cargo, while stating why air
transport is the most desirable for these cargo:
During the fiscal year SIA had carried many cargos in its airplanes from place to
place, among which is the Pharmaceutical Logistics that provided the company with and
award by IATA’s Centre of excellence for independent validators in pharmaceutical Logistics
certificate. The second cargo carried by SIA where carrying state of the art racing
equipment’s used for several events in Formula One and MotoGP races (Singaporeair.com,
2018). Moreover, the company also transported concert equipment’s for several high-profile
artists such as Guns N’ Roses and Adele. From the overall evaluation Air transport is most
desirable for these cargo, as it is time sensitive and needs to be delivered on time in a certain
place. The concert equipment needs to be transported quickly at the desired place, while
maintaining the integrity and safety of the cargo. this will only be provided with Air
transportation, as by other means of transportation the time restriction is always present.
b.i) Using the profitability model to relate these three variables:
Particulars Value
Cargo and mail carried (million kg) 1248.1
Cargo load (million tonne-km) 6895.8
Gross capacity (million tonne-km) 10,912.30
Cargo load factor (%) 63.2%
Particulars Value

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Cargo yield (cents/ltk) 25.9
Cargo unit cost (cents/ctk) 16.8
Cargo breakeven load factor (%) 64.9%
Particulars Value
Cargo load factor (%) 63.2%
Cargo yield (cents/ltk) 25.9
Cargo unit cost 16.37
Losses from operations (0.43)
From the overall calculation it could be identified that 0.43 cents/ltk will be lost by
the organization in its cargo load, as it does not generate the required level of returns to
support its break-even cargo load (Aircargonews.net, 2018). This relevant loss indicates that
the company lost money during 2017 financial year, while conducting its operations.
Wensveen (2018) stated that detection of breakeven analysis directly allows organizations to
identify the actual cost and revenue that needs to be conducted by the company to attain no
profit no loss.
b.ii) Appraising three strategies and corresponding initiatives that the president had
adopted to increase return on profitability:
The first strategy adopted by the directive proposed to have the right size freighter
fleet, as it needs to obtained the revenues generated from the contribution of cargo freights.
The aim of the director is to increase cargo freight with passenger travels, which could help
in generating higher revenues from operation. Moreover, the director focuses its overall

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operation on cargo, which is generating the highest returns for the airline company. In
addition, controlling an efficient hub of operations, which is controlled by the management to
seamlessly transfer cargo from one place to another. The second strategy adopted by the
director is regrading freighters, that play a major role, as identified by the management of
SIA, which relevantly allows the organization to generate adequate revenue report its
business. However, the main stance of the director is to focus on cargo while reducing the
magnification on freighters. Currently the directors indicate that they are still interested in
freighters but at right economics and not at any price, as it was hampering the overall
operational feasibility and revenues of the organization. In this context, Luo, Roach &
Jiratchot (2015) stated that the implementation of SAP allows organization to identify the
relevant cost and profit that is being entered by the organization. This relatively helps in
detecting the current capability of the organization to continue its operations.
The third strategy used by SIA is to implement adequate it software to support various
things including the Core system of the organization (Singaporeair.com, 2018). The
implementation of SAP has allowed the organization to make adequate decisions regarding
the strategic position and condition of its current resources. the software process is relatively
adequate, as depicted by the director which could allow the organization to improve the
current system and increase their operational capability. However, Rezaei, Hemmes &
Tavasszy (2017) argued that without the use of adequate competitiveness and pricing
structure the organizations are not able to penetrate the market and capture market share. This
is the main reason behind the loss of freighters, which was seen by the SIA after the 2007.
The three strategies are well supported by Different levels of operations that is conducted by
the organization, such as the increment in eCommerce operations, which allowed the
organization to increase their freight carriers. Moreover, the Re integration and market

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recovery has allowed the organization to improve its current financial capability by
generating higher revenue from operations.

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Reference and Bibliography:
Aircargonews.net. (2018). SIA is serious about cargo. Air Cargo News. Retrieved 17 April
2018, from http://www.aircargonews.net/news/people/interviews/single-view/news/
sia-is-serious-about-cargo.html
Luo, A., Roach, S., & Jiratchot, C. (2015). The effect of the 7Ps of the marketing mix on air
freight customer satisfaction and repurchase intention. Journal of Supply Chain
Management Research and Practice, 9(2), 28-36.
Lyon, D., & Francis, G. (2016). Current issues in airport management in New Zealand. Air
Transport in the Asia Pacific, 53.
Rezaei, J., Hemmes, A., & Tavasszy, L. (2017). Multi-criteria decision-making for complex
bundling configurations in surface transportation of air freight. Journal of Air
Transport Management, 61, 95-105.
Singaporeair.com. (2018). Singapore Airlines Official Website | Book International Flight
Tickets. Singaporeair.com. Retrieved 17 April 2018, from
http://www.singaporeair.com/en_UK/in/home
Wensveen, J. (2018). Air transportation: A management perspective. Routledge.