CORPORATE FINANCE
Introduction
Corporate value drivers are vital at the corporate level to promote growth and efficiency in an organization’s operations. As such, firms such as Singapore airlines tend to value drivers as a strategic approach to identifying and managing risks in the aviation industry. For instance, Singapore Airlines (SIA) has been at the forefront of promoting core values like the pursuit of excellence and concern for its customers. Therefore, the airline has strived to achieve the highest level of professional standards to increase efficiency. Consequently, the market value added (MVA) is crucial in the quantification of the creation and destruction of value for the company between 1st November 2019 and 28th February 2020.
Drivers for corporate value
Integrity
Singapore Airlines Ltd upholds integrity in its working environment to promote cordial working relationships. As such, integrity has helped the firm develop professionalism in its business environment hence raising the stakeholder’s commitment. Consequently, integrity practices have helped the airline achieve sustainability relative to other crucial areas of operation, such as governance (Asif & Gouthier, 2014, pp. 520). Hence, the Arline has maintained its organizational values, beliefs, and behavior required to maintain continued sustainability despite increased competition. As a result, integrity has helped develop strong guiding principles that help manage corporate and internal affairs. So, the Sustainability Strategic Committee (SSWC) has spearheaded guidelines to safeguard Singapore’s airline Ltd towards achieving its pursuits in the competitive aviation industry (Wirtz & Johnston, 2013, pp. 1). Moreover, the corporate value has helped Singapore Airlines fully comply to set laws and guidelines hence enabling the firm to abide by legal standards.
Safety
Safety is a key corporate value at Singapore airlines, which mandates the company’s operations on a daily basis. As such, the airline has continuously adopted working practices to promote the safety of all its staff and customers. Protective measures have been put by the management to safeguard the airline’s customers, which has significantly raised their standards in the international markets (Wirtz & Johnston, 2013, pp. 1). The staff union at the company has spearheaded to utilize the highest professional standards to ensure every stakeholder is protected from internal risks. Therefore, safety has been regarded as an essential component while dispensing services to customers. So, airline safety measures have enabled it to be apprehended as one of the best commercial airlines globally.
Pursuit of excellence
Singapore’s airline’s pursuit of excellence has been apprehended by perspectives upheld by senior management. Thus, the company’s pursuit of excellence has been both unobtrusive and elusive hence fulfilling the needs of its customers (Singaporeair, 2020). As a result, the airline has been one of the most profitable carriers and has received recognition due to its superb cabin crew services. SIA comprehends the high demands for its customers hence undertake benchmarks and market positionings to ascertain the needs of its clients (Asif & Gouthier, 2014, pp. 526). Hence, immense stress is placed on its frontline staff to ensure they provide the best services to its customers. So, a strong feedback system has been developed by the airline to address any issues regarding its services.
Teamwork
SIA works with pride in its quest to achieve success as a group based on set targets and objectives in the aviation industry. So, the Arline has, over time, promoted safety through teamwork, which raises awareness on overall safety procedures. For instance, the cabin crew undergoes a teamwork training session on safety and emergency procedures to ensure they always work as a group (Wirtz & Johnston, 2013). Hence, teamwork has been used by the company to encourage stakeholders to adopt collaboration as one of the core values in its operations. Thus, all employees are required to adhere to the set code of conduct, which requires a collective responsibility to avert possible risks.
Market Value Added (MVA)
MVA would be utilized to depict the difference between SIA’s current market value relative to the capital contributed by its stakeholders. As such, the difference illustrates the amount of wealth accrued by the airline towards its stakeholders between 1st November 2019 and 28th February 2020. In December 2019, Singapore airlines created value for its stakeholders by adding Brussels to their route networks (Singapore Airlines, 2019, pp. 1). The flight, which would be launched in October 2020, stands to increase SIA market value relative to capital raised by its investors since the route is economically viable. Brussels is the E.U. home, which serves as an important hub to Singapore airline (Singapore Airlines, 2019, pp. 1). The strategic move shows SIA’s commitment to expanding its networks to provide its customers with a satisfying customer experience compared to its competitors.
Besides, in December 2019, the passenger flown revenue increased b $514 million hence creating value to its stakeholders. Therefore, the load factor increased by 1% to hit a record 84.6% during the financial year (SIA Reports, 2019). Singapore airline was prepared for significant expansion in its capacity with its revenue per available seat-kilometer continued to grow hence overtaking its competitors in the aviation industry. The net profit shows that the company increased its capacity for the passenger flights hence taking the leading position in the global market.
However, in January 2020, SIA experienced destruction in value due to a decrease in cargo flown revenue. The loss in market value could be attributed to the emergence of COVID-19, which started to disrupt supply chains globally (Singaporeair, 2020). By February, the airline had suffered a $138 million decline in cargo flown revenue due to a decrease in a load of cargo carried by the airline (SIA Reports, 2019). The deterioration in the cargo segment was caused by an overall drop in demand in airfreight demand. The decrease is attributable to increased trade tensions between the U.S. and China, which significantly the airfreight business. During the same period, the airline expenditure increased due to non-fuel costs caused by the expansion in operations. As such, the airline’s capacity expansion led to the destruction of value since the expansion did not result in immediate revenue generation.
Conclusion
SIA has implemented some of the best drivers for corporate value to increase its sustainability despite barriers in the aviation industry. Key drivers such as integrity and pursuit for excellence has been critical in helping Singapore airline provide the best services to its customers. Besides, teamwork has helped the firm articulate corporate responsibilities with utmost seriousness due to increased competition from its closest rivals. On the other hand, MVA illustrates how the airline has created and destroyed value within the same period. Expanding the airline’s capacity has helped created value for its stakeholders. However, disruptions in its cargo flight have led to significant losses, posing a direct impact on its revenue margins.
References
Asif, M., and Gouthier, M.H., 2014. What service excellence can learn from business excellence models. Total Quality Management & Business Excellence, 25(5-6), pp.511-531. Link: https://www.tandfonline.com/doi/abs/10.1080/14783363.2013.839348
SIA Reports, 2019. [online] Singaporeair.com. Available at: <https://www.singaporeair.com/saar5/pdf/Investor-Relations/Financial-Results/News-Release/nr-q2fy1920.pdf> [Accessed 14 May 2020].
Singapore Airlines, 2019. Singapore Airlines To Add Brussels To Route Network. [online] Singaporeair.com. Available at: <https://www.singaporeair.com/en_UK/nz/media-centre/press-release/article/?q=en_UK/2019/October-December/ne2119-191216> [Accessed 14 May 2020].
Singaporeair, 2020. [online] Singaporeair.com. Available at: <https://www.singaporeair.com/saar5/pdf/Investor-Relations/Financial-Results/News-Release/nr-q3fy1920.pdf> [Accessed 14 May 2020].
Wirtz, J., and Johnston, R., 2013. Singapore Airlines: what it takes to sustain service excellence–a senior management perspective. Managing Service Quality: An International Journal. Link: https://www.emerald.com/insight/content/doi/10.1108/09604520310456672/full/html