Drivers for corporate value in the airline industry
Introduction
Drivers for corporate value in the airline industry involve the addition of products or services hence increasing value towards its consumers. As such, drivers for corporate value has helped Singapore Airlines (SIA) differentiate its products from competitors hence appealing to a large customer base. Therefore, SIA works with relevant stakeholders within its supply chain to explore ways that improve sustainability within its operational aspects. The drivers for corporate value are evident in its sustainability reports based on its continued run of profit-making. Besides, the use of Market Value Added (MVA) stands to help the firm quantity the creation and destruction of value between 1st November 2019 and 28th February 2020. Therefore, the commercial airline has utilized different drivers of value which can be assessed based on the impact of recent activities on SIA.
SIA value drivers
Excellent customer service
airline management utilizes excellent customer services as the key value driver in promoting its brand globally. During the above period, the airline pioneered numerous in-flights and entertainment innovations as a strategic approach to improving its service delivery. As such, the airline continued to offer a choice of meals and personal entertainment systems hence developing a competitive edge over its rivals in the aviation industry (Singapore Airlines, 2019, pp. 1). Therefore, the customers are provided with satisfying client services which provide best-class-experiences hence alleviating the comfort levels while using the airline. In December, the airline embarked on the provision of authentic premium jasmine tea, which lured potential customers into using SIA (SIA Reports, 2019, pp. 1). Besides, customer services provided by SIA reflect on culinary influences of culture the flight is headed. So, creating a positive customer experience has helped lay a culture for success due to increased commitment levels by all stakeholders.
Ethics and Integrity
Moreover, Singapore Airlines has increased its commitment to achieving high standards in corporate governance. As such, the ethical business has played a key role as a guiding principle to promote the airlines national and international operations. SIA integrity is evident in the development of key partnerships with its agents, contractors, and employees. As a result, the airline has increased its reputation in the aviation industry (IATA, 2018, pp. 1). Hence, SIA had been committed to improving its governance through the implementation of high levels of professionalism (Singaporeair, 2020). Consequently, Singapore airlines deployment of integrity as key drivers has helped develop strong internal controls and risk management systems. Thus, the corporate value driver has consequently maximized the shareholders’ returns to achieve long-term sustainability.
Excellence
SIA spearheads for the development of excellence as a key driver for improving its corporate value. For instance, the SIA engineering Division pursued an operation to improve its technical and operational excellence, thus developing a strong correlation between reliability and safety (Wirtz & Johnston, 2013). the airline has ensured that its aircraft maintenance team complied with all requirements as developed by the Civil Aviation Organization (ICAO). As a result, corporate value at Singapore airlines has strictly been adhered to articulate a strong quality management system (Singapore Airlines, 2019). Also, the airline achieved service excellence under the aircraft management framework hence achieving high levels of corporate value.
Safety
Singapore airlines have implemented safety as one of the key corporate values needed to achieve market sustainability. As such, SIA apprehends the safety of its employees and customers since they are the most important stakeholders in the aviation industry. The SIA safety policies are, therefore developed to promote a strong safety culture for the company to achieve organizational goals and objectives (IATA, 2018). As a driver to corporate value, SIA has ensured that its employees are well trained and comply with applicable regulations and standards. Moreover, equipment and operating systems owned by the company comply with applicable requirements hence mitigating possible risks. The airline seeks to continuously improve safety measures in addition to spearheading the development of health programs.
Market Value Added (MVA)
MVA is the amount of wealth a company like Singapore airline is capable of creating from its stakeholders within a given time. However, stakeholder’s intervention would lead to the creation or destruction of value based on the nature of activities undertaken within a given timeframe. For instance, in November 2019, SIA developed its market capitalization in amortization of deferred charges hence raising its value for its final quarter of the year. Therefore, SIA group recorded an operating profit of $1,067 million for the financial year despite numerous marketing challenges (Singaporeair, 2020, pp. 3). As such, stakeholders input enabled the airline to achieve one of their best performances in recent years. The initiatives undertaken by the stakeholders ensured SIA recorded some of the best transformation developments in their passenger and cargo carriers despite challenges in the markets. Furthermore, in December and January, the flown revenue grew up by $829 million due to an improvement in the provision of customer services (Singapore Airlines, 2019). The upsurge in the revenue is attributable to the expansion of its capacity and development of new revenue management systems. Consequently, SIA has significantly improved its value relative to the analysis carried out by MVA.
However, in February, the group’s expenditure rose, resulting in the destruction of value. The loss in value could be attributed to the increase in net fuel cost due to the 21.6% increase in average jet fuel price (Singaporeair, 2020). Besides, non-fuel expenditure also rose during the same period leading to a trajected loss in value for the airline. The increased in expenditure resulted from the expansion of SIA capacity, which did not result in immediate profits. Cost savings could, therefore, not be achieved, resulting from valuing loss despite the firm making profits in other sectors in the aviation industry. As such, value loss in February indicated that the airline needed to accrue immediate benefits from its increased capacity to develop market sustainability into the future. So, MVA has provided the correct approach to exemplifying SIA business within the stated period of time.
Conclusion
Drivers for corporate value have played a key role in placing Singapore airlines among the best globally. As such, SIA has ensured it adheres to the drivers for corporate value to achieve set goals in the aviation industry. For instance, the excellent customer the airline lure potential customers into the business hence controlling a large customer base. Also, safety measures undertaken by the airline has helped mitigate possible risks in the market, thus developing a competitive edge over its competitors. besides, MVA has helped outline how Singapore airline has created and lost value between November 2019 and February 2020 to exemplify its current market position. (Wirtz & Johnston, 2013)
References
Singapore Airlines, 2019. Singapore Airlines – An Excellent, Iconic Asian Brand – Martin Roll. [online] Martin Roll. Available at: <https://martinroll.com/resources/articles/strategy/singapore-airlines-an-excellent-asian-brand/> [Accessed 16 May 2020].
Singaporeair, 2020. [online] Singaporeair.com. Available
at:<https://www.singaporeair.com/saar5/pdf/Investor-Relations/Annual-Report/sustainabilityreport1617.pdf> [Accessed 16 May 2020].
IATA, 2018. IATA Outlines Key Drivers For Its Airline Industry Outlook For 2018 | CAPA. [online] Centreforaviation.com. Available at: <https://centreforaviation.com/news/iata-outlines-key-drivers-for-its-airline-industry-outlook-for-2018-808571> [Accessed 16 May 2020].
SIA Reports, 2019. [online] Singaporeair.com. Available at: <https://www.singaporeair.com/saar5/pdf/Investor-Relations/Financial-Results/News-Release/nr-q2fy1920.pdf> [Accessed 16 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