Analysis Of Singapore Airlines Group And The Aviation Industry In Singapore

Overview of Singapore Airlines Group

Singapore airlines group is the flag carrier airline in Singapore. This company has been founded in 1947. This company has registered its stock in Singapore exchange. Headquarter of the company is established at Airline house, Singapore. Currently, 24574 people are employed by this company and the total turnover of the company was Singapore dollar 972.4 million. This company is offering its services in 40 countries and 90 cities through its route network. This company is the largest operator of

Boeing. Various changes have been done by this company in last few decades to enhance the performance and grab more market share (Air Transport World, 2014).

This company has changed its information technology process as well as various innovations have also been adopted by the company to make the operations better. Further, the marketing campaign has also been started by the company to manage the better position in the market. In domestic market, this company is performing well and it is largest aviation form in the Singapore market. But at international level, Delta airline plc could be the major competition of the company (Beria, Niemeier and Fröhlich, 2011). This company has also adopted various new technology and innovation to enhance its market and it is offering high competition to Singapore airlines.

Horizontal and vertical analysis study has been performed over financial statement of Singapore airlines limited to evaluate the performance of the company. Through the analysis and study over aviation industry of Singapore, it has been found that the industry has faced various changes in last 5 years (Madhura, 2014). The graph of sales depicts about better enhancement in the turnover of the industry so as the performance of Singapore airlines express (Appendix). The sales, profit, assets and liability trend has been analyzed and found that all are depicting about positive changes and a good increment in 2016 from last 5 years. The GDP of Singapore has also been enhanced from last 5 years.  

Further, the aviation industry of Singapore has been analyzed. According to a report of 2016, the international revenue of Singaporean aviation industry has been grown up by 7.4% even the expectation was of 6.7%. Further, the various firms in the aviation industry have also enjoyed a great turnover in last year and due to which the entire performance of aviation industry has been enhanced (Kiran and Singh, 2014). The economic condition of Singapore market has also been better and it has also impacted over the position of the aviation industry. The GDP of the Singapore has been 297 billion in 2016 and in that, the part of aviation industry is 25.3 billion which has been enhanced and depict about the better performance of the industry as well as overall condition of economy. 

Changes in Singapore Airlines Group and the Aviation Industry

Financial ratios are the method to analyze the financial position and performance of an organization. Following are few financial ratios of Singapore Airlines to analyze its liquidity, profitability, efficiency and solvency position:

Profitability ratios express about the profit position of an organization. The analysis over financial statement of Singapore Airlines expresses that how many changes have taken place into the profit position of the company in last 5 years and what is the competitive position of the company. For analyzing the competitive position, Delta airlines has been analyzed

Net margin:

Net margin position depict about the net profit position of the company. The below table express about the net profit position of the company which has been lowered in 2016 in comparison of last year. The analysis over Delta airlines profitability ratios depict that the profitability position of Delta is far better than Singapore airlines.

		2016	2015	2014	2013	2012
Net margin	Net profit/revenues	2.42%	5.28%	2.36%	2.36%	2.51%

Return on equity position depicts about the total return to the equity holders. The below table expresses about the return on equity position of the company which have been lowered in 2016 (Kurov and Stan, 2016). Further, the analysis over Delta airlines return on equity ratios depict that the profitability position of Delta has also been lower due to few external factors.

		2016	2015	2014	2013	2012
Return on equity	Net profit/Equity	2.75%	6.30%	2.95%	2.72%	2.89%

Gross profit margin position depict about the gross profit position of the company. The below table expresses about the gross profit position of the company which has been enhanced in 2016 in comparison of last year. The analysis over Delta airlines profitability ratios depict that the profitability position of Delta has also been enhanced and express about positive changes.

		2016	2015	2014	2013	2012
Gross Profit	Gross profit/ revenues	43.66%	41.17%	39.61%	35.46%	35.42%

Return on assets position depict about the assets position of the company. The below table expresses about the return on assets position of the company which has been lowered in 2016 in comparison of last year. The analysis over Delta airlines profitability ratios depict that the profitability position of Delta has been enhanced and express about positive changes.

		2016	2015	2014	2013	2012
Return on assets	Net income/ Total assets	1.46%	3.38%	1.54%	1.59%	1.69%

Dividend ratios express about the dividend and investment position of an organization. The analysis over financial statement of Singapore Airlines expresses that how many changes have taken place into the performance of the company in last 5 years. 

Dividend yield position depict about the investment position of the company. The below table expresses about the dividend and price position of the stock which has been lowered in 2016 in comparison of last year (Romney et al, 2006). The analysis over Delta airlines investment ratios depict that the investment position of Delta has been enhanced and express about positive changes.

		2016	2015	2014	2013	2012
Dividend yield ratios	Annual dividend per share/ price per share	3.12%	6.55%	2.91%	3.19%	3.31%

Financial Performance and Profitability Ratios

Dividend payout ratios:

Dividend payout depict about the investment position of the company. The below table expresses about the dividend and net income position of the company which has been lowered in 2016 in comparison of last year. The analysis over Delta airlines investment ratios depict that the investment position of Delta has been enhanced and express about positive changes.

		2016	2015	2014	2013	2012
Dividend payout ratios	Dividend / Net income	98.58%	100.07%	98.64%	98.08%	99.21%

Price earnings ratio expresses about the investment position of the company. The below table expresses about the price and the earnings of the company which has been enhanced in 2016 in comparison of last year. The analysis over Delta airlines investment ratios depict that the investment position of Delta has been enhanced and express about positive changes.

		2016	2015	2014	2013	2012
Price earnings ratio	Market value price per share/ earnings per share	31.580	15.271	33.857	30.733	29.949

Earnings per share ratio:

Earnings per share ratio expresses about the investment position of the company. The below table expresses about the net income and outstanding shares of the company which has been lowered in 2016 in comparison of last year (Kaplan and Atkinson, 2015). The analysis over Delta airlines investment ratios depict that the investment position of Delta has been enhanced and express about positive changes.

		2016	2015	2014	2013	2012
Earnings per share ratio	Net income/ weighted average share outstanding	30.43%	68.95%	31.43%	30.59%	32.26%

Stability and liquidity ratios:

Stability and liquidity ratios express about maintain the cash and liquid assets position of an organization. The analysis over financial statement of Singapore Airlines expresses that how many changes have taken place into the liquid position of the company in last 5 years.

Cash debt coverage ratio:

Cash debt coverage ratio expresses about the liquid position of the company. The below table expresses about operating cash inflow and current liabilities of the company which has been lowered in 2016 in comparison of last year. The analysis over Delta airlines investment ratios depict that this company has maintained almost similar position.

		2016	2015	2014	2013	2012
cash debt coverage ratio	Net cash provided by operating activities / average current liabilities	0.10	0.12	0.08	0.10	0.17

Absolute liquid ratios:

Absolute liquid ratio expresses about the liquid position of the company. The below table expresses about the liquid assets and current liabilities of the company which has been lowered in 2016 in comparison of last year (Shapiro, 2005). The analysis over Delta airlines investment ratios depict that this company has not maintained the position in a better manner.

		2016	2015	2014	2013	2012
Absolute liquid ratios	Absolute liquid assets/ current liabilities	0.88	1.02	1.07	1.31	1.30

Current ratio:

Current ratio expresses about the liquid position of the company. The below table expresses about the current assets and current liabilities of the company which has been lowered in 2016 in comparison of last year. The analysis over Delta airlines investment ratios depict that this company has not maintained the position in a better manner.

		2016	2015	2014	2013	2012
Current ratio	Current assets/current liabilities	0.91	1.05	1.10	1.36	1.35

Stability and Liquidity Ratios

Quick ratio:

Quick ratio expresses about the liquid position of the company. The below table expresses about the liquid assets and current liabilities of the company which has been lowered in 2016 in comparison of last year (Saunders and Cornett, 2014). The analysis over Delta airlines investment ratios depict that this company has not maintained the position in a better manner.

		2016	2015	2014	2013	2012
Absolute liquid ratios	Absolute liquid assets/ current liabilities	0.88	1.02	1.07	1.31	1.30

Efficiency ratios express about the working capital management position of an organization. The analysis over financial statement of Singapore Airlines expresses that how many changes have taken place into the performance and the position of the company in last 5 years. 

Inventory turnover ratio expresses about the efficiency position of the company. The below table expresses about the inventory and cost of goods sold of the company which has been lowered in 2016 in comparison of last year. The analysis over Delta airlines investment ratios depict that this company has not maintained the efficiency position in a better manner.

		2016	2015	2014	2013	2012
Inventory turnover ratio	Cost of goods sold/ average inventory	11.63	11.66	10.56	9.50	17.73

Current assets turnover ratio expresses about the efficiency position of the company. The below table expresses about the current assets and revenue of the company which has been enhanced in 2016 in comparison of last year (Madhura, 2011). The analysis over Delta airlines investment ratios depict that this company has not maintained the liquidity position in a better manner.

		2016	2015	2014	2013	2012
Current asset turnover ratio	Total sales/ total average current asset	0.60	0.53	0.53	0.51	1.01

Asset turnover ratio:

Assets turnover ratio expresses about the efficiency position of the company. The below table expresses about the assets and revenue of the company which has been enhanced in 2016 in comparison of last year (De Haan, and Amtenbrink, 2011). The analysis over Delta airlines investment ratios depict that this company has not maintained the liquidity position in a better manner.

		2016	2015	2014	2013	2012
Asset turnover ratio	Total sales/ Average Total assets	0.15	0.16	0.17	0.17	0.34

Debtor’s turnover ratio expresses about the efficiency position of the company. The below table expresses about the accounting receivables and net credit sales of the company which has been enhanced in 2016 in comparison of last year. The analysis over Delta airlines investment ratios depict that this company has not maintained the liquidity position in a better manner (Brigham and Ehrhardt, 2013).

		2016	2015	2014	2013	2012
Debtor’s turnover ratio	Net credit sales/ Average accounting receivables	2.43	2.24	2.40	2.33	4.62

Assumption: It has been assumed that entire sales were on credit basis.

Industry average analysis:

Through analyzing the performance with industry, it has been found that the following are the calculation of Singapore airlines:

Return on assets	Net income / total assets	0.01	0.03	0.02	0.02	0.02
Return on investment	Net profit/ total investment	0.02	0.05	0.02	0.02	0.03
Return on equity	Net profit/ equity	0.03	0.06	0.03	0.03	0.03

(Markides & Sosa, 2013)

Following are the calculations of Delta airlines:

Return on assets	Net income / total assets	0.09	0.09	0.01	0.20	0.02
Return on investment	Net profit/ total investment	0.10	0.10	0.02	0.25	0.03
Return on equity	Net profit/ equity	0.36	0.42	0.07	0.91	-0.47

(Lim and Lee, 2012)

The above calculation express that the performance of Delta is quite better than the performance of Singapore airlines.

Competition and Market Position

Strait times index:

The above evaluation depict that the performance of Singapore Airlines has been better from last 5 years but due to some external factors, the organization has faced some issues and due to which, the performance and the market position of the company has been lowered in 2016. The stock price of the company has also been lowered and depicts that the organization is required to make few changes into its policies (Heracleous and Wirtz, 2012) 

Further the internal and external non financial factors of the company have been analyzed to make a better decision about the position of the company.

Strength	Weakness
Premium product and brand Multi brand model South pacific market strength	Growth opportunities are limited Missed various opportunities
Opportunity	Threat
Premium economy Partnership could be expanded Unique growth	Competition from gulf countries Increased competition

(Hakimian, 2011)

Further, the other factors explain that the employee relations are quite good, quality and image of the company in the market is impressive. CSR activities and sustainability activities express about the better position and the performance of the company (Heracleous, Wirtz and Pangarkar, 2006).

Conclusion:

To conclude, Singapore airlines is performing very well in the Singaporean aviation industry. Though, the competition of the comapny is quite huge ad thus company is required to make few changes to enhance the performance and the position in the market. Further, the industry changes have also affected the performance and the position of the comapny. Further, the report concludes that Singapore aviation industry’ financial and non financial performance would be better n near future according to the current policies and future trend.

Singapore airlines have acquired tiger and scoot and after the acquisition, various changes have taken place into the financial performance of the company. This acquisition has impacted badly on the financial performance of the company (Fu and Oum, 2014). The recent news express that it would take few time for the company to reach over profitable state again.

The current brand position of the company is quite competitive. It express about the good performance in terms of marketing in the marketplace (Cook, Tanner and Lawes, 2012). The performance of the company expresses that the current market campaign has helped the company to manage and enhance the position in a better way (Bloomberg Businessweek, 2017).

The executive directors are managing the financial and non financial department of the company in a better way to enhance the performance of the company whereas the non executive directors are tracking the performance of the company so that no unethical practices could take place into the performance of the company (Centre for Aviation, 2017).

Vision and strategic financial parameters (Conclusion):

To conclude, the management of the company is suggested to make few changes into its strategic financial management to enhance the performance of organization in a better way the organization is required to follow the industry rules and regulations to manage the position in the market. Further, the market campaign of the comapny to enhance the market share and the position in the industry has been very successful. So, it suggested to the comapny that company must launch few more market campaign to manage a good non financial position in the market.

Further, through the above analysis, it has also been found that governance policies of the comapny are quite attractive and t attracts the stakeholders of the comapny towards the company. Further, after acquisition, the business of the comapny has been affected but the future trends express about better position of the company in upcoming years.

References:

Air Transport World. 2014. Singapore Airlines boosts Tigerair stake. Online at https://atwonline.com/finance-amp-data/singapore-airlines-boosts-tigerair-stake. Accessed on 27 December 2017

Beria, P., Niemeier, H. M., and Fröhlich, K. 2011. Alitalia–the failure of a national carrier. Journal of Air Transport Management, 17(4), 215-220.

Bloomberg Businessweek. 2017. Singapore airlines completion rise. Online at https:// www.businessweek.com%2Farticles%2F2012-05-17%2Fsingapore-airlines-competition-rises. Accessed on 27 December 2017.

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.

Centre for Aviation. 2017. Singapore Airlines reduces focus on US market as non-stop flights are dropped. Online at https://centreforaviation.com/analysis/singapore-airlines-reduces-focus-on-us-market-as-non-stop-flights-are-dropped-131665 . Accessed on 27 December 2017

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De Haan, J. and Amtenbrink, F., 2011. Credit rating agencies.

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Hakimian, H. 2011. The economic prospects of the ‘Arab Spring’: A bumpy road ahead. CDPR Development ViewPoint 63 (1), 1-2

Heracleous, L., & Wirtz, J. 2012. Strategy and Organisation at Singapore Airlines: Achieving Sustainable Advantage Through Dual Strategy. In Inderwildi, O. and King, D. (eds.) Energy, Transport, & the Environment (pp. 479-493). London: Springer

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