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Introduction

The air travel industry in which Singapore Airlines operates is prone to volatilities and disruptions that don’t augur well for business. The effects of the global financial crisis, high fuel prices, and security issues such as terrorism and epidemic outbreaks have resulted in a decline in profits in the industry (Yosef, 2006). Singapore Airlines has however maintained a strong recovery path registering improved earnings in the 2010/2011 year.

In this report, the income statement of Singapore airlines will be the subject of analysis. The company’s performance will be measured through a comparison of its inflow and outflow of assets as reported in the financial statement.

Analysis

According to the financial statement of the company, Singapore Airlines group achieved a net profit of $1092 million in the 2010/2011 financial year. Asset outflows of the company for the year ending April 2011 equaled $13, 253.5 million compared to 12, 644.1 million for the same period in the previous year, representing a positive growth of + 4.8%. Asset inflows for the financial year ending April 2011 were $14, 524.8 million compared with $12, 707.3 million for the same period the previous year. This marked a positive increase of +14.3%. The income statement also details the revenue achieved by the company section of the group. The overall asset inflow of the company was $11, 739.1 million while the overall asset outflow was at $10, 887.8 million. The profit after taxation for the company was $1,011.2 million. The value addition at both group and company level was positive with that of the company level being +37.8%. The revenue figures posted by Singapore Airlines show both the top-line and bottom-line growth of the company is on course. It is important to note that all figures are in Singapore Dollars.

Revenue drivers

If a business experiences a return on capital that is more than the asset outflows, then a positive value is created. The creation of value in business is directly linked to the revenue management of a company. However, value alone cannot help in the revenue growth of a company. There is a need to enhance the development of the areas of revenue generation in a company to help in diversifying sources of revenue (Alexander, 2007). Singapore Airlines has as result embarked on a fleet modernization and leasing program, upgrading customer services and increasing its partnership with various airlines, all aimed at achieving better revenue management.

According to the 2010/2011 annual report, the company saw the delivery of new Airbus A330-300 aircraft that are on operating leases to various cities in the world. Additionally, six more Boeing 777-200ERs were leased to Royal Brunei Airlines. Furthermore, the company reported the completion of cabin refreshment in another ten Boeing 777-200s. There were also several additions to the airline’s fleet of Boeing and Airbus aircraft. The fleet expansion according to the company is meant to cater for increasing passenger volumes that will in the long run translate to increased revenue.

The company also embarked on a program of upgrading services including redeeming of points for selected flights besides other local offers and privileges. The main aim of the above strategy is to maintain high-quality service delivery as one of the key revenue drivers of the airline.

Partnership with other airlines also emerged as a leading driver of revenue for the company. For instance, the airline in the last financial year increased its list of partner airlines to 29. This has in turn helped the airline’s customers to earn more miles that are redeemed for extra services without pay. The projected benefit, in the long run, will be a rise in revenue.

Reference List

  1. Alexander, J., 2007. Performance dashboards and analysis for value creation. NY: John Willey & Sons.
  2. Singapore Airlines, 2011. Singapore Airlines Annual Report. (Published 2011). Web.
  3. Yosef, E.,2006. The evolution of the US airline industry: theory, strategy and policy. NY: Springer.

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