SIA to outsource, divest after major restructure
SIA to outsource, divest after major restructure
Agence France-Presse, Singapore
Singapore Airlines (SIA) will outsource some basic services and may divest key units as part of a major restructure that the nation's political powerbroker, Lee Kuan Yew, has ordered, reports said on Tuesday.
Lee, Singapore's first prime minister who still holds the influential position of senior minister, hauled SIA's management and unions into a meeting on Monday to tell them the company must "transform its business model" within the next six to 18 months, the Business Times said.
"Get your act together and make SIA as cost efficient as possible," Lee, 80, was quoted as saying in the meeting.
Lee said SIA, one of the world's most successful airlines, had to adapt to the challenges of low-cost airlines, new technologies and increasing competition from carriers that outsource many services.
"SIA will also have to transform its business model. This is already taking place elsewhere. Airlines are beginning to disaggregate their various components," Lee said, according to the Business Times.
"In the past, it was normal for an airline to cater in-flight meals themselves, perform their own handling at the gates, etc. However, many of these functions can now be better performed out- sourced."
Lee warned there could be job losses in the restructuring process and stressed the government intended to protect Changi airport over SIA.
"Between preserving our assets in SIA and protecting Changi's hub status, our priority must be the hub status," The Today paper quoted Lee as saying.
In this respect, Lee said a third license for airport ground handling and inflight catering would be issued to compete against SIA's Singapore Airport Terminal Services (SATS) and Changi International Airport Services.
Another option Lee floated was for SIA to divest itself of its 87 percent stake in SATS.
SIA also fully owns regional airline Silkair and has an 87 percent stake in SIA Engineer Company, although the media reports said SATS would likely be divested ahead of the other two.
SIA chief executive Chew Choon Seng, who attended the meeting, emerged from the lecture non-committal about the carrier divesting SATS.
"These are matters for the board of SIA to consider," he said.
However Lee's influence within SIA, which the government majority owns, is legendary and his views are rarely challenged.
Most recently, immigration officials last month stripped SIA pilot Ryan Goh, a Malaysian national, of his permanent residency after Lee singled him out for stirring union unrest over the airline's cost-cutting measures.
Goh lost his job as a result, with Home Affairs Minister Wong Kan Seng describing him as an undesirable immigrant.
Singapore Airlines' share price was down 10 Singapore cents (US$5.95 cents) at 11.30 at the close of Tuesday's morning session of trading.