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.