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Friday, December 25, 2020

An interesting article on SATS by Kristy

 The SATS experience over two coronavirus pandemics: A question of investors vis-à-vis employees, and SIA (by Kristy)

The name “SATS” would have been familiar to many Singaporeans. For many years, it was known as the ground-handling subsidiary of the Singapore Airlines (SIA) group, supporting the latter’s airport operations such as check-in, inflight catering, and aircraft cleaning, just to name a few. Moreover, over the years, SATS had also provided some employees with an eventual steppingstone to cross over to its more “prestigious” SIA parent as well. However, SATS’ relationship with its SIA parent was about to change in the wake of the 2003 SARS coronavirus pandemic, which saw both SIA and SATS staff undergoing retrenchment exercises on the back of reduced passenger activity at its Singapore Hub.  Following the SARS episode, then-Senior Minister, the late Mr. Lee Kuan Yew, openly proposed that SATS be divested from SIA, to allow the latter to focus on its core business of running an airline.  That suggestion eventually become reality when SATS was officially divested from SIA in 2009. 

As a result of the divestment, Temasek Holdings, through its subsidiary Venezio Investments, emerged as the chief shareholder of SATS, by virtue of Temasek’s direct majority stake in SIA. Thus, SATS became affiliated with Temasek Holdings itself, just like its former SIA parent, albeit through by indirect means via Venezio Investments instead.  However, being a separate entity from SIA also meant that the SATS staff lost their staff travel benefits that they had long enjoyed as being part of the SIA group. Nevertheless, SATS continued to be featured, and remained a cornerstone in SIA’s service and operational endeavours;  with SATS staff continuing to don the SIA gear whenever the situation warranted it.  Notably, SATS share value achieved new highs beyond its previous pricings when it was still a member of the SIA group (see Appendices Charts). One could say that although SATS continued to remain as a valuable “wingman” for SIA’s Singapore Hub, the employees of both companies now “enjoyed” distinctly different benefits, even if they were both supporting the same cause. Clearly, the past decade since divestment was a joy to SATS investors, including management staff who received share options as part of their renumeration package, but questionably so for the rank-and-file employees. 

Fast forward to 2020 and with the advent of the Covid-19 coronavirus pandemic, the Singapore aviation industry was dealt a far more serious blow than the previous SARS pandemic 16 years earlier. Both SATS and SIA saw their share prices plummet to record lows, and staff from both companies were redeployed to secondary positions in an attempt to avoid direct layoffs.  Although SATS’ aviation-related businesses, such as its passenger services arm which took a hit owing to sharply reduced passenger traffic; its food business unit, which includes the provision of meals to airlines, as well as to the Singapore military, shifted gears to soften the business impact.  Arguably, the advent of another coronavirus pandemic shows that history does repeat itself; and on hindsight, a “spare engine” in the form of SATS might have helped the SIA group to stave off its first-ever full-year financial loss, or somewhat mitigate the fallout.

Despite receiving heavy government support, SIA was finally forced to embark on a retrenchment exercise this year− this unprecedented and extended blow to its operations was simply too much for it to bear.  While SATS has yet to openly announce any retrenchment like its former SIA parent, it mentioned in its quarterly financial results that it was “reducing headcount” and was seeking to step up its efforts in this area.  

Barring any official releases of information concerning SATS’ Human Resources policies, one can only reasonably surmise that the headcount reduction at SATS was achieved arising from these few factors as listed below:

1. Staff who accepted SATS’ early retirement scheme rolled out earlier this year 

2. Non-renewal of SATS staff under limited-term contract service, possibly including flexi/part-time staff and those working under post-retirement re-employment contracts

3. Resignation of SATS staff (including those who were redeployed to secondary appointments over the course of this year)

Without the need to declare a retrenchment exercise, it is safe to say that any company implementing the above measures would be able to achieve a headcount reduction, reduce itself of the relatively experienced, yet costlier senior staff, and also relieve itself of the need to pay out costly retrenchment benefits as well− a clear win-win maneuver from both management and accounting perspectives. Interestingly, the market evidently took well to SATS’ plans for headcount reduction− SATS’ share price closed higher upon the publishment of such news.  Evidently, the spirits of SATS investors were cheered up by SATS’ consideration of employees into its cost-reduction plans. One could say that those investors who had bought into SATS at its record low in March would be smiling away, albeit at the expense of the employees who once again took some of the brunt, again owing to circumstances beyond their control.

Presently, even as plans for a worldwide transport of the Covid-19 is being rolled out, SATS’ share price has rebounded back to nearing that of its pre-Covid value, probably in anticipation of the key role that its local and overseas aviation services arms would play in the eventual distribution effort. At the present time of writing, SATS’ share price is also nearly on-par with that of former SIA parent− an unprecedented scenario which looked out of reach when SATS was still an SIA subsidiary. On hindsight, if SATS had continued to stay within the SIA family, it is likely that SIA’s investor sentiment, and share price in turn could have also been rejuvenated by association as well.  Alas, one can only speculate the benefits that could have been if SATS had remained as an SIA subsidiary in the present age.

What does the fate of SATS employees, and those of its former SIA parent hold in a post-Covid world? One would only know when the new Collective Agreements of both companies are up for discussion, and eventually published in future for further analysis. Owing to its long heritage by virtue of its long association with the SIA group, SATS has grown in tandem with its former SIA parent, and had provided many Singaporeans with a stepping stone for their careers, and bread for their families by extension. Yet by the looks of the present situation, the future still appears to be a hopeful one for SATS investors; but questionably so for the rank-and-file employees, some of whom have given their best years to the company, and had rode through the aftertaste of the previous SARS episode which ended up in SATS being cast off from the SIA family.


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Anonymous said...

Well written am sure the late LKY would be pleased he made the right
decision to split SATS from SIA.

Anonymous said...

SATS retrenched a huge portion of their foreign workforce.. not to forget, Singaporeans received a lot of subsidy during the circuit breaker period. Unlike SQ, that has a lot of foreign professional eg pilots they haven’t retrenched. Even if they are Singaporeans, it’s way higher than the salary limit threshold.

Also in their annual report, can see they made use of govt grants. They conducted courses for external people which they received revenue for. Also, government had provided subsidy if their staff attend course to upskill and train themselves. My friend is in corporate and I was shocked at how many courses she was attending, even though there’s no direct relevance in her work. She told me her HR colleague who attended the course with her told her that is all about her attending so SATS can get subsidy.

Sad part is I heard that many blue collared sats staff are no longer receiving their full allowances and OT due to changing operational demands as compared to pre-COVID-19 days. U know how much their basic can be? $1200 - $1500 (around the same as crew). Like all of us, many of them have financial commitments (since their take home in the past used to be $3k- $4k with allowances and OT).

SATS is surviving many people will still struggle during this period. SATS 85% business is aviation if I remember correctly. The other 15% is non-aviation. Even with supplying food to army camps, foreign workers dormitories, I’m an amateur but I still cannot see how these offset their core aviation business in the long run .

. Will not be surprised if Singaporeans affected by these, aviation or non aviation, actually borrow from ahlongs due to dire situation.

How do I know so much? My friend works in SATS. Also my cousin attended an interview late last year to join them in passenger and catering before while they were recruiting aggressively. but didn’t take up in the end since low basic = not much effect on bonuses. These are what I heard and know. You can also find out by reading SQ and SATS reports and business news, Don’t suka suka POFMA me lol

I have a penchant for SATS. They are just like Singapore when we first became independent. When SATS was divested, people were skeptical and said they couldn’t survive without SQ, but they did.

Anonymous said...

To add on to above post, SIA is a better employer to staff than SATS.

I was with SATS in 2015. During SG50 Period, we heard Management did not want to give any SG50 incentives to employees despite being a local company and making millions of profits.

Apparently the union was unhappy and there was a deadlock. They threatened to raise it to Chan Chun Sing’s attention (labour chief then) during the dialogue session with him. In the end the management relented and gave 50 shares (approximately worth $200 now, btw how to sell 50 shares for cash in SGX ah?) Those who are less than two years of service will receive $100 NTUC vouchers. I belonged to the latter.

If I recall correctly, during SG50, SQ staff received $500.

Additionally I know from my friends that SIA has merit increment for their AOs. SATS is fixed increment - whereby whether you’re a good or crap staff, everyone receives the same amount. Can be very disappointing and unmotivating. Guess it’s communism style and there are no favourites - except when it comes to promotion.

Also there was one year that us, SATS AOs did not receive an increment. Management cited bad outlook even though they were making $200m profits, what’s more during worse situations like now during COVID19.

I left SATS in end 2015. Was only with SATS for 1.5 years, it’s considered long because turnover is high. I heard there are some new staff (usually rank and file) who MIA within three days due to harsh work environment in the tarmac. Ive Joined the logistics sector which has fairer remuneration.

SQ may not be the best employer, but I still feel they are better as compared to SATS. There are many nice colleagues in SATS. Maybe I’d have stayed on if SATS had a fairer system for remuneration for staff.

Will be nice if Boh Tong interviews SQ and SATS staff affected by COVID19 one day. I have left SATS some time back but I really loved the industry a lot.

Blessed Christmas.