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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