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Chew goes, Goh to take over, as Singapore Airlines confronts a brave new world

6-Sep-2010
Singapore Airlines CEO Designate, Goh Choon Phong
Singapore Airlines CEO Designate, Goh Choon Phong

Singapore Airlines’ CEO, Chew Choon Seng is to step down from his role at the end of 2010. His successor, as widely expected, is to be Goh Choon Phong, currently EVP for Marketing and Regions. Mr Goh will join the SIA board on 01-Oct-2010 and assume the CEO role on 01-Jan-2011. The succession is orderly and has been planned meticulously.

Mr Chew’s performance report: maintained level of excellence, while continuing profitability

Chew Choon Seng’s tenure has hardly been a cakewalk. He took over the airline’s leadership in 2003, just as SARS was threatening to ground the entire Asian industry, then more recently navigated the global financial meltdown, followed by a more literal melting of the earth’s core, as the Eyjafjallajokull volcano closed European skies.

A highly skilled technician, already with experience across most areas of the airline, he has consistently led from the front, barely putting a foot wrong. He had a lot to prove; firstly, in Singapore’s close commercial community, Mr Chew was not part of the Establishment and secondly – a chalice that any leader of Singapore Airlines must bear – he inherited perhaps the one airline in the world that is still regarded as the benchmark of industry excellence. From that starting point, generating renewed excellence is a challenge.

So, the fact that Singapore Airlines still carries that mantle today, seven years into Mr Chew’s stewardship, bears its own testimony.

Is a reduced footprint the price of future profits?

But, as the baton passes, once again to a man who has been groomed as a future leader for several years and who has gained experience in the field as well as in many parts of the airline, there are some new issues to be confronted.

For, despite its still-revered stature, Singapore Airlines has become a shrinking force, the price of regained profitability. SIA flew almost 12% fewer seat kilometres in Jul-2010 than it did in Jul-2008 (even though this involved a 0.3% year-on-year increase). Over the same two-year period, Cathay Pacific contracted its capacity by just 2%, whereas Emirates has expanded by close to 30%.

For Singapore Airlines, the capacity restraint has been about rebuilding load factors and yields. It has been remarkably successful at both, as load factors leapt and a consequent recovery in yields (albeit still below pre-crisis levels) helped the airline avoid a full-year loss in the year to Mar-2010.

As with pre-eminence in any sphere, hanging onto the lead will generally require compromises; and it may be that SIA is now embarking on a different course. Just as excellence has to be a given, profitability is still vital for an airline that has become so closely connected with Singapore’s global image.

And a changed status for SIA in Singapore

This dual task became a little harder while Mr Chew occupied the top spot. A major strategic shift occurred a couple of years ago, on instructions from the still-powerful Minister Mentor and father of modern Singapore, Lee Kuan Yew: the roles of SIA and Singapore Airport quietly reversed.

The importance to Singapore’s economy of its airport – also a global brand leader – formally became the government’s leading aviation policy priority. SIA, while still the global beacon, was no longer to be the focal economic point. This reflected both Changi Airport’s wider value, direct and indirect, to Singapore’s economy and the rapid climb of new world order competitors such as Dubai and the Gulf area, as Emirates, Etihad and Qatar Airways chase the future.

SIA was hardly being cut adrift by its parent government, but the airline has been put on notice that its favoured son stature has been passed to a more pressing priority, of retaining Singapore’s hub role, even while new aircraft types and a more liberal aviation regulatory environment changes the ground rules.

China in focus, as the region’s new driver

Yet the rising fortunes of Dubai and the Gulf are not the only direction that SIA has to contest.

The only major achievement that Mr Chew could not claim under his leadership was to entrench SIA in China. This has become more than an aspiration for Singapore. As China quickly dons the mantle of regional aviation leader, it offers both opportunity and threat.

The opportunities are clear – and longstanding rival Cathay Pacific has been a prime beneficiary. China’s domestic market continues to boom. But at the same time, its flag carriers remain unable to capture the high international standards of the region’s airline leaders. This shortcoming won’t persist for ever, but so long as it remains, a lot of collateral traffic is there to be captured.

On the other side of that equation, any airline that can entrench itself as a partner, as Cathay has done with Air China, should be riding a powerful tiger. Singapore sees itself as a natural partner for China in many spheres and the airline industry is a highly conspicuous and potentially profitable area of investment.

SIA tried and fell short in creating a minority partnership in China Eastern Airlines, as entrenched forces in Beijing resisted. As it turns out, the proposed investment in the Shanghai based airline could well have proven very costly in many ways. But today, China Eastern’s fortunes may be improving.

And Goh Choon Phong will be judged on success there – or not

For Mr Goh, as incoming CEO, success in that arena will be the measure by which Singaporean history judges him. He will be expected to retain the flag carrier’s global superiority and continued prosperity, even despite a rapidly shifting industry foundation.

That alone is a big enough task.

Meanwhile, restoring SIA’s larger footprint may become a secondary target, even if it remains a goal.

But if he can secure a partnership, on reasonable terms, with a major player in China, he will also have anchored his place in Singapore’s aviation history. If he doesn’t, Singapore Airlines may be forced to accept the long term role of a high quality niche player. Not a bad place to be at all. But not where Mr Lee would like it to be, however well Changi progresses.


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