New Singapore Airlines CEO considers selling Virgin Atlantic stake
Singapore Airlines' new CEO Goh Choon Phong, who took over the role on 01-Jan-2011, stated the carrier is reportedly considering selling its 49% stake in Virgin Atlantic. This would mark the shedding of the last major remains of the carrier's global expansion strategy as the new CEO confronts rising competition in the fast-growing yet highly competitive Asian market.
Singapore Airlines spokesperson Nicholas Ionides recently stated the carrier would consider “interesting opportunities” for the stake. However, he said: "At this point no decision has been made about an immediate divestment of our stake in Virgin." Outgoing CEO Chew Choon Seng described the investment in the UK-based carrier as “underperforming”.
The sale would allow SIA to focus on increased competition in Asia, particularly with the expansion of LCC operations such as Jetstar and the AirAsia Group in the region, as well as intensifying competition in the premium market from flag carriers and the Middle East that potentially affect the carrier’s ability to attract business-class passengers. The premium market accounts for around 40% of Singapore Airlines revenues. Singapore Airlines also holds a 33% stake in Tiger Airways.
Virgin Atlantic in mid-Dec-2010 stated it had received a “number of lines of inquiry” about potential tie-ups after it suggested it could be interested in a merger. Media reports have stated that Delta Air Lines and unnamed Middle Eastern carriers are among the interested parties. In Nov-2010, the carrier appointed Deutsche Bank to assess the aviation industry and seek growth opportunities. The carrier has stated it is too early to comment on individual details. Virgin Atlantic spokesman Greg Dawson said Singapore Airlines was “very supportive of our business strategy, including the review by Deutsche Bank”.
Singapore Airlines confronts a brave new world
Goh Choon Phong, previously EVP for Marketing and Regions and Chair of SilkAir, joined the SIA board on 01-Oct-2010 and replaces Chew Choon Seng, who stepped down from the role at the end of 2010. Mr Goh has worked in the airline industry for more than 20 years and has been the carrier’s VP for 10 years.
Mr Chew 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. The outgoing CEO acquired stakes in Virgin and Air New Zealand as part of efforts to expand internationally. The value of the Air New Zealand investment was written down in 2001 and the remaining holdings were sold off three years later. Virgin was expected to hold an IPO within three to five years of Singapore Air’s investment, Mr Chew stated in 2006.
Mr Goh, as incoming CEO, will be expected to retain the flag carrier’s global superiority and continued prosperity, while simultaneously maintaining the reputation of Singapore Airlines as a premium airline, even despite a rapidly shifting industry foundation. To put his own touch on the CEO tenure, Mr Goh is expected to entrench Singapore Airlines in the emerging and high potential Chinese market.
He has also stated he would focus on improving teamwork next year to maintain its competitive edge. Mr Goh has stated he expects 2011 to be a challenging year, but also warned SIA’s competitors that the carrier plans to make “strong moves” in 2011. He identified the growing number of carriers in the Middle East as a key issue, as these carriers look to become premium airlines, stating: "There will be many more challenges waiting because there are many more airlines now, both in the upper market and low-cost ones."
“We have lined up three pillars: safety improvement, customer orientation and network connectivity. These will go together because these are the elements that make an airline competitive."