Singapore: Singapore Airlines Ltd.'s Goh Choon Phong, who takes over as chief executive officer today, may shed the last major remains of the carrier's global expansion strategy as he confronts rising competition in Asia.
Goh, 47, may get offers for the airline's 49 per cent stake in Virgin Atlantic after the UK carrier said this month it had received tie-up inquiries.
Outgoing CEO Chew Choon Seng called the investment "underperforming" two years ago and has said the airline would consider a sale.
In Asia, Goh faces low-fare competition on long-haul routes from Jetstar and AirAsia X, as well as renewed efforts by Cathay Pacific Airways Ltd. and Korean Air Lines Co. to lure lucrative business-class travellers.
Emirates, Qatar Airways Ltd and Etihad Airways have also ordered close to 300 planes since 2007 as they build hubs, linking Europe and the Asia-Pacific region.
"Goh has a tough job ahead of him," said K. Ajith, a UOB-Kay Hian Research Pte analyst in Singapore. "The environment is drastically different from five or 10 years ago, when SIA managed to fend off competition by focusing on its branding."
Virgin, 51 per cent owned by billionaire Richard Branson, hired Deutsche Bank AG to explore options as British Airways boosts cooperation with American Airlines across the Atlantic and completes a merger with Madrid-based Iberia Lineas Aereas de Espana.
Singapore Airlines bought its stake in a £600 million (Dh3.43 billion) investment concluded in 2000.
Interesting opportunities
SIA would consider "interesting opportunities" for the stake, Nicholas Ionides, a spokesman, said in an e-mail.
Goh, who joined the carrier as a cadet administrative officer in 1990, after graduating from the Massachusetts Institute of Technology, declined interview requests, he said.
Whether SIA will sell the Virgin stake will largely depend on what price is offered since the carrier is not short of funds, said Rohan Suppiah, an analyst at Kim Eng Securities Pte in Singapore.
"SIA isn't in a hurry to sell, but if they get a fair price they will," he said. "Virgin hasn't provided any significant synergies over the years.""
Delta Air Lines Inc. and Middle East airlines are among carriers exploring a Virgin tie-up, Sky News reported last month, without saying where it got the information. Singapore Airlines' stake complicates a deal as local ownership rules limit non-European investors to minority stakes.
"Either Singapore Air sells or Branson loses effective control by selling part of his stake," said Andrew Miller, chief executive officer of CAPA Consulting LLC, which advises airlines.
SIA is "very supportive of our business strategy including the review by Deutsche Bank," Greg Dawson, a Virgin spokesman, said without elaborating. Virgin operates 38 twin-aisle planes, according to its website.
Chew, who has spent almost four decades with SIA, sold a leasing arm and spun off a ground-handling unit while CEO to focus on the carrier's main flying business. He takes over as Singapore Exchange Ltd.'s chairman today.
Chew's predecessor, Cheong Choong Kong, bought stakes in Virgin and Air New Zealand Ltd to expand overseas.
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 initial public offering within three to five years of Singapore Air's investment, Chew said in 2006.
Shares trailing
SIA, which operates 110 planes, was unchanged at S$15.54 (Dh44.56) in mid-morning in Singapore. The carrier trailed the 15-stock Bloomberg Asia Pacific Airlines Index last year, amid rising competition for premium and low-cost travellers.
The shares climbed 4 per cent last year, compared with the index's 27 per cent advance.
