Singapore Airlines

Here are my views

From 09 to 14, in the airline industry, things started to be poor for SIA because a) Emirates and Qatar started aggressive promotion and discounts for their seats. Emirates started it in 2010, Qatar 2 years later. b) Rise in budget airlines which now seems to be the choice of consumers if they are flying flights in the region of 5 flying hours radius. Also for haj trips, I have heard of Muslim acquaintances who fly budget via airasia instead of SIA. These factors are not truly the CEO's fault.

If one looks at MAS (Malaysia Airline) accounts, MAS was doing well until FY11. Things started to sour for MAS because it too was suffering from Airasia competition, fuel cost and Emirates/Qatar aggression as well as internal factors of MAS' labour union rules which increased their cost

How about the banking industry from 09 to 14? well things did not go south for the local banks (whose main exposure was Singapore); things went north. We had a) boom for housing loans where Singaporeans and foreigners happily took home loans or paid refinancing fees to refinance their housing loans, b) businesses (in Singapore, Asean & East Asia) experienced good times which led to more loans unlike during the 09 recession and c) Construction/Building boom due to more condo/HDB/infrastructure projects in Singapore.

To add the icing to the cake, Singaporeans (who are mainly less risk averse) parked their savings in banks FD despite becoming wealthier as Singapore benefited from the global recovery from GFC and Fed's QE. Looking at DBS Customer deposit data, in 2Q 2014 customer deposits is 296M, in 2Q 2009, customer deposit was 176M. I believe the majority of this increase is contributed by our risk adverse Singaporeans who prefer parking money in FDs! With so much more deposits, DBS could dish out more loans (of course after doing their credit checks/due diligence). I believe this too happened for UOB and OCBC and all 3 banks benefited from the above mentioned turn of events

SQ has lost its aggressive blood and seems not to have any strategy except to manage cost... to a fault.

It seems to be waiting for winds to change, and mean hwile looks inwards to manage what it has control over:

Staff costs
Marketing costs
Material costs

It lacks vision and perhaps bold decisions to hold market share... which I feel it is slowly losing. I think it does not know what it wants to be:

A great way to fly?
The world's favourite airline?

Airline is a tough industry with so many different factors at play - LCCs, competition from main carriers, internet revolution reducing the need for long hual and even fuel prices.

Given that global economy is stuck in the low growth grind for a prolong time and massive unemployment, there is simply too much adverse factors at play.

Its fast becoming another NOL but at least not as cut throat as NOL yet... not as yet.

Banks on the other hand are great proxies to economies that they operate in.

I for one will never invest in the Damn Bloodly Stupid Bank since historically they have been proven to be a professional bank with little management continuity and always subjected to unknown diversifications and premium acquisitions.

As for the remaining 2, like it or not, owners' $ remain in them for the long hual and hence there is always the additional consideration for their own $...

Please feel free to correct me if I m wrong

Odd Lots Vested (All)
GG

Agreed,

DBS : quite sad for them to be in this "professional" situation right?
OCBC/UOB : Owner's money inside! better run it tight!

Oppsss, sorry! off-topic!

(01-08-2014, 11:10 PM)CY09 Wrote: How about the banking industry from 09 to 14? well things did not go south for the local banks (whose main exposure was Singapore); things went north. We had a) boom for housing loans where Singaporeans and foreigners happily took home loans or paid refinancing fees to refinance their housing loans, b) businesses (in Singapore, Asean & East Asia) experienced good times which led to more loans unlike during the 09 recession and c) Construction/Building boom due to more condo/HDB/infrastructure projects in Singapore.

Indeed the airline industry is tough, but the banking industry is not all roses either, especially after the GFC and the collapse of Lehman Brothers. The booming property market we saw in the last few years was a result of easy monetary policies and low interest rates. This has led to too much money chasing after few assets. However, low interest rates cut both ways. While it spur investments and spending, which led to higher loans for the banks, it also led to low margins for the loan bank loaned out. The NIM for past few years has been at historical lows.

Also, the battlefield for the loan market has been brutal. Besides the three local banks, we have a number of foreign banks trying to vie for a pie of the cake. Obviously, each one is trying to outdo the others with very competitive rates. So while SIA has to deal with low yields, DBS has to deal with low margins.

(01-08-2014, 11:10 PM)CY09 Wrote: To add the icing to the cake, Singaporeans (who are mainly less risk averse) parked their savings in banks FD despite becoming wealthier as Singapore benefited from the global recovery from GFC and Fed's QE. Looking at DBS Customer deposit data, in 2Q 2014 customer deposits is 296M, in 2Q 2009, customer deposit was 176M. I believe the majority of this increase is contributed by our risk adverse Singaporeans who prefer parking money in FDs! With so much more deposits, DBS could dish out more loans (of course after doing their credit checks/due diligence). I believe this too happened for UOB and OCBC and all 3 banks benefited from the above mentioned turn of events

Banks are heavily regulated by the authorities, especially so after Leman collapsed. There is the Capital ratios requirements, reserve ratios, Basel II/III compliance etc etc… So even though a high deposit based will give the bank more leverage, they are certain restrictions and limitations they need to adhere to. I do not have in depth knowledge of how these policies work, but I am sure it is not as simple as more deposits = more loans.

(02-08-2014, 07:46 AM)greengiraffe Wrote: I for one will never invest in the Damn Bloodly Stupid Bank since historically they have been proven to be a professional bank with little management continuity and always subjected to unknown diversifications and premium acquisitions.

It is true. It was once not just a Damn Bloody Stupid Bank, but also a Damn Bloody Slow Bank. Before PG, it was Richard Stanley, who held the position for less than a year before succumbing to leukemia. Richard’s predecessor was Jaskon Tai, who became CEO in 2002, though he was already with the bank before that. Jaskon was famously, or infamously know for acquiring Dao Heng Bank, paying more than 3X book value. (Jaskon was not the CEO, but the President at the time of the acquisition but he is widely credited as the man driving it). The bank has to write off huge amount in subsequent years. Those were the past. In recent years, I am beginning to see changes in the bank, and a sign of a Damn Bloody Solid Bank in the making, or at least a Damn Bloody Safe Bank.

Oh, by the way, for those who are not aware, Jaskon sits on the board of SIA since 2011. I hope he do good things to SIA.

Sorry for writing so much about DBS in SIA threat. I shall stop my discussion on DBS here. What I am trying to say is a suitable CEO really can make a difference. With all due respect, and in my personal opinion, I think Goh is less than an ideal CEO for SIA, at least so far.

http://www.straitstimes.com/news/singapo...lui-says-2

Parliament: SIA plane about 90km from MH17 when it was shot down, Lui says
Published on Aug 4, 2014 3:29 PM


A Singapore Airlines (SIA) plane was about 90km or some 10 minutes away, when a Malaysia Airlines jet was shot down over eastern Ukraine last month. -- PHOTO: ST FILE

By Karamjit Kaur

A Singapore Airlines (SIA) plane was about 90km or some 10 minutes away, when a Malaysia Airlines jet was shot down over eastern Ukraine last month.

Confirming this in Parliament on Monday, Transport Minister Lui Tuck Yew said there were no flight restrictions above 32,000ft over the particular airspace at the time.

MH17 was flying from Amsterdam, Netherlands to Kuala Lumpur when it was blown out of the skies while flying over eastern Ukraine where pro-Russian rebels are fighting government forces.

"No national authorities, no regional aviation bodies, nor ICAO (International Civil Aviation Organisation) has provided any advisories to avoid that part of the Ukrainian airspace" Mr Lui said.

(05-08-2014, 07:41 AM)greengiraffe Wrote: "No national authorities, no regional aviation bodies, nor ICAO (International Civil Aviation Organisation) has provided any advisories to avoid that part of the Ukrainian airspace" Mr Lui said.

Then SIA planes should continue to ply that route. Why did they avoid immediately after MAS incident? Monkey see monkey do management lacks foresight.

I am not sure if the reason why SIA is going down is entirely the fault of its management.

The dynamics of the industry weren't great to start with. Furthermore, look at how cash rich nations are sponsoring their airlines (Qatar, Emirates etc).

It's just a tough business.

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact. - Warren Buffett

Regards,
theasiareport.com