COMMENTARY: Home is where the money is
SINGAPORE – Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation (CAPA), calls it “hardly a matter of choice”. TravelMole Asia sees it as “hardly a surprise”.
That to which is being referred is the news that Singapore Airlines and its parent Temasek have bought a combined 24% stake in China Eastern Airlines for US$918 million.
In CAPA’s latest newsletter, Harbison said it was hardly a matter of choice “if the carrier’s (and its government’s) long-term interests are to be well served”.
“China will soon dominate Asian aviation and, within a decade or two, global aviation. And Singapore – the hub – is losing its edge in a highly competitive global market. SIA and Singapore need to entrench themselves in the new Asia, where China calls the shots.”
Facing pressure on the homefront (ie by a goverment paranoid about Singapore remaining relevant in a global world) to expand its wings, SIA has been scouring the world to stake its bets for the future. This is the carrier’s first investment in another passenger airline since chief executive officer Chew Choon Seng took over the reins in June 2003.
Prior to that, it tried its luck down under but sold its stake in Air New Zealand after it found itself restricted from expanding the way it wanted to in Australia.
It then looked north to the UK when it took a 49% stake in Richard Branson’s Virgin Atlantic Airways, an investment it may sell back to Branson, according to a BA spokesman quoted earlier this month.
Branson meanwhile is also changing partners – it took a stake in Tony Fernandes’ soon-to-be launched AirAsia X, the low cost long haul airline.
It was hardly a surprise therefore that SIA, in the end, would opt to place its bets closer to home and in China, the motherland of all aviation markets to come.
China Eastern must also see SIA as a knight in shining armour; It is the nation’s only listed carrier to post a loss last year. Its shares surged on the news in anticipation that expertise from the world’s most profitable carrier ¬ it posted S$2.12 billion (US$1.39 billion) profit last year – will lift it from the doldrums.
The China Eastern partnership will also help SIA flex its muscles against Cathay Pacific and its alliance with Air China and in a market tipped to grow fivefold by 2025, the Singapore Girl needs all the workout she can get.
Yeoh Siew Hoon
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