SATS (SGX: SATS) shares are up near 8% today on the announcement of a change in the management structure. This is announced with the appropriate amount of corporate verbiage: ““The changes in the organisational structure and leadership is an expression of SATS' transition into a global company. This will facilitate management alignment, enhance coordination, and leverage the group's combined capabilities across the globe. This will help us to accelerate our delivery on commercial and operational excellence synergies and better serve our customers,” says Kerry Mok, president and CEO of SATS.” Err, yes, and very good luck to them.
OK, so perhaps we shouldn't be so dismissive but that is just logorrhea from the PR pen. There is an underlying message there but it's one of hopes, not achievements. It's worth remaining ourselves of what SATS currently is: “That linkage though. SATS is the major (some 80% of in fact) provider of ground services at that same airport. Well, of ground handling and catering at least. So, if we've the airline that uses this airport as its major hub reporting a business doing very well then we can imagine the company that handles - and feeds - the passengers going through that airport to also be doing well.” SATS provides most of the ground services at Changi. Singapore Airlines uses Changi as its hub, SIA is doing well, we can expect SATS to do well off the back of that.
SATS share price from SGX
The real message from this management speak announcement from SATS is that this isn't where the company expects to rest. Rather than simply sticking to Changi and growing - or not growing, as the case may be - with the volume of traffic through that one airport they're going to take those management skills on the road. Which is a logical and sensible means of at lest trying to expand.
We do think there's an inherent problem here, which is that few infrastructures are really free market enough to allow a foreign company in to do this sort of work. Just as with the political pressures which led to the establishment of that 80% dominance at Changi, so too with other major airports around the world. There simply always is that political pressure to have a home grown company being favoured.
That's not a definitive problem though, there are some places that allow competition. Therefore sensible selection of where to try to expand into makes sense - but it will be those management skills that count, in that selection.
