SATS is looking to expand its ground handling operations across East Asia – and partnering with carriers in joint ventures is one way to do it
Late last year, SATS, the Singapore-based provider of ground handling and catering services, confirmed that it had agreed a collaborative ground handling deal with Kuala Lumpur, Malaysia-headquartered low-cost carrier (LCC) AirAsia.
The partnership covers ground handling across the Association of South-east Asian Nations (ASEAN) region and saw SATS establish an entirely new ground handling entity called SATS Ground Services Singapore (SGSS) to operate out of Singapore Changi International Airport’s Terminal 4. Moreover, the deal involved SATS acquiring a 50% share in AirAsia ground handling subsidiary Ground Team Red Holdings (GTRH) in exchange for a share in SGSS as well as a cash sum.
According to the terms of the deal, GTRH would be renamed SATS Ground Handling Red Holdings and act as a joint investment vehicle for SATS and AirAsia, holding stakes in both the Malaysian Ground Team Red (GTR) subsidiary and Singaporean subsidiary SGGS.
As a result, AirAsia will effectively hold a 51% share in GTR and 40% of SGSS, while SATS will effectively hold a 49% stake in GTR and 60% of SGSS.
As well as seeing SATS and AirAsia being responsible for growing their ground handling footprint in their respective markets, the deal also anticipates expansion into Indonesia, the Philippines and Thailand.
According to Alex Hungate, president and CEO of SATS, the partnership deal was only concluded after six months of discussion. “AirAsia had always self-handled in the belief that no third-party ground handler could match their quick turnarounds,” he notes. “However, in August 2017, SATS was appointed ground handler for AirAsia in Singapore, and they were impressed by SATS’ performance and by the innovative services that SATS has developed with new technology. That was when the idea of a ground handling partnership was mooted.”
Tony Fernandes, AirAsia Group’s CEO, is also enthusiastic of the potential of the deal, commenting: “We believe this joint venture will allow AirAsia to unlock significant value and grow it.”
Partnership and growth
The accord will give SATS access to the Malaysian ground handling market. According to the company, the partnership will combine AirAsia’s “expertise in providing quick and low-cost turnarounds with industry best practices and innovative technology developed by SATS for passenger and ramp handling”. Indeed, says Hungate: “We like to partner with strong base airlines to strengthen their hub operations and improve connectivity for passengers and shippers across Asia.”
SATS also points out that the growing fleet sizes of Asian carriers like AirAsia represent a “huge opportunity” for a handler such as itself.
Other, similar partnerships may also be in the offing, although Hungate is guarded about this: “For reasons of confidentiality, we cannot comment on new partnerships still under discussion.”
However, with SATS already offering ground handling in Beijing, Taiwan and Hong Kong in East Asia: “We prioritise the most connected, fast-growing airlines in the large aviation hubs,” he adds.
There are changes taking place in the region that are having a definite impact on SATS and its business plans. Hungate explains: “SATS sees three mega-trends in Asia that are benefiting our business – growth in air travel, greater demand for high quality, safe food and rapid rise in e-commerce traffic.
“As these trends drive up volumes, SATS invests in technology to achieve higher operating leverage from improved productivity and strengthened connectivity. For example, we are digitising ramp operations, delivering real-time data to our ramp teams using SmartWatch and Smart Glass.
“We have launched a fully automated eCommerce Airhub and automated kitchen operations with use of AGVs and robotics. We believe we will continue to benefit from our investments in technology,” he concludes.