Koh Boon Hwee at Asia Roundtable Talks

In an interview, Koh Boon-Hwee, Chairman of Singapore Airlines Limited, and a Co-Chair of the Asia Roundtable talks about some of the issues that are on the two-day meeting's agenda.

What are your top two objectives for the Asia Roundtable?

My first priority is to give participants a better understanding of the current situation in Asia. There has been a lot of interest in China and India, but the rest of Asia has a role to play too.The second major objective for the conference is to allow participants to meet people from all over the world and get to know them. Contacts like this are vital to shaping the region.The theme of the meeting is “Tilting the global balance: the strategic implications of Asia’s growth”. A significant rise in travel to and from the region is one such implication.

Just how much is traffic set to increase in the future?

If you look at the different regions in terms of air travel, intra-Asian travel is increasing at a faster rate than the world-wide average. The world-wide average is growing at 5% while Asia is growing at a rate more like 7%. Fuelling this growth in Asia is air travel liberalization and growing air traffic demand from countries like China and India – and from these countries to Europe and the United States.

How will China’s rise impact Singapore as a regional aviation hub?

If we look specifically at the airline industry, we see that a lot of Asian airlines have performed well because intra-Asian traffic is growing rapidly. The pace of liberalization is behind that of Europe and the US, but it is nevertheless increasing.But as the industry liberalizes, there’ll be more competition – for example more low-cost airlines are being set up recently. Alongside this are rising income levels and living standards in countries like China and India. The growing middle class creates more demand for travel and tourism, benefiting the airline industry.The industry won’t develop in same way as the US and European models. For one, even full service carriers have lower cost base because they are younger. So the difference between full service and a low cost airlines is much narrower. Singapore’s position as a regional hub should be enhanced because of the growth in the region and its liberalization of the industry.

Must then the region find an “alternative to China” if they wish to survive that country’s rising growth?
I do not believe, as you often read in the media, that everything is shifting to China. It is true that a lot of manufacturing can be done cost effectively in China, but China will not be the one centre for everything. And so while we will lose market share in areas like low-end manufacturing to China, other activities will rise in its place.

For example, the increasing demand for financial services in cities like Singapore means that we will have to look more to services in areas like insurance and banking, as well as at the top end of technology- and engineering-based services. You can’t look at a region the size of a continent and expect that everything is centred in one spot.

Continuingly high oil prices are fuelling losses in the industry. How is Singapore Airlines affected and how is it dealing with this risk?

The only comforting factor is that fuel prices affect everybody, so it’s a level playing field. We cope with it through hedging strategies, through introducing a fuel surcharge. This can mitigate part of the impact.If oil prices remain high, then I would suspect that pricing will adjust. If you happen to be flying at or below your break-even point and fuel costs rise, then you’re in a bad position. Singapore Airlines is in a better position because of the sustained high demand - especially for intra-Asia travel - and if you are already profitable, then the high oil prices will shave some of your profit margin but you should be alright.

Singapore Airlines represents a well known global and Asian brand of quality and service. What challenges do you see in brand-building by Asian companies?

Many Asian companies are strong in the quantitative and tangible aspects of business e.g. product development, manufacturing, etc. They are weaker in the qualitative and non-tangible aspects of business e.g. marketing, brand building, etc. Brand building, in particular, takes consistency of message, product and services, over very long periods of time. Singapore Airlines was fortunate that in its early years it had a long period of uninterrupted benign neglect when it could build its brand.For Asian companies who want to build a brand, they need to have perseverance and develop a consistent enduring product and service promise for the long term.

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