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I thought the portion about changing customer behavior is pretty alarming. In the years ahead, will SATS follow the fate of another fallen aviation favorite SIA Engineering?
7 things I learned from the 2023 SATS AGM
7. During the AGM, many shareholders questioned the board as to why SATS has been unsuccessful in achieving post-pandemic profitability, unlike its sister company, SIA. Mok had provided 3 main reasons for this:
SATS focuses on building lasting customer relationships on long-term contracts. Due to inflationary pressures, the net income of SATS’s catering business has experienced diminishing returns as the company is unable to quickly update prices due to the longevity of contracts. Mok proclaimed that the company will be taking a long-term approach in remedying this, adjusting prices in a fair and transparent manner to ensure acceptable margins yet still bring value to their customers.
Aviation is the largest sector in SATS’s food business. The company’s inflight catering business operations have not returned to pre-pandemic levels. Mok explained that ‘not every airline has restored the SATS food offerings that they used to offer on board.’ Furthermore, there has been an increasing occurrence of ‘double-catering’; certain airlines have begun to employ the services of inflight caterers from their home markets alongside that of SATS. These two factors equate to a reduction in demand for SATS’s inflight catering, hence lowering the business’s profitability.
The aviation industry has not fully returned pre-pandemic levels. However, as mentioned earlier, aviation passenger traffic is expected to reach 100% of pre-pandemic levels in FY2024. Mok shared that a large sum of air cargo is stored and flown on the belly of passenger aircrafts. Hence with more flights come higher capacity for air cargo and the eventual recovery of SATS’s air cargo business.
https://fifthperson.com/2023-sats-agm/
7 things I learned from the 2023 SATS AGM
7. During the AGM, many shareholders questioned the board as to why SATS has been unsuccessful in achieving post-pandemic profitability, unlike its sister company, SIA. Mok had provided 3 main reasons for this:
SATS focuses on building lasting customer relationships on long-term contracts. Due to inflationary pressures, the net income of SATS’s catering business has experienced diminishing returns as the company is unable to quickly update prices due to the longevity of contracts. Mok proclaimed that the company will be taking a long-term approach in remedying this, adjusting prices in a fair and transparent manner to ensure acceptable margins yet still bring value to their customers.
Aviation is the largest sector in SATS’s food business. The company’s inflight catering business operations have not returned to pre-pandemic levels. Mok explained that ‘not every airline has restored the SATS food offerings that they used to offer on board.’ Furthermore, there has been an increasing occurrence of ‘double-catering’; certain airlines have begun to employ the services of inflight caterers from their home markets alongside that of SATS. These two factors equate to a reduction in demand for SATS’s inflight catering, hence lowering the business’s profitability.
The aviation industry has not fully returned pre-pandemic levels. However, as mentioned earlier, aviation passenger traffic is expected to reach 100% of pre-pandemic levels in FY2024. Mok shared that a large sum of air cargo is stored and flown on the belly of passenger aircrafts. Hence with more flights come higher capacity for air cargo and the eventual recovery of SATS’s air cargo business.
https://fifthperson.com/2023-sats-agm/