05 Feb 2002

Tailspin of his own making
SIA will post its first ever loss - and Cheong could carry the can, reports Eric Ellis from Singapore

`He seemed very short, very curt - we all flew to Singapore and they suddenly went cold on the whole idea' Tata insider

AIRLINE executives are quick to blame Osama bin Laden's destructive handiwork for their woes.
United Airlines chief executive officer Jack Creighton - whose airline last week posted a history-making $4.2 billion loss - is among them; but then he's right to. Two of his planes were hijacked on September 11, 2001.
However, there's one executive enduring the worst year in his airline's history who's got no one to blame but himself.
His name is Cheong Choong Kong - the Adelaide University-educated CEO of one of the world's most famous carriers - Singapore Airlines.
Six months ago it was nearly impossible to pick up a newspaper or watch television and not learn of Dr Cheong's exploits and ambitions.
Brushing away a straggling comb-over that gives him a vaguely avuncular air, he seemed to be forever expounding on what was wrong with trans-Tasman aviation and how he and his airline were its panacea.
Now Cheong and SIA are seeking their own cure. Singapore government-owned SIA is poised to record its first loss since beginning service in 1972.
And Cheong is facing, at best, his first ever turnaround situation in an Asian market that remains stubbornly in recession or, at worst, his dismissal should his Singapore Inc government masters decree.
Cheong's grand strategy for SIA to be a virtual investment trust of global aviation has foundered, less so in the rubble of the World Trade Centre or Afghanistan - though clearly those events haven't helped - but in a display of misjudgment and arrogance that too often marks Singapore Inc's attempts to expand offshore.
What Cheong had hoped would be airline bookends - with Air New Zealand and Ansett at one end of the globe and Virgin Atlantic at the other - has come to naught.
Air New Zealand and Ansett have infamously collapsed - a process under way well before September 11 - and the 25 per cent SIA once held has been reduced to about 5 per cent as Helen Clark's Government begrudgingly bails out the Kiwi carrier, diluting the Singaporean position.
In Australia, meanwhile, transport mogul Lindsay Fox and friends are recasting Ansett without SIA. This week was the final straw as Cheong was bounced from the Air New Zealand board.Cheong is reckoned to have blown about $600 million on that ill-fated foray across the Tasman.
In the United Kingdown, Virgin Atlantic hasn't failed but Sir Richard Branson has been laughing all the way to the bank. SIA paid pound stg. 600 million ($1.6 billion) for 49 per cent of Virgin Atlantic at the height of the tech boom. Branson got top dollar and kept control, the SIA money helped launch Virgin Blue in Australia, which in turn did nothing for the ongoing health of Ansett.
In effect, SIA funded its competition and while Cheong frequently reminded Branson that Virgin Blue's activities were "not helpful", Branson kept it flying. And made it profitable.
SIA's Virgin Atlantic deal put a notional valuation of $US2 billion ($3.9 billion) on the original Branson carrier. Today, many analysts contend SIA would be lucky to get $US500 million if Cheong were to sell the stake as Virgin struggles to re-build its mostly trans-Atlantic business after September 11.
If the Virgin deal was an example of Singapore Inc's famous acquisition premium, then its attempt to buy a stake in Air India spoke of its arrogance.
SIA and India's famous business house, Tata, entered a joint venture agreement last year to privatise Air India from the Indian Government.
Cheong chose his partner well. Like SIA, Tata never stoops to corruption to conquer a deal - not always easy in India.
And Tata were familiar with the airline. The group houses Air India's offices in Bombay, a hangover from when the airline was founded by Tata's late chairman and family patriarch and pilot JRD Tata. In 1953, the Nehru government nationalised it.
Since then, it has been a national embarrassment, presenting a fabulous turnaround opportunity for SIA and Tata.
But as one Tata insider described it, Cheong suddenly went cold on the deal just as the joint venture seemed poised to win it.
SIA explained its pull-out by saying it was surprised by the intensity of opposition to the deal from political groups, trade unions and the media.
But, as the insider explained, the cursory offer of $US1 that SIA wanted to make for the carrier didn't help matters in a "proud country such as India". Air India might be an aviation joke and may well be worth only $US1, but the Tata executive says Cheong seemed "extraordinarily distracted" during the Air India negotiations during August and early September as Air New Zealand was imploding.
"He seemed very short, very curt," the insider said. "We all flew to Singapore for a crucial meeting and they suddenly went very cold on the whole idea.
"We'd come all this way only to arrive to be told they weren't going ahead with it. We found that very strange."
If anyone can deliver in India, it's the Tatas. Indeed, despite the SIA pull-out, Tata has signalled its intention to proceed with the privatisation, though it's yet to reach agreement with the Indian Government.
It even says SIA could re-enter the deal. SIA chose not to comment on this and a series of questions put to it by The Australian.
Government-owned SIA became the world's best airline - and Singapore's global ambassador - with innovation and service.
Singapore's venerated elder statesman Lee Kuan Yew took the view that visitors and possible investors to Singapore entered the country the moment they set foot inside a Singapore Airlines flight.
Now, even that is under threat. Cheong had to endure the tragic October 2000 crash in Taipei that killed 83 people, the first crash in SIA history.
Now, more and more of his high-paying business-travelling passengers say SIA is slipping; that it's not as good as it used to be. That's dangerous tattle in an industry as fickle and as competitive as air travel.
That impression would seem to be borne out by the rise and rise of Dubai-based Emirates Airlines which has used the SIA model of operating a virtual five-star hotel in the sky.
SIA recently deferred delivery of six new Boeing long-haul aircraft - it's usually Boeing's most reliable foreign customer - and junked a plan to install internet connections in its seats.
It's doubtful Cheong will be dusting off his grand expansion plan any time soon.
A new chairman was recently appointed, Koh Boon Hwee, a paragon of Singapore Inc and regarded as one of its safest pairs of hands.
Fortune Magazine's Asian Businessman of the Year for 1999 in hunkering down in 2002, desperately trying to stem losses that might even cost him his job