This story from The Straits Times

SM: We'll meet competition on SIA and Changi head-on
By Zuraidah Ibrahim

IF SINGAPORE Airlines had its way, it would ignore the threat from low-cost carriers, revealed the Senior Minister yesterday when he met union and management to discuss the future of the airline and that of Changi's airhub status.
But that has never been the Singapore way of meeting competition.

Instead, SIA and Changi must tackle the new challenges - whether from low-cost carriers or the arrival of long-range aircraft or other Changi wannabes - head-on and well in advance.
How? By restructuring and cutting costs now to ensure the national carrier can shake off the competition and by remaking Changi so it can stay a vital hub.

Trimming costs and restructuring would be painful, he conceded, but in the end they would save and create jobs and grow the pie for everyone.
With lower costs and greater efficiencies, SIA and Changi can attract more traffic and thus ride the aviation boom of the coming years.
Why the need to lay out the big picture and who was the primary audience?
First, the occasion. It was an Istana meeting between Mr Lee Kuan Yew and representatives from the five SIA unions, and senior management, followed by a dialogue with union members.

The audience: Union leaders and workers in SIA and Changi. But just as important, Mr Lee clearly had a message for other Singaporeans also undergoing pain as the economy restructures to compete against a rising China and India and neighbours snapping at Singapore's heels.
Painful as the adjustments might be now, they would result in a stronger Singapore in the future, he said.

On the aviation challenges specifically, he noted: 'The easiest thing for us to do is to block the competition. In other words, we block low-cost carriers from Changi.
'It will only bring about the inevitable - Changi will be bypassed and we will lose our airhub status.'
At stake, however, is not just this status but the entire economy, which depends on connectivity to thrive.
Indeed, so much is riding on Changi's airhub status that, in its calculations, the Government is prepared to lose its stakes in SIA but will do its all to keep the airhub status, said Mr Lee.
Thus, it has allowed low-cost carriers to operate from Changi and create a low-cost terminal that can turn around aircraft in 30 minutes instead of an hour.
Also, a third ground handler is coming to bring costs down. Handling fees make up 11 per cent of an airline's operating costs. So if costs go down, more airlines will come to Changi.
Workers will have to change and multi-task to ensure low-cost carriers prefer Changi's efficiency.
Changi must also upgrade its infrastructure. And its staff must 'go the extra mile to delight customers', he said.
At the same time, SIA must transform its business model as its profit margins get squeezed. 'Cost management will be a critical underpin' of its strategy.
In restructuring, it could even divest some parts as it outsources to stay lean.
'There will be a different configuration of the work forces in Changi Airport and SIA,' he said, noting that the changes would come within the next six to 18 months.

One example he cited: Singapore Airport Terminal Services, which could see SIA divesting its 87 per cent stake.
He laid down the options: 'Either we wait for SIA and Changi to be under increasing pressure and eventually break down, or we carry out these changes in order to protect and expand connectivity as a hub.'
Yesterday's Istana affair was the second such public meeting in as many months that SM Lee chaired to resolve SIA affairs.
The first had been with the beleaguered pilots' union over its festering woes with management. He urged them to start anew with the new management by building trust.

It was a theme he took up yesterday, this time calling on management to start opening its books so that union leaders could know what was at stake and what had to be done.
He said management was also under notice to perform. It too has to 'change or be changed'.
A key message: Everyone should work as a team. 'We got here by being one team. We are going to overcome these challenges by being one team,' he said.
To make sure this was indeed happening and there was trust, he told the unions and management, he wanted another meeting. 'So we meet again in six months.'
As they gathered to leave, one unionist remarked: 'Six months' time. This is serious.'