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Helping customers create value for their customers: Sats' new CEO

Lim Hui Jie
Lim Hui Jie11/18/2021 09:04 PM GMT+08  • 7 min read
Helping customers create value for their customers: Sats' new CEO
For Sats, its incoming CEO Kerry Mok believes in not just helping his immediate customer, but also help them help their customer.
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As airlines begin to gear up for a potential recovery, providers of ancillary services such as ground gateway services, food catering, and baggage handling are also getting ready to ride on their tailwind once again.For Singapore, this service provider is Sats, which booked a 29.3% y-o-y increase in revenue to $569.5 million in 1HFY2022 ended Sept 30. Patmi stood at $13.2 million, a stark reversal from the $76.9 million loss in the same period last year although the bottom line was heavily helped by government wage subsidies. Sats said without government reliefs, 1HFY2021 would have posted a loss of S$65.5 million.

Previously, travellers who flew out of Singapore would have been served by a Sats’ employee at the check-in counter and have had their luggage loaded on the plane by a Sats’ employee. They would have stepped on a Sats’ aerobridge to board their flight and, perhaps, had a meal onboard prepared by one of Sats’ food kitchens.

However, Sats does not only rely on providing services to Changi Airport to make money.

The company provides services in 55 locations across 14 countries, ranging from aviation security, airline laundry and airport cargo delivery management services. Additionally, it also offers catering services and food solutions to non-aviation sectors and even manages a cruise centre.

The man who oversees all these operations is none other than president and incoming CEO Kerry Mok, who is taking over from current CEO Alex Hungate, who has led Sats since 2012.

Mok is not unfamiliar with the business. In fact, he was part of Hungate’s management team, holding the role of executive vice-president of food solutions since June 2018, before being promoted to CEO of food solutions in December 2019.

As the new helmsman, Mok tells The Edge Singapore in an interview that there will not be a “massive overhaul” in how the company does its business but acknowledges that he will be seeing things through a different “lens”.

“What I would like to do is utilise the lens of me being a solutions person, to work with my team on the gateway side and hopefully drive more solutions because I think [our] solutions is what will differentiate us,” he says.

By the term “gateway”, Mok refers to Sats gateway services, including handling the flow of passengers, flights and cargo at airports globally.

He also has high ambitions for the company. Being a market leader, Mok says Sats has to “take leadership”. The “post-Covid aviation customer”, as he puts it, will be a lot more discerning and will look for products that are “value for money”.

This does not mean a race to the bottom on pricing but that service providers like Sats have to come up with value propositions and differentiated products to explain to customers “why they should be willing to pay more for Sats’ service”.

Mok gives the example of inflight food, saying that Sats’ inflight catering partners must uphold quality and safety standards that are “very, very high” — even higher than the regular F&B retail sector. “At 35,000 feet, you can’t afford to have any problem with food. If it is a flight to the US, I can’t say I’m going to have an emergency landing because someone needs to go to the hospital.”

“Hopefully, we can find ways to improve our performance and then be known for our world-class standards,” Mok says.

To invest for future growth, Sats is “resetting” its three-year $1 billion investment and capital expenditure ambition, first articulated in 2019 but held back because of the pandemic.

According to CGS-CIMB analysts Lim Siew Khee and Tay Wee Kuang, the investment targets include between $200 million and $240 million in maintenance capital expenditure and around $800 million for possible acquisitions. “There is a strong pipeline of targeted assets. We believe India and China could still be key focus markets,” say the analysts.

While Sats did not announce any recent acquisitions to expand its regional footprint, it is planning to do so by building its own capacity.

Specifically, the company announced it has started construction of a 20,000 sqm kitchen located at Kempegowda International Airport in Bengaluru, India. Costing $37 million, the kitchen, when completed in 2023, can produce up to 600kg of different types of rice in an hour, among other capabilities and high-tech features.

In total, Sats is aiming to generate a $3 billion top line by FY2025, which CGS-CIMB analysts Lim and Tay believe will be achievable, “assuming a 100% pre-Covid travel recovery and successful M&A strategy” and assuming Sats’ inflight catering revenue will recover to 99% of pre-Covid-19 levels by FY2024.

However, Sats shared on its capital markets day that this target could comprise about $1.8 billion from travel-related revenue, $300 million–400 million from non-travel and the rest from M&As that are also mainly non-travel related.

As such, Lim and Tay are of the view that Sats expects to see lower reliance from travel revenue as the revenue split for travel and non-travel will be 65:35 in FY2025, compared to the 85:14 split in FY2019.

From a Covid-low of $2.58 back on March 23, 2020, Sats’ shares have gained 59.3% since then to close at $4.11 on Nov 17, valuing the company at $4.62 billion.

The customer’s customer

Meanwhile, Mok insists that Sats, as a market leader, must be the company that drives new solutions with customers and be their partners.

This is the mindset Mok hopes to instil in all employees. “They have to be bold to try new things that hopefully drives value for sales and customers,” he says.

“Making the lives of customers simpler is something we have to constantly think about because by helping customers solve problems, you then become an indispensable partner to the customer. Then, the relationship will be very different and you become more strategic going forward. Therefore, getting closer to the customer is what I like to push for,” says Mok.

But unlike most companies out there, his vision of differentiated solutions does not extend to just the customers of Sats. He says, “when you bring solutions to the table, you bring value. Value can come from value to the customer or value to the downstream customers as well.”

In short, when Sats services a customer, Mok does not want it to be only about that customer. Sats should also be trying to help create value for its customer’s customers as well.

Mok recalls this was his mindset at DHL that when he dealt with a customer like HP, he was also dealing with HP’s customers.

By putting himself in his customers’ shoes, his mindset changes. “I will start to see myself as a consumer and ask: What would I like? Then I can tell my customer this is what he should be doing because it is going to benefit his customers.”

As such, he wants to encourage Sats to think beyond its immediate customer, for instance SIA, and also think about what an SIA passenger would want instead. “How can you help them to be successful with their end customer? If you think with their mindset, then your view of products and solutions will be different. When I say I’m also a consumer, I look at products like a consumer.”

This way, Mok says, you create value for the customer by suggesting what could be beneficial for them, instead of simply creating what the customer asks for without thinking about whether the product or service will be successful.

“I think that has always been how I drive my team to look at things differently. So that is where I can bring a different lens to the company and then help us be more successful in the strategy we put in place.”

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