Singapore Airlines, SATS and Duty Free provider DFASS (Singapore) reset joint venture structure

Singapore Airlines aircraft taken from terminal windows in August 2018.Singapore Airlines aircraft taken from terminal windows in August 2018.

Singapore Airlines and SATS said on Wednesday that they were proposing a new transaction structure for their planned joint venture with Duty Free provider DFASS (Singapore), a deal which was originally announced in March.

The joint venture is for a travel retail business in Singapore and will offer inflight and ground-based duty-free and duty-paid goods as well as mail order and pre-order services, it said. It was expected to use the KrisShop and Scootalogue brand names.

The new proposed structure calls for using Singapore Airlines’ subsidiary, Singapore Airport Duty-Free Emporium, or SADE, in which the airline currently holds around 76 percent, while SATS holds the remainder, Singapore Airlines said in a filing to SGX after the market close on Wednesday.

SADE will now issue Singapore Airlines, SATS and DFASS new ordinary shares, and upon completion of the deal, Singapore Airlines will hold 70 percent of SADE, while DFASS and SATS will each hold 15 percent, the filing said.

SADE will then acquire certain assets and businesses of DFASS SATS (DSPL) to operate the proposed joint venture, it said.

Previously, the joint venture had been planned via DSPL, which is a Singapore-based 50-50 joint-venture company owned by DFASS and SATS’ wholly owned subsidiary, SATS Asia-Pacific Star (APS). The previous proposal had called for Singapore Airlines to purchase 70 percent of DSPL from DFASS and APS, which would then hold 15 percent each, it said.

Both SATS and Singapore Airlines said on Wednesday that the rationale for the joint venture remained unchanged.

In March, UOB KayHian had said the deal was a positive as DFASS had “attractive” procurement costs, meaning Singapore Airlines could offer better pricing on alcohol and fragrances than other retailers. The brokerage had also noted that users of Singapore Airlines’ frequent flier program, Krisflyer, could use their miles for the purchases, which would generate better margins for the airline than if they were used to redeem flights.

Get the Shenton Wire morning briefing in your inbox