CNBC Transcript: Paul Coutts, Group CEO, Singapore Post

Below is the transcript of a CNBC Exclusive interview with Paul Coutts, Group CEO, Singapore Post. The interview played out in CNBC's latest episode of Managing Asia on 08 May 2020, 5.30PM SG/HK (in APAC). If you choose to use anything, please attribute to CNBC and Christine Tan.

 Christine Tan (CT): The pandemic has impacted postal services around the world. As CEO of Singapore's national mail service postal service provider, just how bad is the disruption you're facing? How big a delay is the international mail delivery business?

 Paul Coutts (PC): Christine, thanks for that for having me on. As you can imagine, that's a very challenging environment. It's dynamic, it's changing by the minute as well as by the day. The challenges come in many different ways. One overriding factor for us is that we have to make sure that we are keeping the health of our staff and our customers at the forefront of absolutely everything that we do. Unfortunately, we did have 10 staff who were recovering from having COVID 19. Now, fortunately, most of those have recovered from it and discharged from hospital, and we are keeping our prayers obviously for the rest. One of the big areas for us that we've had to focus on is just the adjustment of resources. With the fact that we did have confirmed COVID-19 cases, we obviously had to quarantine a number of staff for a long period of time until we could satisfy ourselves that the staff were also safe. So, we drew on resources from our head office and elsewhere, from other business units to come and support our postal division at this time of crisis. I'm always proud of Singapore staff at the best of time. But I think in this particular situation, I've been absolutely amazed that they have not only stood up to the challenge, but consistently stood up to the challenge. A lot have been working seven days a week for several weeks just to keep on top of the flows of mail coming through our various different facilities and for delivery to the letterboxes. There's a certain amount of fatigue that is building up, obviously. But I will say that the staff are actually tackling each day with a fresh positive energy and are very committed to making sure we as an essential service provider of Singapore are doing what we were originally established to do, which was to service the community. So, I've got a huge amount of admiration for our staff.

 CT: Let's talk more about the infection. As CEO, what was your first reaction? What immediate steps did you take to contain and control the problem?

PC: Well, I think the first thing was to actually get a quick health check in terms of the individuals themselves. That was the first thing - to make sure that they were okay and that we were supporting those as a company, not only them, but also their families. The staff who came in contact with some of those confirmed cases were quarantined. We also did a lot of deep cleaning of the operational areas in terms of where those people worked. Also, we stepped up our monitoring of the safety equipment and materials that we actually had in place for our staff to keep them safe, including gloves, masks, social distancing. More importantly, the health checks on a twice daily basis so that we knew whether people's health was affected from morning to afternoon. We're pleased that the bulk of the 10 confirmed cases are actually now recovering.

 CT: I understand you had to quarantine dozens of your staff as a result. How did you minimize the disruption in your mail operations?

 PC: The disruption was quite intense for several days. We had to call upon many of our staff who worked in other business units and in other areas to come and support us through that testing time. We also had to pick a position that - basically, we may have to step back in some of our service commitments to our customers for a period of time. So, we were in discussions with the Government. We felt that our service may deteriorate for a few days whilst we go through that resynchronization of resources versus volumes and we re-engineered the processes. And we came through that. Moving onto the next stage, the good news is we've got some of the staff that are quarantined, they have now come back in again. But we continue to have quite extraordinary volume, particularly on the international side and our domestic volumes are holding up quite well.

 CT: When some of your staff were infected, that kind of triggered a little bit of a public panic because people were then concerned whether the virus could be transmitted through the postal services. As CEO of SingPost, how did you allay those fears?

 PC: There has been all sorts of health studies done that say that it's not possible to get contaminated through the mail processing. We've got those control measures in place for the public. So, it really was about making the public aware that there is no danger here from mail.

 CT: Apart from traditional mail delivery, you also handle a lot of e-commerce shipments from here in Singapore and around the region. The cancellation, the postponement of flights has taken a lot of air cargo space out of circulation. How big a disruption are you facing in your e-commerce delivery business?

 PC: So, it's obviously very clear Christine that the whole air freight industry and airline industry are struggling globally. Obviously, a lot of passenger aircraft came off very, very early and has continued to come off as the COVID-19 develops in different markets. That's taken a huge amount of cargo space out of the network. So, therefore, we've seen the supply drain over the last few months or so. We've also at the same time seen a bit of a rebound in terms of e-commerce volumes moving internationally. So, you've now a completely different scenario in terms of supply and demand issues that were there six months ago, three months ago or even two months ago. We've chartered aircraft, we've part chartered aircraft to make sure that we are still getting our product to market. Even doing so, however, it's also true that we're seeing delays. We've seen backlogs in some markets. I think supply chains are going to remain very brittle for a long period of time. So, at this point in time, we have to be extremely agile. We have to be able to adapt very quickly in terms of those flows and make sure that we're managing the demand with the supply, but also with the service level commitments that we have with our customers.

 CT: Is it true that rates for air freight have tripled in the last month or so?

 PC: Yeah, unfortunately, but it's a bit of a cause and effect situation. Obviously, we've seen supply coming off and then demand starting to increase. We've seen rates shoot up from $1.50 in some areas to $5.50, $6 a kilo. So, there's quite a large cost to imports at this point in time for the industry. So, again, it's a balancing act. We have to balance the ability to move our product to make sure that we get our product to market for delivery to consumers. But we've also got to try and do that in a way that makes financial sense for us while we're making the best of that commercial opportunities that exist.

 CT: Does the oil plunge take away some of the costs that you worry about?

 PC: It may reduce the cost of fuel of course, but the costs and air freight rates are climbing and going up. So, you don't necessarily see that coming through into your cost per kilo.

 Before the virus outbreak, SingPost was facing revenue pressures, from a slowdown in global trade and declining domestic letter mail volumes.

 PC: There are definitely some pressures which I talked about earlier that have an impact on our business, but there are also some opportunities as well that we are you know capitalizing on. There is an increase in e-commerce volumes in key markets that we operate in. Not only Singapore, but also in places like Hong Kong and Australia. We're also seeing a lot of traffic coming westbound into Asia, which is quite an interesting development as well in the last few months or so. It's a very dynamic picture that changes, as I mentioned, day by day and it's going to be some time before we actually understand what the full implications of COVID-19 are, not only in terms of the business, but also in terms of our financials.

 CT: To help ride out this downturn, Paul, you've actually put a hiring freeze, you've taken out some of the salaries of some of the upper level management, you've cut their salaries. You yourself have taken a 5 percent pay cut. Do you think that's enough?

 PC: It's a very good question. We took a position many weeks ago and it seemed at the time to be the right position for us. We felt comfortable with it. We are continuing to revisit it. We are continuing to challenge it. It's also more importantly about how do we recognize the people at the frontline who are still out there. You know it's comfortable here. I'm sitting in my house and I'm doing this call. I'm not exposed to a lot of the elements that our frontline troops are exposed to. So, I think one dimension of it is to look at what we can do more as a management team. To be honest with you, I think taking a salary cut is the least of it. What's more important is what can we do as a management team to make sure that we're looking after the wellbeing and health of our workforce, and that we're recognizing them properly in this very critical time.

 CT: As CEO of SingPost, your own leadership is now being tested to drive this company, to steer this company through the crisis. How will you lead your people? How will you lead the company?

 PC: We have to make sure that communication flows are clear and that we are hearing the people at the ground level, because that's the only way that we can adjust to make sure that we are making that life easier every day and that we understand their issues. Management team is being very, very active in making sure that we get to post offices, postal depots, and that we spend time actually in the operations. A couple of weeks ago, I actually spent time myself processing shipments and processing warehouse and mail at our operation facility at Paya Lebar. It was great to spend a day with the people there. You pick up so much from the people on the ground and understand the challenges a lot more at the sharp end. I've never been prouder of them.

 CT: And finally, it's been a tough couple of months for businesses and companies. What lessons have you learned, if any, from dealing with a current pandemic?

 PC: You know we've spent a lot of time putting together business continuity plans over the last few years and updating those as we as we come through new challenges or we have new ideas or new developments. But it's interesting, regardless of how well we think we've prepared in terms of those BCPs, COVID-19 was a whole new experience for us. One of the challenges, for instance, that we had we've had to face the fact that 200 of our Malaysian colleagues didn't quite make it back across the border when the borders closed between Malaysia and Singapore. We have about 20 percent of our total Malaysians staffs traveling back and forth at any given time. We also have a lot of our Malaysian staff here in Singapore who committed to staying here and sacrifice being away from their families at this point in time. They have now been here for over three weeks. Now we're looking after them. We have them obviously housed in hotel accommodation, etc. We have a stipend that we get them every day as well to make sure that they are looked after. But they are away from the families and that's something that we can't replace. That's just one small example. And there's a multitude of those types of challenges that have arisen. We will continue to adapt and hopefully sooner or later we will get through COVID-19. And I'm amazed at how Singapore has really come together as a nation and stepped up to the challenge of COVID-19, and I applaud everybody involved. I do think even once we come through it and we will come through it, there will be a time for reflection as well and say, what could we have done? Yeah, we learned a lot, but what could we have done differently?

 CT: Paul, thank you so much for talking to me on Managing Asia. Please, stay well and stay safe.

 PC: You too. Stay safe. Nice talking to you, Christine.

 END

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