Yesterday, Singapore’s Minister of State for Finance and Transport, Lim Hwee Hua, announced an upgrade of Changi’s Budget Airport, plans for a fourth terminal and further upgrade of Terminal One as well as reiterating the prospect of corporatisation for CAAS. This appears to be a recognition that it is time for a fundamental shift to reflect what is happening in the outside world.
CAAS and Changi Airport can be forgiven for feeling a little threatened. While the Authority has always delivered outstanding airport facilities, always ahead of demand, its hub role is under increasing pressure on several fronts. And its international airport management expansion strategy is being hindered by a shortage of globally experienced consultants.
Not only are airports like Dubai, Hong Kong and Bangkok aggressively targeting traditional network carrier movements, but nearby Kuala Lumpur is now becoming a substantial LCC “hub”. And once Thailand’s government inevitably accepts the full reopening of Don Mueang as an LCC facility, the pressure builds.
As LCCs proliferate and the varietal model evolves - with long haul operators like AirAsia X and Jetstar International using KLIA as a base, the differentiation between the two types of airline model blurs. This is now clearly an enduring and rapidly expanding market sector. So last week’s announcement of plans for a massive new dedicated-LCC facility in Kuala Lumpur echoes loudly in Singapore.
Malaysia’s aviation system has been revolutionised by the entry of AirAsia; meanwhile, the dominance of Singapore Airlines in the island state has stifled any such undergrowth. But part-owned Tiger Airways, after a cautious start, is now ramping up rapidly and needs more airport space. Like AirAsia in KLIA, it is the pre-eminent user of the dedicated terminal (which may be why, following last month’s partial opening up of the Kuala Lumpur-Singapore route to LCCs, none of the new entrants is using the other country’s low cost terminal).
Singapore is finding that the excellence of facilities alone will not attract airlines. Despite the outstanding nature of its infrastructure, CAAS has suffered from a perception – inside and out – of being a bureaucratic entity, rather than an edgy commercial operation. As both the national regulator and the operator of the country’s only commercial airport, this is not surprising.
So, as well as expanding the Budget Terminal and announcing a possible fourth main terminal hot on the heels of the spectacular new third one, the process of corporatisation announced by Transport Minister Raymond Lim last August cannot occur fast enough. As he acknowledged, “through this corporatisation exercise, Changi Airport will have greater flexibility to attract and retain top talent to compete with global airport operators.”
The Minister referred expressly to the “Schiphol and Fraport Airport Groups” as competitors in the airport management space, both of which are long-corporatised. Management subsidiary, Changi Airports International (CAI) has goals of annual revenues close to USD1biilion, so must move with the times.
Changi/CAI has expressed interest for example in buying into a partially privatised Abu Dhabi Airport (where CAI has an 18 month consulting contract); this acquisition would be more conspicuously appropriate if the Changi parent company were at least a corporatised entity, rather than a government regulatory authority/airport operator. (It may be no coincidence that Abu Dhabi is a near neighbour of Dubai Airport, which has been rapidly overhauling Singapore as a global hub.)
But even corporatisation may come slowly. Local conservativism towards even a remotely commercial airport operator means that the process of “review” will not be complete until early next year at the earliest. The aviation world is moving faster than that.