Changi Airport feels the heat

Courtesy Changi Airport Group

Courtesy Changi Airport Group

Singapore Changi Airport is feeling the heat of competition, which has pressured the world’s best airport (Skytrax survey 2015) to cut airport charges for airlines and introduce incentives for ground agents. The airport admits to the increased competition posed by airports such as Hong Kong International (HKIA) and Dubai International.

Airlines operating large aircraft (weighing over 360 tonnes) can expect discounted landing fees of up to 5% from May, in addition to existing rebates of 50% for long haul flights of more than nine hours which will continue to be in force until Mar 31 next year. Current discounts of 50% on aircraft parking and 15% on aerobridge charges will also be extended to Mar 31 2017.

Interestingly, the slate of concessions will benefit not only the airlines but also ground handlers and transit travellers.

Handling companies Singapore Airport Terminal Services and Dnata (previously Changi International Airport Services) will enjoy a 20 per cent rebate on flight catering franchise fees and a similar discount for ground-handling fees from May until Mar 31, 2017.

Transit passengers will pay a lower passenger service fee from July 1, a hefty reduction from S$9 (US$6.82) to S$3. Departing passengers pay a fee of $S34.

Changi Airport Group (CAG) chief executive officer Lee Seow Hiang said: “Changi Airport’s success is very much dependant on the contributions of our airport partners, including airlines and ground handlers. Notwithstanding lower fuel prices, the operating environment in the near-term remains challenging for the region’s airline industry. Likewise, there are also tough conditions for our ground handlers. They face severe manpower constraints which may affect their ability to maintain the high level of service and efficiency expected by airlines and their passengers.”

A good case no doubt of landlord and agents working closely together to the benefit of users, but very clearly, this is about the survival of the airport Changi. Mr Lee added, “We work with them to achieve success and growth of their operations at Changi Airport.”

While Changi stands head and shoulders above its immediate neighbouring airports such as Kuala Lumpur International (KLIA) and Bangkok’s Suvarnabhumi Airport in terms of infrastructure, facilities, efficiency and service, it is no longer endowed with guaranteed business as aviation geography shifts to include competition wider afield from airports outside the Southeast Asian region such as HKIA and Dubai farther away. These hub rivals are as well equipped and offering equally attractive propositions for both airlines and travellers.

Take, for example, the kangaroo route. Qantas has shifted its hub from Singapore to Dubai, which is repositioning itself as the centre of the aviation world with connections to Europe, Africa, the Americas, the Middle east and Asia. Where once Middle East airports such as Bahrain and Abu Dhabi were positioned as necessary technical stops, Dubai today is able to leverage on advanced long range aircraft technology to offer a one-stop hop competing with Changi.

Another example is how HKIA is positioning itself as more than just a door into the massive China market but the Asian gateway for transpacific traffic.

Changi is therefore becoming increasingly challenged as a hub airport that relies heavily on connecting and transit traffic and its ability to extend its traffic hinterland, the very reason why it is paying a lot of attention to such travellers and constantly upgrading its facilities in its promotion of the airport as an attraction or destination in itself, the much-hyped airport city concept. It is easy to see why Changi is the world’s best airport, the way that travellers are pampered even for a short layover, such attention becoming even more critical if they have to sit through long hours of waiting.

However, if being the world’s best airport is not enough to stave off competition from rival airports, ultimately cost becomes the swing vote for operators. Airlines whose business is largely transit traffic may choose to stop between destinations where the cost is lower, assuming all other essential factors that matter have been reasonably satisfied. That includes good connectivity that helps the operators to avoid more costly stopovers, and today’s proliferation of codeshare arrangements has certainly facilitated such options. Changi’s concessions granted to large aircraft and long haul flights demonstrate its desire to retain and attract international traffic through its hub.

A simple comparison of the published fees for Changi (pre-discounted) and Dubai show the former to be more costly, charging for example twice or more as much for landing, say, a 100-tonne aircraft. Changi also charges a minimum base rate of equivalent US$39 to US$78 for parking whereas Dubai offers free parking for up to three hours. Aerobridge use for a 450-seat aircraft at Changi costs the equivalent of US$400 compared to Dubai’s equivalent of up to US$266 (including security services if needed and fire coverage).

Not keeping its cost down to be competitive may also reduce Changi’s attractiveness as the airport of choice for regional flights when cheaper alternatives are only a hop away. The airport continues to thrive on the growth of budget carriers as regional skies become more liberal, but this also means the potential of increased competition from cheaper secondary airports. Malaysia recently announced plans to revitalise Sendai Airport, which is a stone’s throw from Changi, starting with a new carrier named flymojo to be based there. In time to come, Changi may be pressured into re-examining its non-discriminatory handling of legacy and budget carriers within the same terminal (after the short life of a separate budget terminal which has since made way for the construction of a new non-specific terminal). However, instead of making it less attractive for low-cost carriers, it seems Changi is making it more attractive for the big long haul operators through its plate of rebates.

What more can you ask when excellent facilities are matched with competitive rates? It looks like an attractive package. Changi, as any airport, must now understand that geographical advantages can shift. The aviation landscape is constantly changing, influenced by not only technological advances but also political and commercial relations. KLIA and Suvarnabhumi may well revive an erstwhile threat to Changi’s continuing growth. Or another airport in the region. There is good news and there is bad news. While airports too can contribute to that shift, it is not improbable that a threatened incumbent may be able to do something timely to check the erosion of its importance. That’s the challenge for Changi.

This article was first published in Aspire Aviation.

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About David Leo
David Leo has more than 30 years of aviation experience, having served in senior management in one of the world's best airlines and airports. He continues to maintain a keen interest in the business, writes freelance and provides consultancy services in the field.

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