Singapore's Changi Airport is determined to retain its status as Southeast Asia's premiere air hub, with major growth planned in the coming decade.
The airport, one of the world’s most awarded, is building a fourth terminal in place of its former Budget Terminal. The city-state has also announced plans for a fifth terminal and the opening of a third runway, which will further boost capacity to 135 million.
Its ambitious expansion plan to more than double the current capacity of 66 million shows foresight. It is a well thought-out, far sighted plan aimed at keeping Changi flying high above neighbouring peers, cement its long-held position as the region’s leading transit hub, and to give it a boost against competition from the rising Persian Gulf hubs.
When announcing plans for Terminal 5, the country’s prime minister said neighbours such as Kuala Lumpur and Bangkok have set targets to receive 100 million passengers annually, and the threat lies in these airports being geographically better placed since they are nearer to Europe from Southeast Asia. Changi however remains the leading hub because it is able to aim high and plan far – something not many can do.
"Changi's natural competitors are Kuala Lumpur, Bangkok, Jakarta and Hong Kong. But there is also the threat of better connectivity through hubs such as Dubai or Istanbul. A passenger can travel one stop from almost any mid to large city in Europe to a capital in Asia through these hubs," says Vinoop Goel, IATA's regional head for airport, passenger and cargo services, Asia Pacific.
He adds that Asia Pacific accounts for two-thirds of the world’s population but only a third of the air traffic, and as it matures, airports in the region could see a quadrupling of traffic.
"No airport in Asia would want to miss out on this opportunity. This is one of the factors behind Changi's plans. Coupled with the air traffic congestion issues that Changi had faced recently, we can see the need for additional capacity both in terminals and runways."
Changi predicts strong growth
In an interview with Flightglobal Pro, Changi Airport Group's senior Vice President of market development Lim Ching Kiat says the group has a "conservative" forecast that traffic at the airport will grow between 4-6% annually.
"We're positioning ourselves to make sure that when the Asia growth happens, we'll be there to cater to it," he says. "If we grow at 5%, in four years we'll hit 10 million and soon our capacity of 66 million, which doesn't give us a lot of headroom."
"With T5 and all that coming up, we're in good shape. Everyone is building in excess of 100 million, if you want to be with the big boys, 100 million capacity is quite normal,"
To stay ahead of the competition, Lim says Changi's strategy is the continual growth of its network and transit capacity, and also to make passengers' stay at the airport as comfortable as possible.
Changi now sees 110 airlines fly into Singapore, connecting the city-state to over 250 cities in some 60 countries worldwide. The airport however continues working to grow its network. In the last quarter of 2013, it saw the addition of seven new city points to China, increasing its local reach to to 31 points.
"Within Asia, top metros such as Shanghai, Jakarta, Surabaya, we're there. Now we're looking at tier 2 and tier 3 cities. For us to continue to grow our network, we must explore some of these newer points so our passengers have more choices," says Lim.
Short-haul routes within Southeast Asia now account for 45% of Changi's traffic. Another 46% of the traffic is attributed to services to Northeast Asia, South Asia and Oceania.
Based on the number of passenger movements, its top five city links are to Jakarta, Hong Kong, Bangkok, Kuala Lumpur and Manila.
Long-haul traffic such as that to Europe and the United States, make up some 9% of Changi's traffic. Changi has traditionally relied heavily on long-haul connections, but the focus has turned increasingly to regional connections.
For its long-haul network, the group wants to increase connections to destinations in Africa, Russia and Central Asia. In part, it is also aiming to increase demand not just from Singapore, but also passengers from Australia, China and Southeast Asia via Singapore, to these destinations.
Qantas' changes negligible
Changi's long-haul traffic was also impacted last year when Qantas Airways made the decision to move its European hub from Singapore to Dubai, as part of a wide-ranging alliance with Emirates. The Australian flag carrier has however also re-timed flights to use Singapore as its Asian hub.
"Qantas' pull out did affect us a bit, and some transfer traffic has moved. But the Kangaroo route as a whole, it's a mature route. It's growth rate has fallen behind not just for us but for everyone. It has fallen behind the prospects you can see within Asia," says Lim.
Transfer and transit passengers now account for 30% of Changi's traffic. The airport has however noticed that the proportion of point to point traffic is growing faster as more Singaporeans travel, and as the increasing sights in Singapore attract an influx of tourists.
Routes out of Singapore, December 2013
It is also no secret that Changi is under pressure from Gulf hubs, as airports and airlines in the region grow stronger and bigger.
Dubai's Al-Maktoum International Airport last year opened a passenger terminal designed to handle seven million passengers annually. By 2030 however, the facility will be the world's largest with a capacity for 160 million passengers and five runways.
Lim acknowledges the pressures coming from the gulf airports, but says the competition is not head-on as the catchment areas for the airports differ.
"We compete with them for the Kangaroo route from Australia to Europe. But for intra-asia traffic such as China to Australia, the gulf airports can't compete with us. It's not geographically possible. Likewise from Africa to Europe, we can't compete with that," he says. "So each of us while we compete on some markets, on others, we do our own parts."
Last year, a record 53.7 million passengers passed through Changi's gates. This number has grown from 40 million in 2010..
Budget travel boom
Low-cost traffic now accounts for 30% of Changi's traffic, up from about 20% five years ago, and virtually zero 10 years ago. Changi expects this segment of the market to keep growing.
This is why the city-state tore down its dedicated low-cost terminal the Budget Terminal in 2012. Construction is now underway to build Terminal 4 which will have the capacity to handle 16 million passengers annually, more than double the old terminal's capacity.
These budget carriers, hungry to launch new routes and up frequencies, are already having some difficulties securing slots for new services as runway congestion at Changi grows. The Civil Aviation Authority of Singapore has introduced measures such as reducing separation times between aircraft and runway down time to increase the operational efficiency of the airport as it moves towards opening a third runway by the end of the decade.
Three groups of low-cost players - Tigerair, Jetstar Asia and AirAsia - have a significant presence at Changi. A total of 15 low-cost carriers now have services into and out of Changi. Malaysia's AirAsia and Indonesia's Lion Air have even expressed interest to set up an airline in Singapore, only to be rebuffed by local authorities.
Asked how Changi aims to balance the interests of home carriers (SIA Group accounts for about 45% of the seat capacity out of Changi) with opportunities to grow its network should airlines be allowed to set up base in Singapore, CAG says this is an area they have little control over.
"This is government policy. Whether they grant the airlines an AOC, on our part we try and work with airlines to see how they can set up a base here without a new AOC," says Lim. "We welcome new growth. We work closely with home-based carriers and foreign carriers. We're quite agnostic in that sense. Whoever is interested to grow, we're keen."
For now, Changi still holds the position as Southeast Asia's leading international hub and has been able to capitalise its position as a hub for intra-asia-pacific traffic. Flightglobal's Capstats database shows that Changi has over 3.2 billion monthly international seats, surpassing that of KLIA and Suvarnabhumi,
Though its rivals in the region have massive expansion plans, some such as Manila, Jakarta and Bangkok are struggling to get their act together.
Bangkok's Suvarnabhumi airport has announced plans to increase its annual passenger handling capacity from 45 million to 60 million through the construction of a 28-gate 216,000m2 satellite terminal and extending the eastern end of its existing terminal.
The rapid rise in passenger numbers at the airport have even led the country's transport ministry to issue a directive to bring forward the completion of expansion works by a year to 2016. The Thai capital has also re-opened its secondary airport Don Mueang to ease congestion at the city's main gateway.
At Kuala Lumpur, the KLIA2 terminal opening has been delayed for several years now. The 45 million capacity airport, which is now scheduled to open this May, will replace the existing over congested low-cost terminal. The delay has led to a public spat between main tenant AirAsia and Malaysia Airports Holding Berhad.
Jakarta's Soekarno-Hatta International Airport, which urgently requires better capacity, is undergoing a much needed expansion to triple annual passenger capacity from 22 million to 62 million. But this is hardly sufficient considering the airport already handled 51.5 million passengers in 2011. The country has meanwhile resumed commercial operations at secondary airport Halim Perdanakusuma to alleviate congestion at the main airport.
In Hong Kong, work is underway for the construction of a new five-level midfield concourse which is expected to increase the airport's handling capacity by 10 million passengers annually. The government has also given an in-principle approval for a third runway, part of the airport's 2030 master plan.
What Changi knows, and is doing, is that if it wants to stay ahead, it needs to plan ahead - far ahead.
The Association of Asia Pacific Airlines' director general Andrew Herdman says countries in the region typically grow at an annual rate of 6%, which translates into a doubling of the market in just 12 years. Moreover, high growth countries such as China, India and Indonesia grow at around 12% annually, which means the market could double in only a short six years, placing tremendous strain on aviation infrastructure.
"Once you get into that double digit growth, you have to stop thinking in terms of incremental capital expenditure and expanding next year's capacity or a three-year plan. You really have to change the way you think about how many airports we need - don't talk about additional runway but rather when do we go from two to four. Given this long development period for infrastructure, you do need to think in longer time scales."
Airports in the region can also expect to face tremendous pressure when the planned ASEAN Open Skies is implemented in some form or another from 2015.
For Changi, with capacity expansion plans clearly drawn out, an area it will not neglect is in making passengers' stay at the airport extra comfortable.
"Efficient operations is a must, a given. First you must get the basics done right for what people expect at an airport - a safe, secure and efficient environment. Then we must continue to innovate and think of ways to delight passengers, that's the icing on the cake," says Lim.