When Singapore named its dedicated low-cost terminal the Budget Terminal in 2006, it could have been to manage passengers’ expectations.
After all, the city-state’s Changi airport is known for being one of the world’s best, with numerous awards under its belt as proof. The experience at the one-storey Budget Terminal was, however, quite different. With limited food and shopping options, the terminal would at best be described as functional. Though efficient, passengers complained about having to walk under the hot Singapore weather to board their flights since there were no aerobridges.
The terminal survived only a short six years before it was torn down in 2012 to make way for the new Terminal 4, which Changi has said will be more "upscale" and offer a wider range of medium to high-end retail and food options.
Like Changi, a number of airports in Asia appear to be moving away from building dedicated budget terminals, opting instead to incorporate budget operators into their main terminals. Congested airports are, meanwhile, building new terminals that are able to effectively handle both full-service and low-cost carriers.
Malaysia Airports, for example, is investing ringgit (M$) 4 billion ($1.25 billion) to build KLIA2, which is expected to have better facilities than the airport's existing terminal. When the much-delayed terminal starts operations next May, the rundown and congested low-cost terminal will be shut down.
Taipei's Taoyuan International airport is another which has dropped plans for a dedicated low-cost terminal because of space constraints. It is instead working to better accommodate budget operators at its main terminals by offering them lower landing and parking fees should they choose less desirable slots.
Several other countries in Asia such as Indonesia, Philippines, Korea and Japan, are however still keen on building dedicated low-cost terminals as they attempt to cope with the passenger boom brought about by the influx of budget carriers in recent years. Japan alone saw three new low-cost carriers enter the market 2012.
Analysts interviewed say the building of dedicated budget terminals appears to be a trend specific to the region because of the absence of secondary airports in most Asian cities. They, however, warn against it.
Although low-cost terminals aim to have lower operating costs and pass on savings to budget carriers and eventually their passengers, this does not always happen, they say, adding that such terminals are only "economically viable" for airports with substantial low-cost traffic.
“From an airport perspective, having a separate [low-cost carrier terminal] LCCT is sometimes more expensive than having one terminal for all carrier types because of the need to duplicate services and systems including check-in, security and immigration,” says Flightglobal Ascend managing consultant Joanna Lu.
The analysts add that low-cost terminals typically do not allow airside connections for passengers and their baggage, which makes it inconvenient for those connecting to other cities – an important point airports with a hub strategy must consider.
Vinoop Goel, IATA's regional head of airport, passenger and cargo services in Asia Pacific, says building terminals for specific business models is not an optimum or cost efficient way to maximise scarce airport space and resources. Airports should instead build terminals with the flexibility to cater to different business models, which also avoids the risk of the terminal becoming a "white elephant", should a particular carrier pull out.
Simply put, airports should be designed and laid out such that it can accommodate both full-service and low-cost carriers. They should also have the flexibility to allow airlines to choose, and only pay for, facilities they want to use, says Goel.
It is also important to note that while some passengers are content to fly with low-cost carriers, they may have higher expectations of the airport experience such as the use of aerobridges, lounge access and airside hotels. These passengers also have the means to spend.
An Airports Council International spokesman adds that stiff competition between airports has also pushed them to upgrade their services, which means LCCTs cannot afford to fall too far behind.
Those that do, may meet the same fate as Singapore's short-lived Budget Terminal.