IATA warns that Singapore Changi airport's status as a premier hub could be affected as it moves to raise aeronautical charges to fund its expansion.

"Air travel through Changi Airport risks being an expensive proposition and could drive passengers in particular, and possibly airlines to use other airports as their preferred hub. Singapore’s passenger traffic is already lagging behind regional growth," the global body's regional director for airport, passenger, cargo and security of Asia-Pacific, Vinoop Goel, tells FlightGlobal.

"The increase in costs in an already thin margin environment will force airlines to re-evaluate their strategy. Airlines simply do not have the ability to absorb annual increases in airport costs over the long term."

He adds that the move also goes against "the proven core principal of keeping aeronautical charges in check", and pointed to the opening of Changi's third terminal in 2008, where there were no accompanying increases in aeronautical charges.

Goel's comments follow Changi Airport Group (CAG) announcement last week that it will raise Passenger Service and Security Fee (PSSF) from July, by S$2.50 ($1.89) annually until 1 April 2025, for all origin and destination passengers. This presently stands at S$27.90. There will be no change in the PSSF for transit passengers who pay S$6 when departing from Changi.

In addition, the landing, parking and aerobridge (LPA) fees will increase by 1% annually for the next six years. Separately, Singapore's ministry of transport will introduce a new "Airport Development Levy", where departing passengers will have to pay S$10.80, while transit passengers will have pay an S$3.

CAG has said the additional fees will help fund part of the Changi East development, which includes Terminal 5, a third runway and other aerospace-related infrastructure.

IATA adds that Changi must also be aware of "significant growth" in other key hubs that are focused on improving connectivity, supported by lower airport charges and the rise of domestically grown hub carriers.

"Airlines will have to re-evaluate their network based on the economic viability of routes and this might have an impact on Changi Airport," says Goel. "Short-haul flights typically are at a lower pricing point and a considerable portion of low-cost carrier passengers are sensitive to even a slight increase in the overall cost of travel. This decision fails to recognise the highly competitive environment that airlines operate in."

Besides pre-funding, Goel also points to other options to fund the Changi East project. These include having the government increase its funding and for CAG to raise its borrowings and repay the debt through increased revenues when the additional capacity becomes operational.

Source: Cirium Dashboard