Thursday, 2 January 2014

Project Jewel: Changi Airport Group replies

WE THANK the writers of letters on Project Jewel.

The global airports landscape and travellers' expectations have evolved. Air hubs are enhancing their destination appeal to grow their share of air travel and tourism.

In such a competitive environment, Changi Airport Group (CAG) needs to stay ahead and innovate to strengthen Changi Airport's appeal. This is the spirit that drives the development of Project Jewel.

The present Terminal 1 (T1) carpark site, being on the landside of the airport, cannot be developed for post-immigration or aircraft handling facilities.

Our redevelopment plan for the site, which includes Project Jewel and the expansion of T1, will allow CAG to optimise the plot to its maximum potential.

Besides increasing T1's passenger handling capacity, we have the opportunity to create a signature destination that will significantly enhance Changi Airport's offerings.

Project Jewel is a game-changer for Changi Airport, designed to capture tourism mindshare at a global level.

With eye-catching architecture, exciting attractions and quality retail and dining offerings, it will attract tourists and transit passengers to choose Singapore as their preferred air hub and stopover destination.

Project Jewel is also for the enjoyment of local residents.

Singaporeans' participation and emotional engagement with Changi Airport has been a source of strength for our success in the past three decades. Project Jewel represents a continuous investment in this area.

CAG considers seriously the needs of airport users.

Project Jewel's airport facilities will strengthen Changi's service offerings. These include early check-in services for fly-cruise and fly-coach passengers, a new hotel and training facilities for airport staff.

There will also be a larger T1 arrival hall, more taxi and coach stands and three times the current number of parking spaces. The airport's road network will be upgraded.

The Project Jewel concept was the outcome of a competitive process, in which well-known local and international property firms were invited to participate.

Based on the overall quality of its submission, CapitaMalls Asia was selected as CAG's partner by an independent special committee.

While we aim for a signature project, we have calibrated the concept and development so that the project remains value-accretive and financially sustainable in the long run.

CAG and CapitaMalls Asia are committed to delivering an excellent, world-class product that will strengthen Changi Airport as an air hub and one that Singaporeans will enjoy and be proud of.

Hung Jean (Ms)
Senior Vice-President, Landside Changi Airport Group
Deputy Chief Executive Officer Project Jewel
ST Forum, 1 Jan 2014

Proximity to city centre gives Changi Airport an edge

MR KELVIN Quek raised some questions regarding Project Jewel's viability ("Who is Project Jewel's target customer?"; last Friday).

Many Singaporeans already enjoy going to Changi Airport for leisure. Fifty million passengers pass through the airport every year, and 32,000 people work there. These are the people Project Jewel is targeting.

Changi Airport is unique as it is located close to populated areas, unlike airports in most other cities. It is also served by two expressways. This proximity to the city centre gives us the competitive edge.

Under Project Jewel, the number of parking lots will be tripled. The MRT will also further improve connectivity and increase resident catchment.

An aviation museum will be less of an attraction for arriving and departing passengers, and will not do justice to this valuable plot of land.

There is nothing wrong with iconic projects as they are part of progress.

Project Jewel is not a vanity showpiece; it is a privately funded commercial enterprise, and Changi Airport Group and CapitaMalls Asia have to answer to their shareholders on its financial viability.

I am sure Project Jewel will be a game-changer and add to the vibrancy of Changi Airport.

Tan Chin Hwee
ST Forum, 31 Dec 2013

Who is Project Jewel's target customer?

I WAS surprised and concerned to read about the high cost for Project Jewel ("Project Jewel at Changi Airport to cost $1.47b"; last Saturday).

It is unclear how this expensive complex, 70 per cent of which will be retail space, will give our airport an edge over other competing air hubs.

It is also unclear who it is targeting - visitors, residents, airport staff, or all three.

When travellers arrive at their destination, they want to get out of the airport as quickly as possible.

Similarly, departing visitors are unlikely to make it a priority to visit shops, eateries or leisure attractions located outside the departure gates of the airport.

If the project is primarily aimed at attracting residents to Changi Airport, the question then is: Why is that necessary?

Why use up valuable land at Changi to build another shopping mall? Why not have an aviation museum or something related to the airport?

A smaller-scale project to cater for a hotel, airport operations, airport staff facilities, and fly-cruise and fly-coach passengers would suffice.

This would free up land for facilities that will make a real difference to our competitiveness as an air hub, for example, more runways and aircraft parking bays, or more space for passenger lounges.

We should also stop building iconic projects which may just end up as vanity showpieces that bring little tangible benefits to Singaporeans.

The money saved can be put to better use to meet more pressing needs in areas such as health care, education, transport and housing.

Kelvin Quek
ST Forum, 27 Dec 2013

Jury is still out on Changi's 'Jewel'
By Adrian Lim, MyPaper, 2 Jan 2014

CHANGI Airport thinks it is a "game changer" that will strengthen its position as a global air hub.

But one unimpressed observer has asked if it is a vanity project adding to Singapore's long list of shopping malls.

While the jury is still out on the $1.47-billion Project Jewel, experts agree on one thing: Changi needs a big retail fix. But an expensive project with high costs and prices could backfire.

Almost 70 per cent of the space in the mixed-use development, which will be encased in a glass-and-steel dome, will be given over to retail. Some newspaper readers saw this as a debatable use of the building's 134,000 sq m of gross floor area. One likened it to a "vanity showpiece".

The private joint venture between Changi Airport Group (CAG) and CapitaMalls Asia, which will be launched in end-2018, will also feature airport facilities, a hotel and leisure attractions like an indoor garden with a waterfall.

Make no mistake, said observers - retail operations account for a significant proportion of revenue for many airports today.

In 2012, retail sales at Changi Airport hit a record $1.8 billion, a 12 per cent increase from the year before. Retail sales accounted for 50 per cent of the airport's revenue in both years.

Mr Mohshin Aziz, an analyst at Kuala Lumpur-based Maybank Investment Bank, said the rise of the mass-market, regional traveller has boosted retail operations at airports. These travellers are big shoppers compared to business fliers.

But here's the nub of the problem: "(The developers) have to make sure they don't spend a fortune building it," he said. Otherwise, rentals would go up and so will prices. "It'd be hard to imagine who can afford to shop there," he noted.

Mr Colin Tan, Suntec Real Estate Consultants' director and head of research and consultancy, said that trying to satisfy the needs of different groups of visitors - from business passengers to budget-conscious travellers and the domestic shopper - will be a "hard task".

Ms Hung Jean, deputy chief executive of Project Jewel, said in The Straits Times' Forum page yesterday that Project Jewel will "attract tourists and transit passengers to choose Singapore as their preferred air hub and stopover destination". It will also be for the enjoyment of local residents.

Mr Greg Waldron, Asia managing director of Flightglobal, feels that getting Terminal 4 and the third runway up and running is more important for Changi's competitiveness than Project Jewel.

Mr Mohshin said that Project Jewel will become an iconic showpiece similar to Changi's famed control tower. But in deciding whether to fly here, airlines would be more concerned about connectivity, available slots and terminal charges.

Sparkling core of Jewel's allure for Changi
The major retail-cum-airport complex at Changi is designed to share risks with the private sector, while making the airport attractive to travellers on long transits
By Karamjit Kaur, The Straits Times, 9 Jan 2014

CHANGI Airport's future "Jewel" will no doubt be stunning.

After all it is being designed by Moshe Safdie, the same architect who dreamed up the iconic Marina Bay Sands.

But even as details emerge about the $1.47 billion retail-cum-airport complex codenamed Project Jewel, questions are being asked about whether it should even be built.

In recent weeks, several readers have taken to the Forum Page to voice their concerns.

How will Project Jewel make Changi more attractive to travellers and airlines? Why spend money on what looks to be another shopping mall? Will the cost eventually be borne by travellers and airlines in higher departure taxes and airport fees? Why can't Changi just focus on running the airport?

Mr Kelvin Quek is concerned about the "high cost" and wonders who Jewel is targeting. Arriving travellers are unlikely to hang around the airport and those departing will surely prefer to shop within the transit area.

If the new complex is for local residents, is it wise to use "valuable land" at Changi for another shopping mall? Better to spend the money on more important things like health care, education, transport and housing, Mr Quek suggested.

It is presumably not the first time such questions are being fielded. Insiders say it took some convincing by Changi Airport Group (CAG) before the Government said yes to Project Jewel.

The plans were eventually unveiled by Prime Minister Lee Hsien Loong during his National Day Rally last August. It will be "something special", he said, stressing the need for the airport to continuously expand and enhance its offerings to beat rivals nipping at it heels.

To understand the thinking behind Project Jewel and whether Changi Airport should embark on it, one must be clear about the new role of CAG and how it is regulated.

The new corporate kid on the block

ON JULY 1, 2009, the Civil Aviation Authority of Singapore (CAAS) - a statutory board under the Ministry of Transport - was divided into two.

Changi Airport Group (Singapore) Pte Ltd emerged to run the airport, leaving a smaller CAAS to regulate the industry.

Singapore's air hub status was under threat from other ambitious airports. Rivals in the Middle East and India were poaching Changi's employees to fuel their own expansion.

Changi needed more teeth and flexibility to fight back.

As a corporate entity - wholly owned by the Minister for Finance (Incorporated) - the new CAG would be free to set its own pay structure.

It could also grow traffic more aggressively by engaging with and rewarding like-minded airlines, tourism bodies and other partners to fly into or transit via Changi.

But even as Changi was given wings to fly farther, there was concern that as a business entity instead of a statutory board, the focus would be on the bottom line at the expense of the airport's much-acclaimed high service standards.

To prevent this, the CAAS regulates with a firm hand.

Service standards are set. The airport is free to earn as much as it wants from dining and shopping receipts - referred to as non-aeronautical revenues - but part of these proceeds must be ploughed back into the aeronautical till. This is money collected from airlines, ground handlers and other partners, including aircraft landing and parking charges.

In effect, this means commercial takings are used to subsidise airport fees and charges so that Changi stays competitive vis-a-vis rivals. The exact percentage is not publicly known but such cross-subsidies are believed to be more than half of total collections.

Changi Airport is also regulated in terms of its total spending and what it can charge travellers in departure fees.

There is a revenue cap per passenger, which is determined based on total traffic and what the airport spends to enhance its products and services.

Changi is allowed to recover part of this spending from the charges it levies on travellers, airlines and other airport users.

At the end of each financial year, the airport retains part of its profits and the rest goes to its government shareholder - the Minister for Finance (Incorporated).

In the year ended March 31, 2013, total revenue for the Changi Airport Group hit $1.9 billion. Of this $918 million came from commercial avenues.

The beauty of Jewel

WHEN Jewel got the official nod, it was agreed that the project would fall outside the normal regulatory framework.

CAG will hold a 51 per share in the project, while listed company CapitaMalls Asia will hold the rest.

The money invested will be used for non-aviation-related facilities such as shops and a hotel. So CAG will not be able to recover any of the cost from travellers, airlines and other airline players.

This is unlike spending on the three main terminals. Right now, the CAAS takes into consideration this spending when fixing the fees and charges that CAG can charge.

Every year, $250 million to $300 million is spent on maintenance of land, buildings and equipment. This figure does not include large capital projects like the cost of terminal upgrading.

In essence, this means the cost of developing a new airport building is being shared with a private sector partner, CapitaMalls Asia. The latter has an interest in developing this project due to its commercial potential as a retail mall, in return for a share of revenue.

As for CAG, it will need to plough back part of its profits from Jewel back to its shareholder - Minister for Finance (Incorporated). But it has flexibility to use a share of profits to cross-subsidise airport operations to keep airport fees and charges low, so it can retain a competitive edge over rival airports.

More profits will also allow Changi to invest in other areas such as foreign airport acquisition and consultancy projects, which is a growing sector.

This partnership - sharing the risk of development while retaining flexibility over profit for CAG - is the true value of Jewel from a public interest perspective.

A massage while you wait for your flight?

APART from the cost-sharing structure, Jewel allows the airport to cater to an important growing pool of passengers: those on longer transits, or transfers to and from cruise ships.

Jewel allows Terminal 1 (T1) to add a third more passengers to the 18 million people it handled last year.

More travellers are spending more time at the airport, according to Changi, with a substantial number having more than six hours to spare between flights. A de luxe mega mall at the airport will certainly be an attraction for these transfer passengers.

More travellers are also on cruise-fly packages.

To make their travel experience seamless, Jewel will offer advance check-in. The idea is to streamline the transfer experience so check-ins and exits are hassle-free, and wait times are enjoyable with shopping, spa or eating options within the same complex.

Experts like Mr Alan Tan, professor of Aviation Law at the National University of Singapore, think Project Jewel is a great idea if the aim is to enhance Changi's attractiveness to travellers and set it apart from the competition. But it is still not clear how this is to be achieved, he added.

Other airports in the region have been quick to get into the game of building mega projects for travellers around airports.

South Korea's Incheon city, where the country's main airport is located, is planning a US$275 billion (S$350 billion) tourism city project to be built by 2030. There will be luxury hotels, casinos, shopping malls, theme parks and a Formula One racing track.

Qatar is planning a 10,000 sq m Airport City, designed to create an interface between the capital city of Doha and Hamad International Airport.

Closer to home, Kuala Lumpur International Airport has built Gateway@KLIA2 (Malaysia). This is a new complex adjacent to the airport with three levels for retail and dining.

Airports are eager to expand their commercial offerings because that is what travellers want, said Mr Sagar Shahane, aviation analyst at industry consultancy Frost & Sullivan. It is also important for revenue diversification, he said, adding that commercial takings are usually less susceptible to ups and downs in the aviation business.

There is thus hard business sense behind Jewel's glow.

But whatever the final plan for Project Jewel, the new venture must not be at the expense of Changi's service standards and good global reputation.

As regulator, the CAAS must continue to ensure that the interests of travellers, airlines and other airport users come first.

At stake is Singapore's premier hub status, which must not be compromised.

A gem of a project
By Karamjit Kaur, The Straits Times, 9 Jan 2014

CHANGI Airport's Project Jewel will be completed in 2018.

To be built in front of Terminal 1 where an open-air carpark now sits, the structure will rise five floors above ground with five basement levels.

The retail-cum-airport project will be Changi's first tie-up with a private firm - CapitaMalls Asia.

Jewel will be built and managed by a new entity, 51 per cent owned by Changi Airport Group and 49 per cent by the retail firm.

Close to 70 per cent of the total gross floor area of about 134,000 sq m will be set aside for retail.

The remaining space is reserved for airport facilities like passenger lounges and check-in counters.

There will also be a hotel and an aviation museum, plus other leisure attractions, including an indoor garden with a 40m-high waterfall.

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