Thursday, 6 August 2015

Govt to co-fund Changi Airport's big expansion

Airport project costing tens of billions of dollars aims to cement Singapore's status as a key hub
By Karamjit Kaur, Aviation Correspondent, The Straits Times, 5 Aug 2015

The Government will co-fund Changi Airport's biggest expansion to date, including the construction of the future Terminal 5 (T5), with other stakeholders chipping in.

Revealing this to The Straits Times in an exclusive interview last week, Senior Minister of State for Transport Josephine Teo said the final cost-sharing has not been decided.

The project - expected to cost tens of billions of dollars - is an investment that is beyond the means of Changi Airport Group (CAG), its chairman, Mr Liew Mun Leong, had earlier told The Straits Times.

Mrs Teo said the right thing to do would be to share the investment costs between the Government, the CAG and those who will use the facilities. "The Government will look at this from the perspective of how it benefits Singaporeans and Singapore as a whole," she said.

In charging airlines and travellers, the Government is mindful that Changi Airport must remain competitive in an increasingly challenging environment.

The project aims to cement Singapore's position as a key hub for regional and global traffic, amid fierce competition from rival airports in Hong Kong, South Korea and elsewhere.

The development of the 1,000ha Changi East site - about three-quarters the size of the current airport premises - includes the construction of T5, a third runway, new taxiways and plane parking areas, as well as cargo facilities.

In an interview with The Straits Times, the CAG's Mr Liew had suggested that one option was for the Government to foot the entire bill, leaving his team to run the airport.

Explaining the rationale for co-funding, Mrs Teo, who is also Senior Minister of State for Finance, said: "Fiscal requirements for the Government, as a whole, will become more significant.

"We already know that we are going to have to spend more on healthcare. We have a lot of social programmes which we think are important. We want to continue to invest in education for our people and a large part of it is also the SkillsFuture piece."

Still, the Government knows how vital the aviation sector is and will factor this in when funding decisions are made, she said.

"If you look just at the number of people working at the airport, it is quite modest; 77,000, 3 per cent of GDP," she said.

"But if you look at it through a broader lens and ask which are all the other sectors that will be quite hurt if your air hub was lousy, then you would add tourism, finance, retail; and if you add all of those sectors, it is another 16 per cent of the economy, another half a million people... Then you say the externalities are very big. Therefore, when you develop Changi East and it's a massive investment, it's reasonable for the Government to bear a part of the costs."

Pressed further on what this could amount to, she said: "The Government is sensible."

Citing the MRT system as an example, she pointed out that the Government funds all the infrastructure and first set of rolling stock, which accounts for about 90 per cent of the total start-up costs.

Associate Professor Terence Fan, a transport specialist from the Singapore Management University, said the Government should consider some private sector involvement in the Changi East project.

"When the private sector is involved, whoever pays is keen to ensure that resources are used efficiently. This helps the Government get the best bang for its buck," said Prof Fan.

'Flexibility is key' in the design of mega terminal
By Karamjit Kaur, Aviation Correspondent, The Straits Times, 5 Aug 2015

When Changi Airport's Terminal 5 opens in about a decade, it may not be able to handle up to 50 million passengers a year, as is the plan. Depending on air traffic numbers and projections, there could be a Phase 1A and 1B, said Senior Minister of State for Transport Josephine Teo.

Ultimately, the aim is for T5 to handle up to 70 million passengers a year - more than T1, T2 and T3 combined. Flexibility is key in the design of the mega passenger terminal to ensure efficient use of resources, she said.

During seasonal or other lull periods, for example, parts of the terminal could be shut down if necessary to minimise waste, she added.

Keeping an eye on future demand is important, said research firm Endau Analytics' aviation analyst Shukor Yusof.

"The main challenge for any airport today is to manage capacity and cope with future traffic growth. How to achieve this?

"It needs to be cost-efficient and there must be a timeframe corresponding to expanding airport infrastructure according to user demand," he said.

Even as planners are mindful of the industry's volatility, there is confidence that there will be strong growth, Mrs Teo said.

Last year, Changi Airport handled a record 54.1 million passengers, but the growth of 0.7 per cent year on year was the lowest since 2009, when business was hit by the global financial crisis. Industry analysts do not expect the numbers to pick up significantly this year.

The moderation, due in part to consolidation in the low-cost carrier sector, does not change the trends of a growing middle class in Asia and the high propensity of Singapore residents to travel, Mrs Teo said. The slowdown is more likely "a temporary blip", she said.

This is why it is important for Singapore to plan ahead, even beyond T5, she stressed.

"Is there room for further growth and room to organise things even more efficiently?... We are not only looking at 10, 20 years," she said.

"We have to look at SG100 and ask ourselves what might Changi Airport be then... We have to leave enough on the table for the future generations of Singaporeans to work on."

She added: "We have built up a good habit of looking very far into the long term, which I think is an advantage you need given Singapore's land constraints."

One runway may close for work in 2019
By Karamjit Kaur, The Straits Times, 5 Aug 2015

One of Changi Airport's two existing runways will have to be closed temporarily - in 2019 at the earliest - to support growth plans, The Straits Times has learnt.

Runway 2 will be closed when a third landing and take-off strip - being built on the other side of Changi Coast Road as part of the construction of the future Terminal 5 - is ready.

This way, the airport will continue to have two working runways to handle a growing number of flights.

A spokesman for the Transport Ministry said the plan is to have a three-runway system by the early 2020s. "This requires Runway 3 to be first completed and operational, after which Runway 2 will be closed temporarily, to allow for works such as underground tunnelling and the construction of additional rapid-exit taxiways."

It is not clear how long the runway will be closed. During the closure, travellers can expect some delays getting to and from the runway and terminal buildings.

The plot of land where the third runway and other facilities are being built is about 1.6km away from the current airport premises.

To make the transition from two to three runways, Changi Airport has roped in British firm Nats, which provides air navigation services for London's Heathrow Airport. Nats will also help Changi Airport beef up other capabilities, for example, by training its air traffic controllers.

The firm's managing director for services, Ms Catherine Mason, told The Straits Times recently that with any expansion, there would be some temporary inconvenience for users.

"Whenever you build, there is always going to be an element of disruption and change... This is true for any airport," she said.

However, with good planning and execution, inconvenience can be minimised, she said.

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