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Singapore air hub faces new rivals

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  • Sg_Review@yahoogroups.com
    Singapore is a stop-over for 99% of air travellers. No one visits Asia s Alacatraz per se. Most transit to bigger and more exicting venues Even stop-overs at
    Message 1 of 1 , Jan 20, 2004
      Singapore is a stop-over for 99% of air travellers. No one visits
      Asia's Alacatraz per se. Most transit to bigger and more exicting venues

      Even stop-overs at this "Walt Disney with the Death Penalty" will
      plummet with the onset of long-haul flights.

      Singapore air hub faces new rivals
      Tuesday, January 20, 2004 Posted: 0250 GMT (10:50 AM HKT)

      How can Changi compete? Serving budget airlines could be the answer.

      SINGAPORE (Reuters) -- The amenities at Singapore's award-winning
      Changi Airport are legendary: a departure lounge swimming pool and
      jacuzzi, a free in-house cinema, a massage parlor and an obsessively
      efficient arrival hall.

      From stepping off a plane to passing through immigration, grabbing
      the luggage and exiting into the thick humidity outside, the entire
      process usually lasts just 30 minutes. Changi's efficiency is a
      source of national pride.

      But Changi is now fighting to preserve its status as Asia's fourth-
      biggest air hub, while the stock price of its main carrier, Singapore
      Airlines Ltd, has stalled as budget airlines chip at its dominance in
      Southeast Asia.

      At stake are 55,000 jobs and an industry that generates about 9.2
      percent of the island's $89 billion economy, says Senior Minister Lee
      Kuan Yew, who has spearheaded Singapore's development as an aviation
      hub while developing Singapore Air into one of the world's most
      profitable airlines.

      Underscoring the scale of the problem, Lee -- Singapore's sprightly,
      80-year-old elder statesman -- has leapt from his more typical behind-
      the-scenes policymaking into a high-profile public campaign to cut
      costs by 10 to 15 percent at Changi and the airline.

      "I've had to study this problem because I've decided that it needs to
      be looked into," Lee told an interviewer recently. "We are not going
      to die but we will be diminished. To prevent that, costs must be cut
      by 10 to 15 percent," he told another.

      The threat is multifold - from budget airlines and new long-range
      aircraft that allow airlines to bypass Singapore altogether, to fast-
      growing regional hubs such as Bangkok and Kuala Lumpur. Even Dubai in
      the Middle East is seen as a threat.

      "All airports in the region are trying their very best to pull in
      more traffic and of late, every one of them is trying to use lower
      rates to pull in more airlines," said Stephen Chu, an executive at
      Dubai's Emirates airline.

      Pressure from Thailand
      The biggest pressure comes from Thailand, which only recently
      overtook Singapore as Asia's third-biggest air hub. Tokyo's Haneda
      airport and Hong Kong's Chep Lap Kok are the first and second biggest

      Changi handled 24.7 million passengers last year, compared to 30
      million at Bangkok's Don Muang airport. Bangkok's new Suvarnabhumi
      airport, due to open next year, will have a capacity of 45 million

      Planes that can fly longer, such as Airbus's new 340-500 aircraft,
      are also a problem for Changi.

      From December, Emirates began flying non-stop between Dubai and
      Australia using the new A340-500, bypassing Changi.

      Fees - ranging from charges covering landing and terminal navigation
      to use of air bridges - are higher at Changi than at Bangkok and
      other regional airports. For that reason, Chu said, Emirates may
      decide against using Singapore as a stopover on a new non-direct
      Australia-Dubai flight.

      "If it's cheaper to fly to Bangkok or Kuala Lumpur and we have a lot
      of passengers wanting to fly there, then why do we want to come to
      Singapore?" said Chu, who manages the airline's Singapore and Brunei

      Fees at Malaysia's KLIA for turning around a Boeing 747-400 are about
      28 percent less than those at Changi, says the International Air
      Transport Association. For the same aircraft Singapore charges about
      five percent more than Bangkok.

      So how does Changi compete?

      Going budget
      Lee said fuel costs, a fifth of total bill, and maintenance, cannot
      be compromised. Wages make up 15-20 percent of total costs but cost
      cutting should not just focus on wages.

      To keep costs down, Transport Minister Yeo Cheow Tong said last week
      he would open tenders for a third ground-handling firm.

      Another strategic move is a S$40 million ($24 million) two-year
      scheme rewarding airlines with cash for increasing traffic through
      Changi, which started this month.

      Changi is also likely to build a low-cost terminal for budget
      carriers. That's on top of plans to spend about S$500 million to
      upgrade Changi's two airport terminals. Both terminals will have a
      combined handling capacity of 44 million passengers.

      "There's almost a religious focus on costs as fares continue to come
      down," said Andrew Drysdale, the International Air Transport
      Association's director for the Asia-Pacific. "A continual focus on
      costs and efficiency is going to be critical."

      For its part, Singapore Airlines -- which is 56.8 percent owned by
      Singapore's government -- has announced plans to set up a budget
      carrier, Tiger Airways, in response to increasing competition from
      rapidly expanding Malaysia's Air Asia Bhd and new players such as
      independent carrier ValuAir Pte Ltd.

      Over the past six months, Singapore Air shares have risen by only
      about one percent, underperforming the benchmark Straits Times Index
      that rose 16 percent.
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