Is Singapore getting airport crazy?

Singapore's Changi Airport
JTB Photo | UIG | Getty Images

Singapore's latest budget includes a $3 billion plan to expand its Changi airport with a fifth terminal before the fourth is even completed, but whether or not the travelers come isn't clear.

"Changi's current success and successful completion of the expansion alone will not guarantee that the new capacity is utilized," Graham Pickett, a global aviation and transport analyst at Deloitte, said via email.

It's not a modest expansion. The new terminal five, targeted for completion in around 10 years, will be as big as terminals one, two and three combined, more than 1 million square meters. The additional airport spending is likely a contributor to expectations Singapore's budget deficit this fiscal year will rise to around 6.67 billion ($5.3 billion), up from last fiscal year's smaller-than-expected 100 million Singapore dollar deficit.

Singapore is projecting Changi will see passenger growth of around 4-6 percent each year for the rest of this decade, according to a speech by Lui Tuck Yew, the transport minister, a year ago.

Read More Will Singapore's tax hike on top earners deter top talent?

But it isn't entirely certain that traffic will materialize. In 2014, Singapore's international visitor arrivals fell 3.1 percent on-year to 15.1 million, the first drop since 2009, during the financial crisis, amid a double-digit decline in Chinese tourist arrivals, the Singapore Tourism Board said.

In a research note in August of last year, Maybank-Kim Eng analyst Derrick Heng noted that Changi's flight traffic was expanding faster than its passenger throughput, as the region's airlines deal with overcapacity -- something Heng believed would lead to carriers scaling back their offerings.

The airport expansion was also singled out early last year by economist Jesse Colombo in a controversial Forbes column. He claimed Changi's amenities -- including its butterfly garden and children's play areas -- were a sign that Singapore's economy was headed for an "Iceland-style" meltdown.

Chart status

But the expansion may be at least partly aimed at keeping Changi's top of the charts status, with the airport repeatedly ranked as the world's best airport in multiple surveys.

It's an attempt to "stay ahead of the curve" by building the infrastructure ahead of the demand, Ben Vogel, editor of IHS Jane's Airport Review, said via email, citing a forecast that the Asia-Pacific region's air traffic will increase threefold by 2031.

Read More Singapore raises spending, retirement benefits in budget plan

He noted that other Southeast Asian hub airports in Bangkok and Jakarta are suffering as they aren't able to cope with rising passenger traffic.

Failing to anticipate growth and passenger needs is a clear driver of the "worst airports" surveys. In the U.S., New York's Laguardia airport last year once again topped travel website Sleeping in Airports worst airport list, calling it "worn out," while U.S. Vice President Joe Biden likened it to a "third world country."

"Singapore is taking clear steps to avoid this fate," Vogel said.

Economic lifeline

But Changi's expansion isn't only about passenger comfort or avoiding long immigration lines.

"Singapore takes its airport very seriously," Jonathan Galaviz, a partner at Global Market Advisors, said via email. "It serves as an economic lifeline to the world," he said.

Changi Airport's plans for growth
Changi Airport's plans for growth

It's a lifeline that's facing a lot more competition, especially from the Middle East, and Galaviz believes Singapore doesn't really have a choice about ramping up its airport capacity.

In 2013, Changi took a double blow as Australia's Qantas shifted its European hub to Dubai from Singapore and AirAsia closed its Singapore base, moving back to Malaysia.

"In theory, the more capacity that the airport has, the more likely it is that Singapore can be a hub for major carriers besides just Singapore Airlines,"Galaviz said.

But other airports are also going that route, noted Deloitte's Pickett, citing new hubs in Guangzhou and the Middle East as well as plans for as many as 100 new airports in China by 2027. "The major airports in Hong Kong, Dubai (both Dubai International and Al Maktoum International), Abu Dhabi, Istanbul and Qatar are undergoing significant expansions before 2030," with Al Maktoum potentially becoming the world's largest airport by 2027, Pickett noted.

"Singapore has no choice but to ramp up capacity to fend the competition off," Galaviz said.

--See Kit Tang contributed to this article.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1