Singapore tightens grip on Southeast Asia airport crown with new project

Changi Airport in Singapore.
Piotr Powietrzynski | Photographer's Choice RF | Getty Images
Changi Airport in Singapore.

Singapore's ambitious project to double its air passenger handling capacity by the mid-2020s is set to extend its lead over neighbors like Kuala Lumpur, Bangkok and Jakarta, whose airports are struggling with congestion and construction delays.

Changi, Southeast Asia's biggest and most popular international airport, is keen to seize a greater share of a boom in regional traffic, mindful of competitors' plans to grow into international hubs.

The increased capacity also plays into the hands of budget carriers such as Malaysia's AirAsia, Singapore Airlines affiliate Tiger Airways, Qantas Airways affiliate Jetstar Asia, which is based in Singapore, and Indonesia's Lion Air.

Low-cost carriers such as these account for a third of Changi's traffic, up from virtually zero just eight years ago, and are hungry to expand routes and flight frequencies.

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The expansion plans, which include a third runway and a fifth terminal by the mid-2020s on top of a fourth already under construction, will double current capacity to around 130 million passengers annually and cement Singapore's leading role as a hub of Southeast Asian business.

Regional traffic predictions point to the need for bold construction plans as airports will have to double their passenger capacity every 12 years just to keep up, said Andrew Herdman, director-general of the Association of Asia Pacific Airlines.

"It's no good thinking in terms of incremental capacity enhancements of terminals or airports or runways," he said.

Driven by growing economies and rising middle-class incomes, passenger traffic in Southeast Asia is expected to rise 7.6 percent a year in the 20 years to 2031, outpacing a global average of 5 percent, according to research firm Strategic Airport Planning Ltd.

Travel between Southeast Asia and South Asia, for example, is expected to grow even faster, at 9.5 percent a year.

"Changi has big growth markets such as Vietnam and Indonesia in its region that it can serve. That can drive demand," said Shukor Yusof, aviation analyst at Standard & Poor's.

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Narrow bodies, many flights

The rapid rise of Asian low cost carriers caught much of the airport industry unprepared and led to Changi's decision last year to shut a budget terminal and build a larger one, the T4.

"To continue its lead position in the fast-growing Southeast Asian market, Changi needs the space to handle more flights, particularly narrowbody flights as it is the short-haul market that is growing the fastest," CAPA, an aviation consultancy, said in a report.

The use of narrow bodied aircraft, such as Airbus A320s and Boeing 737s, means the number of individual aircraft movements grows more quickly than the actual traffic growth rate, sometimes leading to congestion problems for the region's airports.

That has not stopped the airlines from going ahead with their expansion plans. Lion Air has existing orders for more than 500 Airbus and Boeing jets, while AirAsia has around 350 A320s still left in its order book.

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"As the airport grows, we will have more capacity and opportunities to grow as well so we definitely welcome the good news," said Logan Velaitham, CEO of AirAsia's Singapore unit, which has long wanted to set up a joint venture in the city.

For now, Changi does not appear to have a serious challenger to its place as Southeast Asia's leading international hub.

It has over 630,000 weekly international seats, more than Kuala Lumpur International Airport's 438,400 and Bangkok's Suvarnabhumi with 274,700 according to CAPA.

For Changi's rivals, setbacks have come in spades.

Kuala Lumpur International Airport has been working on a 45 million passengers a year terminal to replace a low-cost one but has been plagued by delays, with its opening pushed back three years in a row. It is now slated to open in April 2014.

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The postponements have prompted scathing comments for operator Malaysia Airports from AirAsia CEO Tony Fernandes who has warned that Kuala Lumpur could be left behind by its neighbors.

But even after the extension, which will double its capacity, the airport will still lack an extensive airline network like Changi, with much of its business reliant on AirAsia.

In terms of overall traffic, Changi was outstripped last year by Jakarta's Soekarno-Hatta airport which handled 57.8 million passengers in 2012, nearly six million more.

But its flights are largely domestic. Soekarno-Hatta was only built for 22 million passengers, resulting in frequent delays and much congestion. Work has started on an expansion, with an eventual goal of 62 million passenger capacity, but the time frame for that is unclear.

Political infighting since 2011 has also delayed Airports of Thailand's expansion of Bangkok's Suvarnabhumi airport. The plans call for capacity to grow by 15 million to 60 million passengers a year by 2017. It also intends to expand the secondary Don Muang airport, which is used by low-cost carriers.

In the wider Asia-Pacific region, other airports are also upping the ante.

Hong Kong International Airport, which handled 56.5 million people in 2012 and is projected to handle 102 million in 2030, is proceeding with a study for a third runway and expanded terminal. Studies are also underway for the expansion of Seoul's Incheon Airport and for a second airport in Beijing, while debate about a second Sydney airport has also been reignited.