PUDONG INTERNATIONAL AIRPORT AS AVIATION HUB (Impact on Singapore Changi Airport)

Mdm Ho Geok Choo asked the Minister for Transport in view of Shanghai promoting Pudong International Airport as an aviation hub in the Asia Pacific region from 27th October 2002, (a) what will be the impact on Singapore Changi Airport (SCA) which has consecutively been voted as the best Airport in the world by Business Travellers (Asia Pacific) in the last 11 years; and (b) what measures can SCA take to address the challenges so that it will continue to be competitive and maintain its number one position.

The Minister for Transport (Mr Yeo Cheow Tong): Sir, China's civil aviation market is expected to grow by about 8% per annum with its air cargo traffic growing at an even faster 12% per annum for the next 20 years. China is likely to become the largest commercial aviation market outside the USA. Given this immense potential, it is likely that there will be several aviation hubs in China, including Pudong in Shanghai.

We see this development in positive light. As the established hub for Southeast Asia and the Australasia region, Changi Airport will benefit from the growth of the North Asian hubs, because the airports serve complementary roles. For instance, air traffic between Changi and Pudong is expected to increase three-fold by end of this year compared to just a year ago, from 14 to 44 weekly services. As Shanghai and Pudong continue to develop rapidly, we expect the traffic between Changi and Pudong to grow in tandem. The development of the Chinese hubs will also bring about further downstream economic opportunities for Singapore, eg, in the maintenance, repairs and overhaul sector.

Sir, let me now move on to how Changi Airport intends to stay ahead of its competitors.

Globally, the aviation industry has yet to fully recover from the economic downturn exacerbated by the September 11 events. Regionally, competition has become more intense, with many airports offering new facilities and larger capacities.

Against this backdrop of continued uncertainty in the global aviation industry and intensifying airport competition, my Ministry has embarked on a fundamental review of Changi Airport's competitive strategy. What we aim to do is to not just help our airline partners tide through this difficult period but, more importantly, position Singapore for the long haul.

I am therefore happy to inform Members of the setting up of a 3-year, S$210 million Air Hub Development Fund (AHDF) as part of our competitive strategy. A number of initiatives will be launched under the AHDF. These will be targeted at our industry partners, and help us further anchor Changi's position as the premier regional air hub.

For example, CAAS will, under the AHDF, step up collaboration with airlines and various Government agencies, like the Singapore Tourism Board, on traffic development programmes. Fundamentally, the most critical element for an airline is the demand for air travel. If we can stimulate greater demand for air travel to, through and from Singapore, the business of the airlines will improve, margins will increase, and they will not only stay, but increase their presence here.

We will also enhance our existing cost reduction measures under the AHDF. The House may recall that as part of the Government's Off-Budget measures in October 2001, we had introduced a 10% landing fee discount and a 15% rental discount. With effect from 1st January 2003, we will increase the landing fee discount from the current 10% to 15%. This will generate savings for the airlines of about S$30 million annually for the next three years. In addition, the current 15% rental discount will also be extended for another three years. This will benefit not only our tenants at the passenger terminals but also our tenants at the Changi Airfreight Centre.

Sir, CAAS will announce more details of the AHDF, and all these measures will help Changi remain competitive as a key aviation hub.

Mdm Ho Geok Choo: In view of the fact that cost is a big consideration in the airline business, does the Minister think that it is viable for Singapore to look into the possibility of setting up a no-frills airline?

Mr Yeo Cheow Tong: Sir, as the CAAS has replied in the newspapers a few days ago, we would welcome the setting up of an additional airline in Singapore, whether it is a low-cost carrier or otherwise.