CHANGI AIRPORT (Competitive advantages)

Mdm Ho Geok Choo asked the Minister for Transport (a) what are the competitive advantages of Changi Airport and (b) what plans and strategies are there for the Airport and its operators, to mount a pre-emptive programme to minimise the impact of competition from the region and to remain the airport of choice.

The Minister for Transport (Mr Yeo Cheow Tong): Sir, as I had informed Members late last year, my Ministry had reviewed and refined Changi Airport's competitive strategy. Our goal is to anchor our airline partners here, attract more airlines to use Changi Airport and position Singapore for the long haul.

First, let me stress to Members that an airport does not exist purely on its own merits. What do I mean by this? Let me illustrate. If tomorrow, we are given permission to build an equivalent of a Changi Airport at the South Pole and we offer airlines all the airport services free of charge, can that airport automatically become a hub airport? I think the answer is obviously no. Airports succeed only when there is enough passenger demand in the locality that the airport is located. And airlines will always fly to airports where there are passengers to be served. Changi Airport has grown over the years because Singapore is a tourism centre and a regional business hub. The large number of MNCs located here, the significant number of Singapore businessmen and professionals who travel regularly to serve their regional customers, the many Singaporeans who travel abroad each year on holiday and the seven million tourists we attract every year, all add up to a huge base load of air travellers. As long as the base load is here, airlines will continue to serve us regardless of competition from other airports.

The challenge is how to remain as a key hub airport for the region. Here, connectivity and quality of the airport are vital factors. International airlines that serve the region in a limited way will look for an airport that has a good base load and good connectivity to the key cities and attractions in the region. This allows them to fly into the selected hub airport and distribute their passengers through other airlines to the final destination in the region. They also look for an airport that their passengers will feel comfortable and happy transiting or transferring through.

In terms of connectivity, Changi Airport ranks very high. Today, Changi Airport serves 63 airlines and is connected to 137 airports in the region and throughout the world. We will continue our efforts to increase Changi's connectivity, both in terms of attracting new airlines as well as actively working with them to serve more destinations. In terms of passenger comfort, Changi Airport enjoys significant competitive advantage through state-of-the-art infrastructure that is managed efficiently and effectively. Passengers using Changi find the speedy clearance, the shopping mall environment, the friendly service and the various passenger facilities provided a very pleasant experience. Many contrast this with the experience in other airports. We therefore coined the term "the Changi Experience" to describe our airport.

Our lead in terms of comfort and service level, however, has been narrowed in recent years with the building of newer regional airports. We must therefore continue to upgrade our facilities, raise productivity, improve operations and enhance our customer orientation. As our competitors catch up, we have to learn from them as well. The Changi Experience is a unique one and we must continually revitalise and enhance it.

To ensure that Changi remains ahead of our competitors, we have set up a 3-year S$210 million Air Hub Development Fund in January this year. Under the scheme, we have launched a number of initiatives targeted at our industry partners which will further anchor Changi's position as the premier regional air hub. For example, CAAS, the Singapore Tourism Board and various agencies are collaborating with airlines to further stimulate demand for air travel to, through and from Singapore.

Sir, cost competitiveness is another relevant factor. We will keep our costs competitive by benchmarking internationally and regionally. Where the situation demands it, we have not hesitated to step in early. For example, CAAS was one of the first to introduce a S$45 million SARS relief package and, subsequently, a S$10 million air traffic development scheme. Both schemes help the industry to lower their operating costs. We will continue to look at our cost structure to ensure that our airline partners find it profitable to operate at Changi.

We have also developed the Airport Logistics Park, or ALPS. Located strategically in Changi's Free Trade Zone, ALPS leverages on the excellent connectivity and superior handling efficiency of Changi Airport. This enables the logistics companies to enjoy rapid turnaround with minimal customs formalities thereby strengthening our position as a leading air logistics hub.

In preparation for the longer term, I have tasked my Ministry to look at how we can further develop Singapore as an International Aviation Centre. Working with other agencies, our vision is to create a vibrant cluster of aviation and aerospace companies and activities. This will then provide another engine of growth for our aviation sector. I can therefore assure Members that my Ministry and the CAAS will proactively ensure that Changi retains its competitive position in the years ahead.

Mdm Ho Geok Choo (West Coast): Sir, the success of Changi Airport, in short, boils down to satisfaction of passengers and our ability to connect with other airports and anchor airline partners. In the Minister's plan to continue to develop the vibrancy of Changi Airport, how does he propose to incorporate programmes that would continue to enthuse the service providers to continue to deliver excellent service, which is a very important factor in attracting tourists and passengers to come to Singapore?

Mr Yeo Cheow Tong: Sir, the CAAS engages in close consultation with all their airline partners. From these consultations, they get a better understanding of what is needed by not just the airlines but the travel industry as well. So, by having all these dialogue sessions, we are able to formulate programmes to address areas where further improvements are needed. And I think that is how Changi Airport has managed to achieve continual progress, and we will continue to do that.

Mr R. Ravindran (Marine Parade): Sir, I understand that many domestic airlines in Indonesia and also some of the budget airline operators in the region would like to hub in Singapore. But they are complaining that the cost of hubbing in Singapore is too high. Are we reacting fast enough to ensure that we are able to attract them to hub in Singapore? Or are we going to wait until a situation arises like PSA where we lose the customers and then we take measures to attract them back to Singapore? I would like to get the Minister's input on this.

Mr Yeo Cheow Tong: Sir, as I explained just now, if the passenger load is here, airlines will want to operate through Singapore. Mr Ravindran mentioned about low-cost airlines wanting to hub here. If he knows which of these airlines, please let us know and we will definitely reach out to them.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Sir, budget airlines like ValuAir said that they want to use Changi Airport as its hub. But how can they do it when, according to the CEO of that budget airline, the landing fees are so high, and that they actually need to use Paya Lebar Airport instead of Changi Airport. Can the Ministry clarify?

Mr Yeo Cheow Tong: Sir, I do not know what he is talking about, because Paya Lebar Airport is not meant to be a civilian airport. We are in discussions with airlines that are interested in operating through Singapore. As I mentioned just now, Changi Airport serves over 60 airlines, and they have operated here very profitably. If the budget airlines are interested in operating here, I am sure they will find Singapore equally profitable for them.