CHANGI BUDGET TERMINAL

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CHANGI BUDGET TERMINAL: 15.

Mr Ong Kian Min asked the Minister for Transport why so far only Tiger Airways has signed up to operate out of Changi Budget Terminal and what are the reasons for the other low cost carriers not wanting to use the Budget Terminal.

The Minister of State for Transport (Mrs Lim Hwee Hua) (for the Minister for Transport): Sir, my Minister had previously shared with this House that our rationale for building a separate Budget Terminal at Changi Airport was to accommodate the specific needs of low cost carriers, whose no-frills and low-cost business model is fundamentally different from full service carriers like SIA and Qantas.

The Budget Terminal was therefore designed and built in consultation with prospective users. For example, the feedback from many low cost carriers was that they would not want to use aerobridges in order to save cost. The terminal was thus built as a very simple, functional and cost-effective facility.

Tiger Airways will be the first airline to begin operations from the Budget Terminal. Other low cost carriers may be adopting a "wait and see" approach before deciding whether to use the Budget Terminal. The business model of low cost carriers is also still evolving. As such, some of these carriers may prefer to continue to use Changi's main terminals as it fits in better with their business model, despite the fact that they will have

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to incur higher operating costs. For example, some carriers currently have arrangements to transfer passengers to other airlines at the main terminals, unlike the typical low cost carrier which focuses on end-to-end traffic. For such carriers, operating out of the main terminals will allow transfers to be done expeditiously and with minimum inconvenience to travellers.

Being a new concept, it is understandable that most potential users of the Budget Terminal would want to wait and watch the reaction of travellers to this new facility. If travellers give the new Terminal the thumbs up, we are then likely to see increased interest from other budget airlines. Although the facility has been sized to meet the needs of Tiger Airways for the next few years, it can be expanded modularly to cater for other airlines should they decide to operate at the Terminal.

Mr Ong Kian Min (Tampines): Sir, for the low-cost carriers concerned, other than cost, what are the benefits of operating out of the Budget Terminal instead of the main terminals, and whether these benefits are sufficient to justify the inconvenience and the lower-quality service that it offers to the passengers?

My second question: is Tiger Airways' commitment to operate out of the Budget Terminal firm binding and, if so, for how long? In other words, can they change their decision on short notice and move back to the main terminals?

Mrs Lim Hwee Hua: Sir, Mr Ong asked about the benefits of operating out of the Budget Terminal. There are both direct and indirect benefits. In terms of the direct benefits, as I mentioned earlier on, it is the doing away of the use of the aerobridges at the Budget Terminal which is the main cost savings. The other cost savings would come in the form of lower

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aircraft towing cost and also ground handling charges. The simple and no-frills design will enable users to save on overheads, like the office rentals and check-in counter charges. Our estimate is that users can actually save as much as 50% of the cost that they would otherwise incur at the main terminals.

The other indirect benefit would, of course, be the shorter waiting times for aircraft push-back for take off as well as disembarkation. Here, passengers would also benefit from the lower passenger service charge of $7 as opposed to $15 at the main terminals.

Mr Ong's second question about whether Tiger Airways' commitment is firm and binding on the Budget Terminal, I would say that both Tiger Airways and CAAS are committed to making the Terminal a success. There is no minimum tenure but, given the cost considerations, we trust that Tiger Airways would continue to operate out of the Budget Terminal for as long as it is commercially viable. At the same time, other airlines are also welcome to use the Budget Terminal.

Mr Sin Boon Ann (Tampines): Sir, the Minister of State has said that the concept of the budget air travel is still an evolving one and the other airports are just observing how this business is going to evolve. Are we not being too hasty by going out there to build a Budget Terminal ahead of its time? Could we not have used an existing airport in areas, like Seletar or elsewhere, as a designated budget terminal first, and then wait and see how this model would evolve before finally deciding to spend money building a new terminal?

Mrs Lim Hwee Hua: Sir, the Budget Terminal project was undertaken after extensive consultations with the different users. It is one where, as the Member has rightly put it, an evolving model. This is really a question of judgment. By the

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same token, if we had waited for models to succeed elsewhere, then Changi Airport would never have been built as well. So, in many cases, these are business decisions as well as strategic decisions that the Government would have to take. But I would like to assure the Member that this decision has been taken after extensive consultations. In case he is worried that should Tiger Airways decide to shift back to the main terminals, I would like to assure him that most of the equipment can actually be redirected for use at the main terminals as well.