A leading commentator in the airline industry suggests the soon-to-be opened expansion of Singapore’s airport is a clear signal of its intent to remain a leading regional airport hub.
Figures indicate massive outpouring of investment at other airports in South East Asia. These trends in the sector bode well for shippers and logistics operators in general, the analyst stressed.
Singapore’s Airport (Changi), which handled 1.97m tonnes of cargo during 2016, and was recently voted by a Skytrax poll as the World’s Best Airport for the fifth consecutive year, has developed its new state-of-the-art Terminal 4 (T4) ahead of increases in passenger demand, so the additional capacity is well in place for growth in both passengers and cargo. It is due to commence operations later this year and comes ahead of another terminal, the T5, due to be operational by 2025, which will be even more expansive and offer upgrades in cargo and logistics facilities, and the development of a new runway.
This phased investment in airport expansion represents a bold vote of confidence in Singapore’s status as a regional hub, according to Ellis Taylor, Asia Finance Editor at aviation intelligence provider FlightGlobal. “Given that passenger and cargo growth through Singapore has slowed in recent years, and hub carrier Singapore Airlines is under pressure from competitors, the new developments could probably have been delayed for a few years without any significant loss to the airport,” Mr Taylor said.
”The expansion at T4 and the forthcoming T5 plans are aimed at making sure that Singapore Changi stays ahead of its rivals. Arguably, there is sufficient terminal capacity across the previous three terminals to handle more flights, but the investment in expansion will deliver more take-off and landing slots, more terminal space for new airlines, which will be good for cargo and passenger operations alike.”
Changi airport is also making strides to better optimise existing runway capacity to help carriers get slots at peak periods, Taylor pointed out.
T4 is purely a passenger terminal addition and is not linked to cargo infrastructures such as cargo terminals, warehouse or aprons. However, additional belly capacity will become available because the additional stands for passenger aircraft mean the airport can support more passenger flights.
Joanna Lu, Head of Advisory Asia, Flight Ascend Consultancy, suggests Changi’s current cargo infrastructure is already impressive: over 70 hectares of Free Trade Zone, 3 million tonnes of annual handling space, over 100,000sqm of warehouse and office space, 14 dedicated freighter parking bays, over 30 remote bays, A380 and B747-8s ready, and two dedicated cool chain handling facilities.
Lu stated, “The most attractive aspect of Changi’s cargo capability is the round-the-clock efficient customs and ground operations. In other words, the ‘soft’ skills.”
She also suggested maintenance, repair and operations (MRO) business at Changi is set to become a massive growth sector for regional logistics. She said, “Changi’s MRO cluster is home to more than 100 companies. A major MRO facility, Changi East Industrial Zone, will be built to the northeast of the future T5. This expansion will hugely drive the long-term growth of the logistics and aerospace industries.”
These developments come ahead of any supply bottlenecks at Singapore’s airport, whereas Taylor suggested other hubs may soon face capacity restraints, “I think this really underscores Singapore’s commitment to maintaining its hub status in the region by ensuring that it has the capacity in place to handle more growth ahead of time. This compares favourably to regional rival hub airports, such as Bangkok Suvarnabhumi and Hong Kong International, which are facing capacity constraints.”
These airports do plan to expand, but in Hong Kong, additional capacity will only become available once the three-runway system is in operation in 2024. Bangkok Suvarnabhumi has $3.5 billion of expansion planned by 2021
However, figures released recently by CAPA, the Sydney-based centre for aviation, and published by Bloomberg, suggest massive investment is projected for regional air hubs over the ensuing decades. Brand new airports within Asia will involve a total investment outlay of about $500b. This includes a $12.9b new airport in Beijing, upgrades at Bangkok’s Suvarnabhumi Airport, including a third runway, and a second terminal at South Korea’s Incheon International Airport. TR Weekly reported that the Vietnamese government has commissioned various parties to research possibilities for the Tan Son Nhat Airport expansion, including sending missions to Bangkok and Hong Kong.
Source: Flight Ascend Consultancy
Singapore and Hong Kong are fully aware of the growing competition from mainland China and other regional hubs, as Taylor explained, “Bangkok, Seoul Incheon and Tokyo Narita are pushing to become hubs linking passengers and cargo from Southeast Asia through to North America. Likewise, the rise of Chinese hubs in Shanghai, Guangzhou and Beijing will also play a disrupting role, in the same way that the Middle East hubs of Doha, Dubai and Abu Dhabi previously altered air routes for many Southeast Asian carriers.”
Lu thinks other hubs should be careful of being drawn into a regional race for supremacy, “They will not and should not consider expanding just for sake of catching up with the other airport in the region.”
According to Lu, airport expansion is not linked to growth in Asian trade. She also believes that the predictions about the demise of the regional hub are premature and “long-range aircraft technology is a supplement to the market dynamics rather than the killer of hubbing.”
Torbjorn Karlsson, senior client partner, Korn Ferry, insists developments at Singapore were important to protect Singapore’s position as the regional hub for South East Asia, Australia and North Asia, necessitating additional terminal space and runway capacity.
He suggests other regional hubs may find it hard to compete, “However, as many of these airports are even more infrastructure constrained than Changi, they will also need a stronger focus on building connected domestic networks. Finally, we see a need for airports to be overall more commercially centred and looking at competitive advantages regionally and globally as technology continues to allow hubs to be bypassed.”
He cites lack of international standard airport development, often due to their complex and lengthy gestation periods, as potential hurdles to air cargo related trade. He concludes, “The airline industry has become increasingly interconnected and started shifting to ‘open partnerships’ to drive profitability. Consequently, it’s crucial for the regional industry to add innovative commercial capabilities and differential global/partnership thinking that emulates the tech sector.”
The promising news for shippers is that growth in freight rates should soften, according to Taylor, as Singapore’s additional capacity should encourage more competition among regional hubs, encouraging more airlines to mount services. These developments should bring additional belly cargo into the market, which for general shippers should maintain downward pressure on shipping rates. He also suggests the expansion of low-cost carriers in the region should also increase cargo space available, although many of these carriers utilise narrowbody aircraft, so airfreight is unlikely to be containerised cargo.
One intriguing question is how expansion in the capacity at airports across South East Asia will influence the demand for dedicated cargo aircraft. Taylor suggests few airports are likely to invest heavily in facilities to handle dedicated cargo aircraft, except for those hubs where shipping perishables or pharmaceuticals is a priority
He explained, “In Asia, there has been a structural shift towards belly-loaded freight as many carriers use large widebody aircraft with strong cargo carrying abilities on the passenger services.”