Singapore Budget 2018: Higher airport charges now will avert big hike later: minister

Singapore

RAISING passenger charges earlier to fund the airport's Changi East development is being undertaken to avoid imposing a big hike in the amount airport users would have to pay down the road, said Second Minister for Transport Ng Chee Meng in Parliament on Wednesday.

"Airport users will start to benefit from Changi East progressively," he said during the Committee of Supply debate. "Having users start paying earlier avoids large spikes in the amount they have to pay later on."

The new fees announced last week have attracted criticism from airlines, which have warned that higher fares could dampen demand for flights out of Changi.

Passengers aren't the only ones to have to bear higher fees. Airlines too, will pay more to use Changi Airport; there will be a one per cent hike in landing, parking and aero bridge (LPA) fees from July.

From July 1, passengers departing from the airport will pay S$10.80 for a new airport development levy (ADL); transit/transfer passengers will pay S$3 per leg when they pass through the airport.

The airport's passenger service and security fee (PSSF) will go up as well - by S$2.50 to S$30.40 from July. It will continue going up by S$2.50 a year until 2024.

The International Air Transport Association (Iata) has also expressed its disappointment at the new charges, saying it was unfair to expect passengers and airlines to pay in advance for a facility they may not use later.

Aside from Terminal 5 (T5), the Changi East development covers works for a third runway and a network of tunnels and systems linking Changi East and the existing terminals.

The third runway will be operational by the early 2020s, and T5, around 2030, adding capacity of 50 million passengers a year.

Changi Airport's four terminals now handle up to 82 million passengers a year.

By next year, the mixed-use development called Jewel and the expansion of Terminal 1 will add a further three million in handling capacity.

In his speech to the House, Mr Ng also explained the decision to go for a flat ADL instead of a tiered one, as has been done by airports such as Hong Kong International. (There, the fee a passenger pays varies by distance and type of fare.)

The minister said: "Passengers make use of the same facilities at the airport, regardless of where they are flying to. It is only fair that the charges they pay are the same. This is the same principle that has been used for other passenger charges such as the aviation levy and the passenger service and security fee."

Akin to building a second airport, the massive Changi East development will cost "tens of billions of dollars". The government will fund the majority of the cost; airport operator Changi Airport Group (CAG) will commit its reserves, future surpluses as well as undertake substantial borrowing, he said.

The balance will come from passengers and the airport community. The government has committed over S$9 billion to the project so far and CAG, some S$3.6 billion. "Without government funding, airport charges will have to increase even more," said Mr Ng.

The push to expand Changi Airport comes as Changi Airport seeks to build ahead of demand so that passengers can experience high service standards, even during peak hours.

Mr Ng said that infrastructure development is a long-term endeavour; with Terminal 3, for example, the decision to build it was taken in 1996, ahead of its launch in 2008.

Last year, Changi Airport handled a record 62.2 million passengers; passenger traffic is slated to continue rising at a clip of 3-4 per cent a year over the next two decades.

He added that the government would ensure prudent spending on Changi East: "We will strive for the most cost-effective way to develop Changi East, and ensure that Changi continues to be world class."

CAG is now evaluating proposals from three consortia which are vying to be the master building consultant for T5. Mr Ng said all three have submitted designs that will set T5 apart from other airports around the world.

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