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Commentary: What will happen to Changi Airport?

With major carriers at the airport almost zeroing their capacity, what are Changi’s options?

In the fight against Covid-19, Singapore has finally done in March what it has long been reluctant to do: shutting off its borders to visitors.

As an international and world renowned air hub, this was simply unimaginable in the past. Here in Singapore, we pride ourselves for being an open nation, where foreign tourists and businesses alike are welcome to spend and earn their money here.

Since the beginning of the year, Singapore has increasingly tighten the controls to keep the virus out. First it was a Stay-Home Notice (SHN) on visitors from select region, followed by a ban of visitors from certain regions, and the list of countries slowly expanded over the weeks.

These measures weren’t success enough, by the government’s standards, to keep the virus at bay, so the final gauntlet was dropped on Sunday when Singapore announced it will bar all short term visitors since 23 Mar. Subsequently, even long-term pass holders had to seek permission before setting off for Singapore, and anecdotally there are many instances where these workers are told to hold off their return to Singapore.

So as countries around the world shut their borders, Singapore had no choice but to do the same.

Home carriers reduce their capacity drastically

Since February, all three home-based carriers have been cutting their flights. First it was all flights to China, and as the virus spread across the world, more and more flights were cut.

In the latest moves, Singapore Airlines, Changi’s home carrier, announced a 96% cut to its originally scheduled April capacity.

This follows Scoot’s announcement of grounding all but two aircraft, to continue operating only about 1% of its capacity. The low cost carrier will only operate 26 flights between 22 Mar and 5 Apr.

Jetstar Asia, the smallest of the Singapore-based carriers, has thrown in its hat earlier in the month to say that it will ground all flights for three weeks from 23 Mar through 15 Apr. It probably had the foresight to see this coming, given the timing of its suspension.

In the first three months of 2020, Changi Airport reported a drop of 32.7% in passenger numbers, with most of the fall coming from February and March. This is likely to continue falling as nations hold out on closed borders.

Terminals are eerily quiet

If one takes a look at Changi Airport’s flight information, they are mostly blank.

Take 23 Mar, Monday, just before the all out ban on short-term visitors kicked in for example. Changi’s Terminal 4 has only seven scheduled flights on the Flight Information Display System (FIDS), and only one is operating – CX759 from Hong Kong. I wonder how many people were on that flight.

With the drop and virtually no visitors, one might expect that the hardest hit groups will include airside retail operators, ground handlers and other service providers.

At its peak of handling over 68 million passengers, Changi Airport depends on over 20,000 workers within the airport community to keep the airport running smoothly. Now that we are seeing just drips of passengers, one can imagine that many of these jobs will be at risk.

So with a dwindling number of flights, what are Changi Airport’s options to minimise the impact to its service providers and tenants?

Reduced footprint across all terminals

Up to last night, Changi Airport was still operating flights across all seven piers (A through G) across four terminals. One possibility is to restrict operations to one pier of each terminal, while cordoning off the other.

The layout of Changi Airport and the seamless connection across Terminals 1 to 3 may work against this option right now, but there can still be a meaningful way to do it.

For instance, Changi Airport could consider shutting off all the A gates in Terminal 3 and F gates in Terminal 2, while using the B & E gates respectively. Given’s Terminal 1’s seamless connection to Terminals 2 & 3, it may not be feasible to close off any parts of it.

By shutting off one pier in two of the terminals, Changi could look to park grounded aircraft at the closed off piers, and also close off one set of immigration counters at each terminal. This arrangement will also allow transit retail operators to reduce its footprint, and thereby reducing overheads during this period of time despite the rental relief that Changi has said to offer.

Consolidate ops in one terminal

If the low traffic is going to persist for a while, Changi Airport can also consider closing off one terminal, just as what London Heathrow is contemplating.

If that happens, this will likely happen to Terminal 4, given that it is now operating only 1 to 2 flights a day. Sources familiar with Changi Airport says that while this is being studied, it is very unlikely. This is because there is a possibility that airlines who are asked to move back to Terminals 1 to 3 – despite it being temporary – may not want to move back to Terminal 4 once the situation normalises, as Terminals 1 to 3 enjoys better land transport options and also a wider range of facilities, including the proximity to Jewel Changi Airport.

A terminal move is also a major undertaking both for airlines and the airport. Typically, airlines moving terminals will have to configure their check-in systems to the rows that they are working out of. Along with that, they may also have to move certain specialised equipment and signages, and sometimes, their office.

The obvious upside to this option is that as Changi Airport is currently upgrading Terminal 2, this will allow Changi Aiport to shut off Terminal 2 altogether and fast track the upgrading works, making this a fairly attractive proposition given that it is almost certain that traffic numbers will take time to go up again.

Final thoughts

While conserving resources to minimise ‘wastage’ is critical during this time, one must not forget that aviation is a very big part of the Singapore’s economy, accounting for about 5% of Singapore’s GDP.

The airport alone supports about 20,000 jobs, and with this virtual halting of traffic, many of these jobs are definitely at risk. On top of these jobs, there are also the non-aviation businesses, such as the retail outlets within the terminals that are at risk with a prolonged downturn.

While Changi Airport Group – the airport’s operator – has stepped in to offer rental waivers for its tenants, more can be done to help these businesses stay afloat, especially if the crisis prolongs.

Changi Airport Group’s consistently draw in an annual operating profit in excess of S$900 million, with net profit varying from year to year depending on other factors. Most of this would come from its non-aeronautical revenue, given that the aeronautical revenue is regulated and therefore can be presumed to not draw much of a profit.

While the company is a privately held corporatised entity, Changi Airport Group cannot take away from the fact that it is operating a national – if not global – institution. By extension, it has a national service role in keeping jobs and helping businesses stay afloat, especially when it uses the Singapore brand, and leverage many other Singapore brands operating on its premises when selling itself to the world. It has relatively deep reserves, and if there’s a time the reserves should be tapped on, the time is now.

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