Airports: terminal speed

Dedicated low-cost terminals are now in operation at two Asian airports offering lower prices and faster turnarounds

When Singapore’s airport operator was looking for an innovative name for its new low-cost terminal at Changi airport, it launched a contest. Some 12,000 entries were received, so there must have been interesting suggestions to choose from. The name that was selected? “Budget Terminal”.

While hardly innovative, its operator, the Civil Aviation Authority of Singapore (CAAS), sees the name as ideal, insisting it “succinctly reflects the terminal’s purpose, which is to provide simple airport facilities at a lower cost to its users”.

And simple it certainly is. The facility, just down the road from Changi’s main terminals, consists of a basic single-story building in pastel colours. Initial handling capacity is 2.7 million passengers annually and while basic, it has some frills such as money exchange, duty free shops and food and beverage outlets. Shuttle buses link it with the main terminals and there are no airbridges, helping airlines reduce costs and speed up aircraft turnaround times.

A terminal designed for use by low-cost carriers is an entirely new concept for Asia, where such airlines remain in their infancy but where growth in the sector has been strong. Balancing the needs of the new players and the bread-and-butter full-service customers has been a dilemma of sorts for airport operators, as they have had to accommodate both, given a general lack of secondary airports in many parts of Asia.

In Singapore, after a debate about whether to expand the secondary Seletar airport to handle low-cost airlines, the government decided the best option was to keep them at Changi. But CAAS knew it had to accommodate them, as low-cost carriers have been increasing in importance, and their requirements are different. CAAS says, for example, that around 10% of the total passenger aircraft movements at the airport are now from low-cost carriers.

Singapore ultimately decided to build a dedicated terminal to handle them and construction was fast-tracked to allow for an opening on 26 March this year. Without boarding bridges, passengers simply walk to the aircraft – whether in rain or sun. The facility and related infrastructure cost S$45 million ($28 million) and the 270,000ft² (25,000m²) terminal has scope for expansion to allow it to handle up to 5 million passengers a year.

So far only one airline, locally based Tiger Airways, has committed to using it, leading some to ask if it will be a “white elephant” – particularly since two other low-fare carriers based in Singapore, Jetstar Asia and its sister carrier Valuair, have said they plan to stay at well-equipped Terminal 1. Other regional low-cost carriers say there are not enough incentives to encourage them to use it, as landing and navigation charges have not been reduced.

CAAS says airlines using Budget ­Terminal will have to pay the same landing fees as those using the two main terminals as they still use the same runways and airfield infrastructure. However passenger taxes have been reduced, to S$13 from S$21, reflecting the fact that amenities at the new terminal are much more basic. Of this fee, S$7 is a passenger service charge and S$6 is a security charge, with the security portion the same as at the main terminals.

Tiger Airways chief executive Tony Davis says that although landing charges are the same, the terminal’s opening is a very positive development for the carrier, which now operates all of its flights out of the facility. Tiger has already been able to cut the minimum check-in time from 45 to 30 minutes as the simplicity of the design speeds up check-in and boarding processes. But most importantly, says Davis, the terminal is helping the airline reduce its ground costs, therefore making it more competitive.

Cost savings
“We reckon that our ground costs here at Changi, year-on-year, will be 60% lower on a like-for-like basis,” says Davis, who notes that not using airbridges alone will save the carrier around S$1 million this year.

“The Budget Terminal has been a fantastic success in giving us the operating platform we needed to ensure we could meet our 30-minute turnaround target and make sure we could get the cost efficiencies necessary to offer the low fares that our business model dictates.

” He adds: “If you look at what is going to happen over the coming summer, it is obvious that fuel is going to be higher than anyone would like, and the only way we can keep our fares low is to make sure that the other controllable costs are as low as we can make them. If you are having to absorb higher fuel costs, paying less for your ground costs is clearly a very big advantage.”

Singapore’s decision to build a terminal dedicated for use by low-cost carriers prompted Malaysia’s national airports operator to do the same, rather than allow low-cost carriers to move back to Kuala Lumpur’s old Subang airport, which is much closer to town than the main Kuala Lumpur International Airport (KLIA). Although the decision to build a low-cost terminal at KLIA came after the Singapore go-ahead, its 108 million ringgit ($29 million) Low Cost Carrier Terminal opened on 23 March, three days earlier than rival Singapore’s Budget Terminal.

KLIA’s anchor tenant is fast-growing Kuala Lumpur-based AirAsia, which previously operated from its main terminal after being forced to move out of Subang in 2002. It lobbied hard to move back to the old airport but was unsuccessful, and has since embraced its new home by saying it will help it to significantly reduce costs. Also using the low-cost terminal are AirAsia’s associate carriers in Indonesia and Thailand, although to date no other airlines have signed up. Like Singapore’s facility the new KLIA terminal has basic amenities and no airbridges.

“It will be good for AirAsia, giving them better operational efficiencies that translate into reducing their operating costs,” says managing director of national airports operator Malaysia Airports, Bashir Ahmad.

“It is all about operational efficiency for low-cost airlines. When they use that terminal it to meet their operational requirements. They won’t have aerobridges and can do power-in and power-out. They will also have lots of counter and check-in space because in the main terminal they are competing with the other airlines for that space. Also, in terms of passenger departure lounges, there will be an open lounge where people can board the aircraft very quickly, which will further improve operational efficiency.”

Bashir says the new terminal is not meant to give any particular airline special treatment. Built to handle up to 10 million passengers annually, it has 30 aircraft parking bays – and growth potential to handle up to 15 million passengers a year. Bashir says at least 4.5 million passengers are expected through the terminal in the first year of operation, as AirAsia is continuing to grow rapidly.

“We built the low-cost terminal firstly because AirAsia was expanding very fast and they needed more gates, more counters and more office space, and we couldn’t provide it at the main terminal,” says Bashir. “Secondly, they cannot secure the kind of operational efficiencies they want at the main terminal .” Bashir says moving AirAsia to the new terminal, 20km (12 miles) from the main terminal, will give more “breathing space” to KLIA, which last year handled around 23 million passengers – close to its design capacity of 25 million. Of those, more than 17% were carried by low-cost airlines.

There has been controversy over the new KLIA terminal, however, as IATA has criticised Malaysia Airports for not consulting it before lowering departure taxes for international passengers, which it alleges contravenes ICAO charging principles.

IATA says it is demanding assurances from Malaysia Airports Holdings “that passengers and airlines using the main terminals at KLIA will not be subsidising those using the low-cost carrier terminal”. While Singapore’s Budget Terminal also has a lower per-passenger fee than the main terminals, IATA says CAAS held consultations with airlines and its charging regime is transparent. ■

Source: Airline Business