T3’s up, now for the tenants

Will offer of slashed rentals lure airlines rooted in Changi’s other terminals?

The bait would tempt any business: Move over, and you will not have to pay rent for six months.

This is the proposition the Civil Aviation Authority of Singapore (CAAS) has laid before airlines, in a bid to lure them to the new Changi Airport Terminal 3 (T3) ahead of its first flights on Jan 9.

Built at a cost of $1.75-billion, the seven-storey T3 will be Changi’s biggest and costliest terminal, able to cater to 22 million passengers a year. So far, Singapore Airlines (SIA) is its only confirmed tenant.

But that, the CAAS hopes, will soon change. At least six carriers currently at Terminals 1 and 2 are considering its offer, this newspaper has learnt.

Rental rates at T3 are about 10 per cent higher than the $35 to $65 per square metre at T1 and T2, according to airlines Today spoke to. The half-year relief would save a small airline company with a 100-sq-m office anywhere between $23,100 and $42,900.

Airlines are also being wooed with reassurances of adequate premium passenger lounge and check-in facilities at T3.

Some airlines were concerned that as SIA has been allocated a dedicated passenger lounge and uses a unique check-in system at T3, other carriers might be left out in the cold.

The CAAS has assured them otherwise, and noted that half of the new terminal would be equipped with a common check-in system any airline can use.

These terms were spelt out in a letter sent to all airlines last month. The terms are also available for those keen to move from T1 to T2, and airlines have up to the end of next month to decide.

The aim of the big Changi reshuffle? To better spread out usage across the airport’s three terminals, even as T1 is set to undergo a $180-million upgrading later this year.

Currently, 67 airlines are based at T1, while 12 airlines, including SIA, are at T2.

During the morning and evening peak hours, all of T1’s check-in counters are often occupied, said Mr Johnny Chan, chairman of the Airline Operators’ Committee, which represents more than 50 airlines based at Changi.

While the CAAS did not indicate how many airlines it hoped to host at the new terminal, a spokesperson said the “preference” was to have “airlines with flight schedules that would allow optimal utilisation of slots at T3″.

But perks or no perks, some T1-based airlines are not in favour of the big migration.

Air France and KLM Royal Dutch Airlines general manager Frans Leenaars told Today the two airlines are “happy to stay” at T1 despite the “enticing offer from CAAS”.

One reason is that their partner airlines also intend to stay put. “We need to make it easier for our passengers. We need to be together with our partners to make smooth connections,” said Mr Leenaars.

Emirates, likewise, has no plans to move, having recently made “considerable investments”. Said area manager Stephen Chu: “We opened a new multi-million-dollar Emirates Lounge in October last year, and also a new airport office.”

But six other airlines — Cathay Pacific, Qatar Airways, Korean Air, Southern China Airlines, Thai Airways and United Airlines (UA) — said they are considering the CAAS’ offer.

UA station manager Joseph Chia said that besides working out the financial sums, the American carrier is considering whether it can build on existing synergies for an airline alliance. United is part of the Star Alliance group that includes SIA, Swiss Air and All Nippon Airways.

SIA has indicated that it will move more than half of its operations out of T2. Affected services include long-haul flights to the United States, Europe, Japan, Australia and New Zealand.

Aviation consultant Prithpal Singh said airlines would be hesitant to move because the huge relocation costs may outweigh the rental reliefs. “Unless there is a big discrepancy in terms of quality of the terminals airlines would not consider moving for such short-term benefits,” he said.

He suggested making T3 a dedicated SIA terminal and cited regional examples, such as in Bangkok and Manila, where the national carrier has its own terminal.

Added Mr Singh: “SIA, having the highest frequency of flights, should have a terminal where it can centralise operations and enjoy economies of scale. It is easier from a logistical and customer point of view.”

CAAS said it would “work closely” with interested airlines to facilitate their relocation.

Source: Today, 13 June 2007

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