The Shape of Things to Come

Are the new low cost terminals in Asia-Pacific pushing ground support operations into the 21st century?

“The budget terminal in Singapore is structured in an efficient layout such that passengers simply take a short 50-meter walk from the terminal to the aircraft,” he says. “There is no need for the bus shuttle that is commonly used by other airlines.”

According to the spokesperson, the uncluttered terminal structure brings travel back to the basics by paring down unnecessary frills while still providing a safe and completely efficient service. “As an LCC, Tiger Airways keeps to simple operations to ensure costs are kept as low as possible, so savings are then passed on to customers through low fares.

“Tiger Airways works with our appointed ground operations staff with a close focus on the efficiency of resources to keep costs low,” he continues. “For example, we use the same ground staff at check-in counters and during aircraft boarding. This allows us to manage our manpower costs more effectively.”

International rescue
Tiger Airways also operates out of LCC terminals at Melbourne and KLIA — much like Singapore Changi, extremely busy airports. Although this seems like a strange mixture — a no-frills service coming out of an international hub — surprisingly, it seems to work.

Tiger’s spokesperson says it’s because the airline enjoys the advantages of great geographical locations and good infrastructure that supports the high level of traffic seen at such airports.

Singapore’s budget terminal figures support this argument. Since it first opened March 26, 2006, it has handled more than 3.2 million passengers. In 2007, approximately 1.77 million passengers passed through the terminal.

The number of weekly scheduled flights at the budget terminal, which is so far served only by Tiger Airways and Cebu Pacific Air, has also increased from 124 in March 2006 to 248 in February 2008, representing a healthy growth rate of 100 percent. Today, the budget terminal is connected to 20 cities in the region, up from 12 destinations when it first opened.

Malaysian statistics also point to the wisdom of a bespoke low cost facility. Malaysia Airports Holdings Bhd (MAHB) recently reported a 20.7 percent year-on-year increase in revenue in 2007.

Although the main international airport at Kuala Lumpur (KLIA) performed well, registering 9.6 percent year-on-year revenue growth, its passenger numbers actually fell. On the other hand, total passenger numbers at the KLIA LCCT boomed to 7.7 million passengers (a 64.9 percent increase), thanks largely to AirAsia.

Back to the future
The success of LCCTs, though, might be a double-edged sword. Both Singapore and Malaysia have announced expansion plans, which surely hint at the outsized facilities that LCCs rejected in the first place.

MAHB’s existing LCCT was expected to reach its 10 million passenger limit in 2010, but AirAsia is proving this to be a timid prediction — even in today’s softening world economy.

The airline is on course with its business plan, which anticipates carrying 70 million passengers from 2014. This would make it the largest carrier in the region. Meanwhile, the 175 A320s on order, together with 50 options, would put it top of the world in terms of operating the aircraft.

An interim expansion of the existing KLIA LCCT will provide more space for food and retail outlets until a new 30-million capacity building comes online in 2010. This will cater mainly to AirAsia, but could feature carriers such as Australian LCC, Jetstar, which is reputed to be considering Kuala Lumpur as a base in Asia for one-stop services to Europe.

CAAS (Civil Aviation Authority of Singapore) isn’t far behind in its enthusiasm. It’s embarking on a S$10 million expansion of the budget terminal to increase the terminal's handling capacity from the current 2.7 million passengers per annum to 7 million. The expansion project, which will take place from July 2008 to early 2009, will increase the floor area of the terminal from 25,000 square metres to 28,700 square metres.
Exactly to what extent LCCTs can expand remains to be seen. There are two problems for airport operators and ground handlers alike. First, while LCCs offer a great opportunity, they also represent a great risk.

The fate of Oasis Hong Kong and Skybus underlines the point.

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