S'pore plans a second fund to lure airlines to Changi

S'pore plans a second fund to lure airlines to Changi

Bloomberg, Singapore

Singapore's government plans to set up a new fund to give
airlines financial incentives to route more flights through the
island's Changi Airport, the world's sixth- busiest, Transport
Minister Yeo Cheow Tong said.

The Singapore government, which gave 44 airlines more than
S$105 million (US$64.3 million) since 2003 after Asia's SARS
outbreak, plans to cut Changi's landing fee and give other
incentives to encourage carriers to use the airport, Yeo said,
without disclosing the size of the proposed fund.

"Growing the passenger arrivals is very important because
that's our role as a regional business hub to enhance tourism,"
Yeo said at the Asia Pacific & Middle East Aviation and Tourism
Outlook conference in Singapore today. "We need to encourage more
airlines to fly here because they bring people."

Tourism receipts make up more than 5 percent of Singapore's
S$91 billion economy every year and an increase in tourist
arrivals last year expanded the economy by 8.1 percent, the
fastest annual pace in four years. Changi, Singapore's main
airport, handled a record 30.4 million passengers last year, 4.7
percent more than in 2002. It also processed a record volume of
1.8 million tons of cargo last year, 8.4 percent more than 2003.

Changi has been trying to increase its traffic by cutting
airport fees, letting more companies handle ground services,
adding a third terminal, and building a dedicated, lower-cost
facility to attract low-fare carriers. Less than a third of
passengers passing through Changi enter Singapore, most of them
stopping in the city in transit.

Qantas Airways Ltd., Garuda Indonesia, Air China, China
Eastern Airlines Corp., China Southern Airline Co. and Air India
are among the airlines that have received disbursements from the
first fund because their operations in Changi added to the
airport's growth, Yeo said.

"Because of the overwhelming endorsement from our airline
partners, we have decided that when the fund expires at the end
of this year, we will replace it with another fund so that we can
continue to support and facilitate the expansion," Yeo said.

The Dec. 26 earthquake-triggered tsunami will only affect the
travel industry in the short term, Yeo said. He expects air
travel within Asia to continue rising, with China and India as
the main catalysts for growth.

"While the recent tsunami tragedy will have some impact on the
industry in the short term, I am confident that air travel within
Asia will continue to grow rapidly," Yeo said.

Southeast Asia, home to over 500 million people with a
combined gross domestic product of about $700 billion, will
experience "strong aviation growth" partly driven by the
emergence of low-fare carriers, Yeo said.

About 10 low-fare carriers are flying in the region. Singapore
is home to three discount carriers -- Valuair Ltd., Tiger Airways
Pte. and Jetstar Asia.

Budget carriers accounted for 7 percent of total flights at
Changi last year, flying to eight cities from Singapore, such as
Hong Kong and Thailand's Bangkok, Phuket and Hat Yai.

Thai AirAsia Co., a budget carrier jointly owned by Thailand's
Shin Corp. and Malaysia's AirAsia Bhd., also operates in Changi.

"The potential for low-cost carriers growth in Asia is
tremendous," Yeo said, citing China's population of 1.3 billion
people and India's 1 billion.

Changi is upgrading and expanding its two terminals and
building a third terminal to meet rising travel demand. It is
also building a terminal dedicated for low-cost carriers, with
commitment from Singapore-based Tiger Airways to use the
facilities.

The low-cost terminal will be gradually expanded if any other
discount carrier uses it, Yeo said. Low-fare carriers will be
treated the same way as full-service airlines, paying the same
landing fees, he said.

Yeo said that this year, Singapore hopes to exceed the 30.4
million passenger traffic at Changi and the more than 8 million
tourists that visited the island nation.

Singapore expects its tourist arrivals to rise 6.9 percent in
2005 to 8.9 million from last year's record of 8.3 million, the
Singapore Tourism Board said. The government agency also said it
expects tourism revenue to rise 8.3 percent to S$10.4 billion
this year.