Why Singapore’s hub status is of ‘higher national priority’ than its national carrier

Producer: Felix Tan
First broadcast: 8 June 04, Radio Singapore International

Singapore’s Prime Minister Goh Chok Tong said yesterday that Singapore’s status, as a hub and its connectivity are of ‘higher national priority’ than its national carrier, Singapore Airlines.

He made this point during the 60th Annual General Meeting of the International Air Transport Association or IATA.

Mr Goh also stressed the need for the airline industry to reform its regulatory environment, and abstain from protecting national airlines by restricting market access to foreign carriers.

But why is there a need to compare Singapore’s Changi Airport’s hub status with our national carrier’s performance at this point in time?

Felix Tan put this question to Song Seng Woon (SSW), regional economist at G. K. Goh in Singapore:

SSW: “Well, I am speaking in terms of interpreting it - we look at the broader picture. The numbers of, I suppose, travellers that goes through Changi at its peak before SARS. I think it was around 27 million people. So, I think what he probably may be referring to is that from the point of view of the impact for the broader economy, it is more important to look out for, I suppose, the role of Singapore as a, well, famous logistic hub for people travelling through the region or for in transportation of other goods through move through around the region and around world as well. So, I think that creates a much more higher value-added to the economy than just looking strictly at whether we have to protect Singapore Airlines in terms of the intense global competition that we are currently seeing in the region. So, I suppose, it is the sense of looking at the whole model of Singapore as a logistic hub where we see the airport arrivals and departures from an overall broad sense is much more important than just strictly looking at protecting Singapore Airlines.”

What are some of the challenges facing Changi Airport as it strives to keep its hub status?

SSW: “Well, I suppose it is still leading the pack, so to say. However, with the advent of budget airlines, we have seen air travel increase significantly and so are other destinations in other ASEAN countries, such as Bangkok and KL has also seen an increase of arrivals. And the one thing that they are able to offer is that they are much cheaper to operate from and these days, with greater connectivity, it may not make out much difference therefore, to come to Singapore. They probably will be able to, in a matter of time, if more airlines, say, operate from, say, the other major cities that they would also find the connectivity in the other cities as well. So, this is where the Singapore government planners have realised that to maintain its competitiveness, they will have to look at the whole picture in terms offering, in a sense, a menu to the whole range of service providers - be it you as a high end traveller, i.e. SIA or a budget traveller looking at, say, ValueAir.”

What about Singapore Airlines now - what kind of challenges is SIA facing?

SSW: “Well, I suppose it is still in a dominant position. It basically has a lot more planes - they can fly around. But the budget airlines, for instance, have only a handful. What they have been able to do is to prevent, say, Singapore Airlines from raising fares in some of the more competitive routes and with the industry, I suppose, still in a very competitive mode, what you basically find is very important to manage and that basically is the bottom line really. It is still to be able to present an image that attracts to, say, business travellers, but not too expensive to scare away your budget travellers as well. This is tough. In an environment where increasingly there will be more budget airlines taking over the horizon. So, this is where, I think, coming back to the original question, where Changi airport wants to see in that they know that the big role will be coming from, say, the budget travellers side. So, they do not exactly want to miss that one out, otherwise it will move to Senai or whatever. Bear in mind that Senai has grand vision of competing with Singapore by providing connectivity and et cetera. So, I think this is also with an eye to other airports, like Senai and further up north, Bangkok.”