“Privatising profits and socialising costs?” — Prediction that airport costs will rise to fund upgrades sparks criticism

SINGAPORE: Airports across the Asia-Pacific region are gearing up for major infrastructure upgrades as air traffic is expected to double over the next 20 years. To cover the hefty costs, airport operators are eyeing fee hikes, sparking criticism from netizens.

According to The Straits Times, Stefano Baronci, director-general of Airports Council International (ACI) Asia-Pacific and Middle East, has pointed out that raising charges is necessary to fund these improvements.

He says, “If you cannot find other sources of financing, such as state support, then the primary beneficiaries of the (airport’s) service are the ones that have to bear the cost.”

However, this has gained criticism online, as netizens argue that the costs are unfairly shifted onto the public while private entities continue to profit.

One commenter described it as a “business model of privatising profits and socialising costs.” Another noted, “Purely coincidental that they’re raising taxes on a captive local customer base while cracking down on cross-border transport services which locals prefer.”

Another remarked sarcastically, “Record profits for shareholders woop woop.”

Mr Baronci stressed that factors like demand patterns, supply, and price elasticity drive airfare prices. He argued that the competitive environment among airlines at airports like Changi will help keep ticket prices in check, even with rising airport charges.

“I don’t think that in Singapore, the increase of (airport) charges has a huge impact in terms of a decrease in demand,” he said, pointing to Changi Airport’s strong competition among carriers.

The steady rise in passenger charges has been felt across the region, with airports in Malaysia and Thailand already raising their fees.

In Malaysia, passenger service charges were increased from RM35 (S$10.50) to RM73 in June. In Thailand, six airports increased their passenger fees by 30 baht (S$1.15) in April this year.

Seletar Airport also increased its fees for passengers and aircraft operators in July. Meanwhile, Changi Airport raised its fees in November 2022, currently $65.20 for departing passengers, and will stay in place until March 2025. This includes a $10.80 fee added in 2018 to help pay for projects like the upcoming Terminal 5.

As the Asia-Pacific region is on track for rapid growth in air traffic, airports will need to keep up.

ACI predicts that the region’s passenger traffic will reach 8.7 billion by 2042, more than twice the levels seen in the region in 2019, necessitating an estimated US$1.3 trillion (S$1.7 trillion) in infrastructure investment.

Although Mr Baronci believes achieving even 50% of this target would be significant, it still requires massive financial input. According to him, “There is a gap that we have to address since the demand will be higher than in other regions.”

Despite the challenges, Mr Baronci expressed optimism about the region’s ability to adapt.

Airports like Sydney’s new Western Sydney Airport, Cambodia’s upcoming Techo International Airport, and expansion projects in Bangkok, New Delhi, Seoul, Taipei, and Tokyo signal that development is underway.

Maintaining a competitive edge for Singapore will involve balancing infrastructure growth with efficient operations and unique passenger experiences.

Mr Baronci highlighted the “big fuss from a cost perspective” of Changi’s Jewel, which has become a model for other airports worldwide.

He noted the importance of making the right decisions in a timely way to keep pace with rising demand. “You cannot wait for the demand to knock at your door,” he said. /TISG

Read also: Changi Airport passenger traffic hits 99.3% of pre-pandemic levels in H1 2024

Featured image by Depositphotos