Aviation trade body, airlines express disappointment at new airport charges

SINGAPORE — The airline industry’s most prominent trade body, the International Air Transport Association (IATA), expressed disappointment at Singapore’s decision to impose a new airport tax and higher departure charges to fund new developments, describing the move as “unfair”.

At least one airline, budget carrier Jetstar Asia, warned that the new charges would be passed on to passengers, with fares departing Singapore expected to rise by between 10 and 25 per cent, depending on the destination.

Qantas, which resumes its Singapore-London service on March 25 will see the number of weekly flights out of Changi go up from 38 to 49, also said it was disappointed at the move. Its spokesperson added that the new tax will “put pressure on costs, and ultimately, the fares that passengers pay”. 

Singapore Airlines, however, said only that it noted the new charges and would implement them, adding that it supported the planned development of the airport’s Terminal 5. 

Analysts interviewed by TODAY largely said that the move was fair, given the need for an expanded infrastructure to cater to burgeoning traffic growth in the region and to ensure that Changi Airport remains competitive.

The reactions came after the authorities and Changi Airport Group (CAG) disclosed on Wednesday (Feb 28) that from July 1, passengers flying out from Changi Airport will have to pay S$47.30 — or S$13.30 more — in departure charges, which includes a new Airport Development Levy. The levy, chargeable at S$10.80 for departing passengers and S$3 for transit passengers, is to help fund airport expansion plans, such as the new Terminal 5 and related infrastructure in Changi East, the Ministry of Transport and the Civil Aviation Authority of Singapore said. 

Airlines will also see an annual increase of 1 per cent in their landing, parking and aerobridge fees until April 1, 2024. 

IATA previously objected to Singapore using such a “pre-funding” model. Mr Conrad Clifford, the association’s regional vice-president of Asia Pacific, said that the authorities here decided to go ahead with it “despite the feedback provided by the industry”. 

“The airline industry is against pre-funding for infrastructure projects,” Mr Clifford said. “It is unfair to expect passengers and airlines to pay in advance for a facility they may or may not use in the future when the facility is ready. It also goes against the International Civil Aviation Organization’s charging principle of cost relatedness, where passengers and airlines are charged for the cost of services actually used.”

He added that there should be “greater transparency” on the costs of the Changi East project and Terminal 5, as well as “how the costs are being apportioned between the Government, CAG, airlines and passengers”. 

A Jetstar Asia spokesperson told TODAY that the airline supports a “fit-for-purpose development of Changi Airport which the airport itself should fund”. 

Noting that 80 per cent of Jetstar’s ticket prices are under S$100, the spokesperson said that fares could increase because of the higher airport costs and new tax.

The Qantas spokesperson, on the other hand, said while the Australian national carrier supports Changi’s developments, it believes the expansion should not be funded through additional taxes levied upon passengers.

SOMEONE HAS TO PAY SOONER OR LATER

One aviation analyst noted that there is always a “price to be paid for world-class standard, which Changi Airport provides consistently”. Mr Shukor Yusof, founder of research firm Endau Analytics, said: “Overall (the new charges) are fair… Changi needs to stay competitive (and) the public needs to see the bigger picture.”

He pointed out that the airport has remained “relatively inexpensive compared to the facilities and conveniences provided” despite escalating costs over the past few years.

Mr Greg Waldron, Asia managing editor at aviation information firm FlightGlobal, said: “Changi Airport is among the world’s best, but it does not come for free.”

In countries with major airport developments, “sooner or later the public has to pay, either taxpayers or travellers”, he said.

What happens is that the higher airport charges translate to higher costs, and this could “trim airlines’ room for manoeuvre and can hurt passengers, shareholders or both”, he added.

Mr Brendan Sobie, chief analyst at aviation information group Centre for Aviation, cautioned that higher fees for transit passengers could affect demand, since some airports in the region have no fees for this group of travellers. “The transit segment is very competitive and adding even just $3 in additional fees could make a difference for some passengers.” 

TAX REVENUE FOR DIFFERENT NEEDS

The new airport tax comes a week after the Government announced that the Goods and Sevices Tax (GST) will go up to 9 per cent between 2021 and 2025, to fund rising costs for infrastructure, healthcare, education and other public goods and services.

Accountancy firm KPMG’s head of indirect tax Lam Kok Shang told TODAY that the GST hike is not intended to cover the construction of Terminal 5 but infrastructure needed for the ageing population, such as hospitals and hospices. 

“With an ageing population, some Singaporeans will no longer pay income tax when they retire. The GST rate increase will go some way to broaden the tax base for the government in such a scenario.”

Some travellers approached by TODAY said that the new airport charges will have a minimal impact on those who take flights occasionally, but frequent flyers will be most affected.

Having to go to regional countries almost on a weekly basis, Mr Abdul Rashid Salleh, 42, a sales manager at an IT firm, said that he will have to fork out more than S$188 a month because of the new charges. “Yes, the company will pay, but employees always have to first pay with our own money. And it’s not as if I’ll get the money back within a week of filing my claim. Sometimes, you have to wait about a month.”

However, publicity assistant Holly Matthews, 24, who travels about five to six times a year for work and to visit her family overseas, said that the increase of S$13.30 is “not a huge amount especially for the convenience we get”.
“And in the long run, another terminal means more flights and more route options, so it’s only going to improve my travel experience,” she added.