New Changi Airport Charges Generate Around $7.6 Billion In Revenue Over 6 Years To Fund Terminal 5 Expansion
Buying a plane ticket to depart from Changi Airport just got a whole lot more expensive.
Is probably what every Singaporean was thinking, when Changi Airport Group (CAG) announced on Wed (28 Feb) that they’d be raising their departure charges to $47.30.
This is an increase of $13.30 in airport taxes for consumers, presumably to help fund airport expansion.
But what will this additional revenue be used for? And is this increase in tax even justified? Let’s find out.
Let’s crunch the numbers
The increase in departure charges include the Airport Development Levy (ADL) and Passenger Service and Security Fee (PSSF).
Passengers leaving via Changi Airport can expect to pay an additional $13.30 per flight in tax as shown in the table below.
To break down the $13.30 increase, $10.80 comes from the Airport Development Levy (ADL), and $2.50 from the Passenger Service and Security Fee (PSSF).
Separately, the Passenger Service and Security Fee (PSSF) will also be raised by S$2.50 from July 1 annually till April 1, 2024.
Here’s a quick breakdown of the total increase in charges over the next 6 years.
Next, let’s try to estimate the yearly tax revenue generated by CAG from this tax increase.
In 2017, CAG reported a record 62.2 million passengers in the airport.
If we assume that Changi Airport serves a similar number of passengers over the next 6 years, we can work out an estimated amount of tax revenue generated yearly from this increase.
Jul 2018: $827,260,000
Jul 2019: $982,760,000
Jul 2020: $1,138,269,000
Jul 2021: $1,293,760,000
Jul 2022: $1,449,260,000
Jul 2023: $1,604,760,000
Jul 2024: $$1,604,760,000
The estimated total? A whopping $7,607,069,000 to fund CAG’s new expansion plans.
The T5 project is estimated to cost “tens of billions of dollars”, but the Ministry of Transport said on Wed (Feb 28) that the “total costs and funding breakdown” have not been finalised.
Currently, CAG is reported to have only $4 billion in their Changi Airport Development Fund started in 2015 for this very purpose.
What will the funds be used for?
CAG has big plans for Terminal 5 – as it’s slated to serve 70 million passengers per year. That’s more passengers than T1, T2 and T3 combined.
A third runway will be constructed, along with a complex system of tunnels to transfer both passengers and baggage across terminals.
Since CAG’s already awarded the contracts, they’ll have to start making payments for construction work that include:
- Land preparation works
- Development of a canal network to prevent flooding
- Extension of the third runway.
They also justify the “earlier adjustment in aeronautical fees” as a way to avoid a steep escalation of fees at a later stage.
Why can’t Changi Airport pay for their own upgrades?
But why is there a need to tax passengers for the construction of a new facility? Why can’t CAG fund the expansion themselves?
CAG clarifies that, previous airport expansions were funded through “aeronautical charges” and “non-aeronautical revenue” in a similar fashion.
The last time this was raised was back in 2013 – from $13.90 to $19.90 – presumably to fund the Terminal 4 expansion.
In the case of T5, CAG had to raise these charges earlier to generate sufficient revenue to pay for the massive expansion and “operating expenditure of existing terminals”.
For airlines on the hand, landing charges were raised in 2016.
This time around, they can expect landing, parking and aerobridge (LPA) fees to increase by 1% every year for six years.
Will these taxes increase further?
CAG says they will stop increasing PSSF by April 2024, as that will be the estimated mid-point of the construction phase of Changi East project.
However, after a review is conducted in April, CAG may make further adjustments.
They also have the “flexibility to set the amounts for the various aeronautical charges for up to 2030”.
In other words, taxes may or may not increase further, depending on the results of the review.
Taking to the sky comes at a high cost
Apparently, Singapore isn’t the only country whose airport is raising taxes to fund expansion plans.
Hong Kong International Airport, and several others like airports in Dubai and Qatar have introduced similar departure taxes to fund their projects.
However, the International Air Transport Association (IATA) seems to think that this is a bad idea.
Mr Conrad Clifford, IATA’s regional vice president was quoted as saying,
It is unfair to expect passengers and airlines to pay in advance for a facility they may or may not use in the future.
So unfortunately, to cut a long story short — as unfair as this may seem, we don’t really have much of a choice.
Featured image from Jewel Changi Airport.