CAPA report: Singapore's aviation business to expand offshore

Singapore: According to a Centre for Asia Pacific Aviation 2007 outlook report, released this week, Singapore-based aviation will see a significant expansion into offshore investments over the next few years.

"Investment will occur on many fronts - from airports, to LCCs and full service carriers - in response to changing market dynamics and emerging opportunities", said Richard Pinkham, the Centre for Asia Pacific Aviation's senior analyst, based in Singapore.

"Geographic diversification is the key for the future of Singapore's aviation businesses. With a home market of only 4.3 million, maturing growth rates and increasing competition for transfer traffic from other hubs, within and outside the region, Singapore's world-leading aviation sector knows that its focus must shift off the island for growth opportunities," continued Pinkham.

The outlook also predicts that there will be an accelerated liberalisation of aviation by governments in 2007.

"The prospect of a momentous opening up of the Singapore-Kuala Lumpur route - provoked, significantly, by tourism interests - would have repercussions right around the region, as ASEAN States prepare to open their skies between capital cities in 2008. Until now considered more of a concept than a serious reality, ASEAN 2008 would take on genuine meaning", said Pinkham.

CAPA observes that the Singapore Government is building its business using the vehicle of direct offshore investments, which it says is the early stage of establishing an airport system that resembles that of Airport Authority Hong Kong (AAHK). The AAHK is establishing investment and management contracts in airports in the Pearl and Yangtze River deltas.

"But Changi's airport business will have a wider geographical focus than AAHK's, developing its holdings and operations portfolio in four regions - China, India, the Middle East and Russia. Behind this outward strategy is the reality that Changi's traffic growth has slowed to a level suggesting maturity, even as the Civil Aviation Authority of Singapore has proactively undertaken efforts to attract and facilitate new service and new carrier entry, especially in high-growth short-haul markets", said Pinkham.