Two in one will go: Soaring passenger numbers lead to backtrack on single airport policy

The theory is sound. A single mega-airport housing all international and domestic flights in and out of Bangkok has its obvious advantages. It would bring economies of scale for the airport and airlines as well as easier transfers for passengers, advantages endorsed by the International Association of Air Transport (IATA). However, Thailand is a victim of its ability to attract extra tourists by the millions despite the political upheavals and natural disasters of the past few years.

RISING NUMBERS: While the number of tourists fell sharply in 2009 following the temporary closure of Suvarnabhumi Airport in Bangkok in November 2008 due to political demonstrations, in 2011 a 20% surge in the number of visitors pushed the total to 19.23m despite serious flooding in parts of Thailand. Indeed, by 2011 the difficulties caused by earlier underinvestment at Suvarnabhumi were woefully apparent.

The situation had not been helped by continuing indecisive debate about whether to close its predecessor, Don Muang, use it for maintenance, domestic flights or as a full-service second airport. In the end, the decision to renovate and bring it back into full service was determined by congestion, with Suvarnabhumi bursting at the seams. By the fourth quarter of 2012, the primary low-cost carriers (LCCs) serving Suvarnabhumi – Thai Air Asia and Air Asia – are expected to have moved to a new base at Don Muang 45 km away, taking with them around 10m passengers a year.

SINGLE AIRPORT MODEL: Tony Tyler, the director-general and CEO of the IATA, said on a visit to Bangkok in February 2012, “Bangkok is one of the main aviation hubs in the region – alongside Hong Kong, Incheon and Singapore. It is also well placed to be a hub to Cambodia, Myanmar, Laos, Vietnam – as their economies develop.” While recognising the current problems, IATA still favours a “single strong hub”.

A month after Tyler’s visit, the minister of transport, Jarupong Ruangsuwan, emphasised the point, saying in a speech, “It's clear that the single-airport policy isn't practical due to the problems of congestion. I don't want to say we are adopting a dual-airport policy. But for the long term, we must put Don Muang to use.” Nevertheless, the single hub idea may be an extremely long way in the future. Suvarnabhumi, opened in September 2006, is designed to handle 45m passengers a year. The estimated total for 2012 is put at around 52m. Even after the LCCs stop using the facility, the airport may well be over capacity again before its phase-two extension is scheduled to open in 2017.

INCENTIVES TO SWITCH: Thai Air Asia and Air Asia were encouraged to move operations to Don Muang by, inter alia, temporary subsidies on airport charges.

The airlines will also likely benefit from a cut in fuel consumption caused either by being directed into holding pattern while waiting to land at Suvarnabhumi or queuing up on runway approaches during busy periods. Landing delays can add up to one hour to a flight.

According to Tassapon Bijleveld, the CEO of Thai Air Asia, there would be no turning back once the move to Don Muang was made. Orient Thai Airlines, a domestic budget carrier, has moved between facilities three times in the past five years. The LCCs, in effect, want an assurance that a return to Suvarnabhumi is not on even a distant horizon. Sensitive to these concerns, Kanputt Mungklasiri, the general manager of Don Muang International Airport, told OBG that the decision to move LCCs was a long-term objective, because planned expansion at Suvarnabhumi would be quickly met by rapid growth in air passenger numbers. The airport debate seems to be far from over.

Thai Air Asia has 24 aircraft with three more expected in 2012. Plans to increase the fleet to 48 aircraft by 2016 are on the table, with the target of doubling the current annual 8m passengers during the same period. The cost of relocating to Don Muang for Thai Air Asia is estimated to be BT60m-80m ($1.9m-2.6m), but the airline is hoping its move will reduce its fuel bill by about 5%. Meanwhile, Air Asia and Indonesia Air Asia will also move to Don Muang’s international terminal 1, which can handle about 16.5m passengers a year.

Chula Sukmanop, director-general of the Office of Transport and Traffic Policy and Planning, told OBG, “Some airlines don’t need to coordinate with international arrivals, so they can move easily. Others, not so easily.” That fact has not been lost on the various Air Asia sister firms, which face losing some of their transfer passengers who fly into Suvarnabhumi on other airlines. Anirut Thanomkulbutra, president of Airports of Thailand (AOT), which runs both airports, was in talks with 14 airlines about a move, although most were not named. Domestic airline Nok Air moved back to Don Muang in March 2012 after flood damage was repaired.

INCENTIVES: All the airlines that move to Don Muang will benefit from lower fees, some of which will run for three years. All charges were cut by 95% for August and September 2012. From October onwards landing fees, space rental and check-in counter charges will be reduced by 30% for one year, 20% for a second year and 10% for a third year, ending in September 2015. Don Muang’s parking and landing fees are already 30% lower than those at Suvarnabhumi.

If all 14 airlines agree to move, AOT puts the cost of the incentive programme at BT246m ($7.8m). Yet the expense does not stop there. To lure airlines to Don Muang, as well as provide improved facilities for those who have already agreed to move, AoT plans to spend BT1.6bn ($51m) upgrading international terminal 1, concourse 4, bus gates, cargo building 1 and runways.

Don Muang was Bangkok’s main airport until 2006, handling up to 38m passengers annually. Over-capacity operations is not a new phenomenon. AoT puts its original capacity at 36.5m, but this is well over that needed for in the medium term, even with Thai Air Asia’s plans to increase its passenger load to 16m by 2016.

ROAD & RAIL LINKS: To help minimise transfer passenger losses for the migrating LCCs, AoT says it will run a bus service between the two airports using elevated toll roads that it claims will cut the journey to 35 minutes. Plans have also been approved to extend the airport rail link from Phaya Thai station in central Bangkok to Don Muang, which would connect the airports by rail. Chula told OBG, “We have reserved the space for an airport link between the two airports.”

The BT19.4bn ($618.9m) project has been granted an environment impact assessment certificate, although the bidding process will not start until 2013 and it will be around five years before the service starts.

SUVARNABHUMI EXPANSION: Even before the LCCs moved out, some measures to ease congestion at Suvarnabhumi were agreed, including extra staff at immigration desks and increasing air traffic control capacity to handle up to 68 flights an hour rather than 55. The airport’s maximum capacity is 76 flights. Another move to lessen the number of people in the airport at any one time is to encourage airlines to use the hours between 2.00am and 5.00am. That encouragement is taking the form of a 95% cut in AoT fees for takeoff, landing and aircraft parking during those hours.

The longer-term expansion to raise capacity to 65m, subject of much talk over the past few years, finally saw some action in the signing by AoT and local consultancy group EPM Consortium of a BT809m ($25.8m) project management contract, which runs until March 2017. This second phase incorporates a new satellite terminal that can handle 20m passengers.

PHUKET: The numbers may not be as high but the capacity problems at Phuket are as pressing as those in Bangkok. According to Bill Barnett, managing director of the hospitality consultancy C9 Hotelworks, airlines will bring around 9m visitors to Phuket in 2012. The airport’s official capacity is 6.5m, although even in 2011 it handled nearly 2m more than that.

The government has approved a $180m airport expansion, including a new international terminal, but the project is not expected to be completed until 2015. “With the upgrade set to accommodate only 12.5m passengers, the new airport may be redundant by the time it hits the market,” Barnett told OBG.

SAMUI: The quest for bigger airport facilities has equally spread to the resort of Samui Island, with pressure from the local business community, which sees the current single airport as a barrier to tourist growth. The island has 19,000 hotel rooms but the maximum number of visitors that can fly in is 3000 a day because flights are restricted to 6.00am to 10.00pm for environmental reasons. To get around these, the mayor, Ramnate Chaikwang, has suggested new airport facilities be built on the mainland at Don Sak, close to the ferry port. “It would satisfy the green lobby and it could serve ferries to other islands such as Pha Ngan and Tao,” he said.

As a rule of thumb, airline passengers head for the mid-to-upper level resorts, while the Don Sak ferry caters to budget travellers. The rationale for more flights is to bring in more big spenders. As to when such an airport might be ready, Bannasat Ruangjan, the president of the Tourism Association of Samui Island, said, “A new airport project has been approved in principle by the mobile cabinet meeting held in Phuket.” However, cabinet approval and airport reality can be decades apart. Indeed, the initial political go-ahead for Suvarnabhumi came in 1959, but it opened 47 years later.