Tough times ahead for Changi Airport Group

Annual net profit falls 36% and company questions longer-term operational and financial performance due to COVID-19 pandemic

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Singapore has opened new Vaccinated Travel Lanes with about a dozen countries to reopen its connections to the world. Show is Changi Airport in Singapore. (PHOTO: Shutterstock)

Use this oneChangi Airport Group (CAG) said last week it turned in a net profit for the 2019/2020 financial year of S$435 million (US$318.87 million), a decrease of 36% from FY2018/19. The company said In the first 10 months of the year, Changi Airport in Singapore, consistently rated the world’s best airport, performed well across key indicators, but added that in February and March 2020 passenger traffic there plunged 33 percent and 71 percent respectively, compared to a year ago, with concession revenue declining 58 percent, year-on-year, for the two months. The company ended FY2019/20 with marginally lower net operating revenue of S$2.6 billion with 62.9 million passenger movements for the year.

In January and February, Changi Airport in Singapore was full of passengers. Now a lone student waits to say goodbye to a friend in a nearly deserted departure hall. (PHOTO: Matt Driskill)

“Strong travel demand as well as the opening of Jewel Changi Airport in April 2019 contributed to a commendable performance for the group in the first 10 months,” CAG said in its announcement, adding that “business conditions deteriorated sharply in February 2020 as the COVID-19 outbreak started to spread globally. Travel restrictions and border controls led to a collapse in demand for air travel in the last two months of the financial year.”

Total revenue for the CAG group in FY2019/20 rose 3 percent to S$3.1 billion, due to the opening of Jewel, the company’s huge shopping centre at Changi Airport. The group’s total expenses increased by 6 percent due largely to higher depreciation and operating expenses with the opening of Jewel and the completion of the Terminal 1 expansion project.

The COVID-19 pandemic has virtually shut down international aviation. Normally bustling Changi Airport in Singapore was quiet on 12 August. (PHOTO: Matt Driskill)

The company reported that the COVID-19 pandemic also affected the financial performance of its airport investments overseas. In Brazil, where the group has a 51 percent stake in Tom Jobim International Airport (Tom Jobim) in Rio de Janeiro, the market conditions continue to “be challenging”, CAG said. “Economic and political factors, the cessation of operations of a major airline in May 2019 as well as COVID-19 have caused declining passenger traffic and capacity cuts by airlines, which have further impacted Tom Jobim’s business prospects. As a result, the group has recognised a one-off non-cash impairment of assets in Tom Jobim. This contributed to a reduction in net profit attributable to shareholder by S$200 million.”

CAG worked with the Singapore government and the Civil Aviation Authority of Singapore on two assistance packages for the aviation sector that provided cost relief to affected companies and protected jobs, while safeguarding Singapore’s air connectivity. Under the Stabilisation and Support Package, which CAG jointly funded, and the Enhanced Aviation Support Package, passenger and freighter airlines, ground handlers, cargo agents as well as retail and F&B tenants operating at Changi Airport received cost assistance including rebates on landing and parking charges, and rents.

CAG also supported tenants, contractors and customer service agencies by assisting in managing manpower resources. This was done through sending airport staff for training and matching them with available jobs within and outside the airport where possible. CAG also worked with SkillsFuture Singapore’s appointed training providers to offer an expanded suite of over 25 virtual training courses suitable for airport workers, to utilise the downtime to deepen and broaden their skillsets.

CAG also has suspended operations at two terminals. From 1 May 2020, Terminal 2 operations were suspended for 18 months, while Terminal 4 has been placed on standby since 16 May 2020 until air travel demand picks up and a sufficient number of flights return to the terminal. In addition, the Ministry of Transport has announced that the construction of Terminal 5 (T5) will be paused for at least two years. This is to allow a reassessment of air traffic demand projections to take place, and for studies (such as how air travel processes might evolve in a post-pandemic world and what implications it may have for the future design of a terminal) to be undertaken. T5 remains a critical long-term infrastructure investment for the future of Singapore’s economy, and CAG is committed to seeing through the completion of the development in the years to come.

Changi Airport in normal times would handle hundreds of flights per day. On 13 August there were only 10 departures scheduled. (PHOTO: Matt Driskill)

“The impact of COVID-19 on the aviation industry has been without precedent,” CAG said. “The operating results of the group are expected to be materially and adversely impacted for the year ending 31 March 2021. However, CAG will continue to invest prudently to ensure Changi Airport’s long-term competitiveness while maintaining high standards of safety and security. Changi Airport has begun transforming the passenger experience with new contactless and cleaning innovations for a safer, yet seamless, airport journey.

“How COVID-19 will affect the longer-term operational and financial performance of the group remains uncertain at this point,” the company added. “The recovery of the aviation industry is dependent on future developments such as the opening up of international borders, requirements and regulations for air travel, as well as medical breakthroughs. The group will continue to work closely with the relevant authorities and its airport partners to pursue recovery in the air travel sector, while enabling a safe and comfortable travel experience for all passengers.”

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