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Airport projects in Thailand, Singapore resume after COVID hiatus
Despite traffic recovery, scale of expansion raises concerns about capacity glut


Tan Son Nhat Airport near Ho Chi Minh City will break ground soon on a $460 million expansion that will boost capacity by 80%. © Reuters
TAMAKI KYOZUKA, SHUGO TAMURA and MAYUKO TANI, Nikkei staff writersSeptember 30, 2022 10:53 JST

TOKYO/SINGAPORE -- Airport projects are popping back up across Southeast Asia as demand for passenger and cargo flights rebounds from the pandemic.

Thailand is accelerating expansion plans at three Bangkok-area airports -- Suvarnabhumi, Don Mueang and U-Tapao. The government is looking to accommodate an expected increase in travelers in the upcoming busy season and beyond, a spokesperson told local media.

Multiple projects are underway at Suvarnabhumi, Thailand's main international gateway. A third runway is set to be completed this year, and the government plans to solicit bids next year for construction of a new terminal. The additions are expected to enable the airport to handle 120 million travelers a year.

In Singapore, Prime Minister Lee Hsien Loong announced in August that work would resume on the new Terminal 5 at Changi Airport. "The future of aviation remains bright," he said.

The new terminal -- a long-term project expected to finish in the mid-2030s -- will be able to operate as smaller sub-terminals to adjust capacity as needed and prevent infections from spreading between flights. This facility, along with an expansion of Terminal 2, will boost Changi's capacity to 140 million passengers a year, up 65% from pre-COVID levels.

These are part of a broad push around the region to expand airports to lift pandemic-hit economies, both by buoying the tourism industry and via an economic boost from the construction projects.

Eight major Asian economies are investing $164 billion in airport projects, according to Fitch Solutions. The Philippines and Vietnam are outpacing even mainland China, with $44.3 billion and $23.7 billion in spending, respectively.

Inbound travel to Southeast Asia is gradually recovering, if more slowly than in the West. The number of passengers at Changi had returned to 58% of 2019 levels as of late August, according to Singapore Transport Minister S. Iswaran, and the flight schedule will be back to 80% of its former levels at the end of this year.


Singapore's Changi Airport is restarting work on a planned fifth terminal. (Image courtesy of Changi Airport Group)

As traffic picks up, congestion, long a challenge at major aviation hubs, could hold back the industry's recovery.

The impact is already being felt at Tan Son Nhat International Airport near Ho Chi Minh City, where a long queue snaked from domestic flight check-in counters during a visit in mid-September. Nearly 20% of domestic flights in Vietnam faced delays or other issues in June, according to local media, with most caused by overly packed schedules.

Tan Son Nhat is set to break ground soon on an 11 trillion dong ($460 million) expansion slated for completion in 2024, boosting capacity by 80% to 45 million passengers a year. Work is also underway on the new Long Thanh International Airport nearby, now scheduled to open in 2025.

There are concerns that these expansions will increase supply far beyond demand. Total capacity in Thailand, southern Vietnam, the Philippines and Singapore is set to swell to 460 million people based on known projects alone -- well over five times the total number of international travelers in 2019.

The Philippines in mid-September awarded the $11 billion Sangley Point International Airport project to a consortium including Samsung group member Samsung C&T, an affiliate of local conglomerate LT Group, and Munich Airports International. The decision brings plans for the new airport back on track after a previous contract winner dropped out amid profitability concerns.

"Southeast Asian countries have been starting to put funding for coronavirus countermeasures into infrastructure development and other public works investments, making it easier to move forward with plans," said Makoto Saito of the NLI Research Institute.

But companies still remain uncertain about the likely profit margins of these projects.

Airport expansion presents business opportunities to construction companies. But those companies will face high material and labor costs, just like airport operators that are making the investments.

"Not only are large-scale construction projects at overseas airports risky, the profit margins are slim," said an executive at a Japanese general contractor with an extensive track record landing contracts in Southeast Asia.

A candidate for such contracts would face local contractors, along with rivals from China and South Korea. The bidding wars have devolved into cutthroat price competition.

For projects that would strain a government's coffers, debt risks around the corner.

Japanese engineering group Taisei entered negotiations with the Sri Lankan government to possibly suspend the expansion of an airport. Funding for the project was frozen due to Sri Lanka's economic crisis, and the talks could result in Taisei being released from its contract.