If CEO Chow Kok Fong had his way, every ChangiAirports International (CAI) venture would shareone common value. “There should be an unhurried

pace throughout the airport; unlike some European air-ports which are congested, and where people seem to bein a hurry all the time. The environment and ambiencewe want is one where people feel relaxed when theycome to the airport. That’s a hallmark of Changi thatwe’re proud of.”

As templates go, Changi isn’t a bad one for an airportinvestor. Now that CAI – Changi Airport’s overseasinvestment and consultancy arm – is fast becoming a sig-nificant player in the international airports industry,Changi represents the blueprint for its ambitions abroad.And that blueprint extends to commercial activities –and Changi’s firm belief in the concessionaire model.

“In a lot of countries airports operate the shops directly,”says Chow. “Wherever we go, we tell them that theyshould get outside parties to bid for the concessions; weadvise them how to control the quality of offerings andensure that at the end of the day passengers who shop atthe airport must feel that they are getting good value forwhatever merchandise they purchase.

The Moodie Report 89

May 2007 INVESTMENT • Changi Airports International

The ChangitemplateThe Changitemplate

Having secured a number of high-profile deals in the past year, Changi AirportsInternational is beginning to make waves as an investor, joint-venture partner andconsultant in the international airport market. But wherever, it goes, says CEO ChowKok Fong, it will take the Singapore Changi Airport model with it. Hui Min Neo reports.

Article of faith: Chow Kok Fong is a firm believer in the concessionaire model

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The Moodie Report 91

May 2007 INVESTMENT • Changi Airports International

“Once you get to the airport you’re their captive customer.It’s part and parcel of the overall travel experience. But atthe same time, nobody wants to be taken advantage of.”

One “remarkable” project undertaken by CAI, says Chow,was a consultancy for Chengdu Shuangliu InternationalAirport in China. “The kind of improvements we madethere enabled the retail revenues to jump three-fold with-in two years. We’ll not promise that everywhere we gorevenues will grow by that amount; but we intend tobring in a sense of the shopping experience that oneencounters in Changi.”

At the same time, using the Changi template doesn’tmean enforcing the Changi style. “We don’t think thesolution is to standardise the retail experience,” says Chow.“The retail experience should be unique in each place.There has to be a fairly proportionate mix, so that onedoes not dilute the local characteristics of the airport.”

Expect those ideas to influence a growing number ofairports as CAI extends its reach. As a consultant, Chan-gi has been building relationships with other airportowners for many years, and as long ago as 1993 SingaporeChangi Airport Enterprise (SCAE) was created to provideconsultancy services to overseas airports using Changi’smanagement model.

Changi has also previously taken stakes in other airports and airport groups. In 1999 SCAE took a 7.1%stake in Auckland International, and in 2001 it took ahuge step forward by acquiring a 50% stake in AlterraPartners (the other partner is Bechtel Group), equitystakeholder in Costa Rica, Curaçao, Lima and LondonLuton airports.

Three years later Changi’s ambitions to spread its expert-ise overseas were rubber-stamped with the establishmentof CAI in 2004 as an airport consultancy managementfirm – a wholly owned unit of the Civil Aviation Author-ity of Singapore. Then in 2006 it changed its businessmodel: from now on, it said, alongside consultancy andmanagement services, CAI was going to actively seekmore direct involvement in foreign airports.

Chow says: “We decided that if we’re going to apply somuch thought and ingenuity to helping other airports,then we should put ourselves in a position where we couldparticipate and get some uplift further down the road. Sothat’s why we changed our model: we want to invest in newairports. We want to structure our engagement in a waythat brings possibilities for a fairly long-term relationship.”

Serene Singapore: the relaxed atmosphere at Changishould be a hallmark of all airports, says Chow Kok Fong

92 The Moodie Report

INVESTMENT • Changi Airports International May 2007

The CAI model isn’t new; top-class airports have beenexporting their expertise – and making investments –overseas for many years. Companies like Fraport, Aéro-ports de Paris, Schiphol Group and Copenhagen Airportshave leaned on their home airports’ best practice man-agement in many overseas locations.

In Asia Pacific, Airport Authority Hong Kong’s drive totake a slice of the emerging Chinese airport market isgathering pace. But for now the authority’s mission isconcentrated on integrating Hong Kong into the airtransport system of the Pearl River Delta rather thanenhancing its international credentials.

By contrast, the development of CAI marks the firstattempt by an Asian airport to go truly international –through a combination of consultancy, management con-tracts and direct investments. And in the past year itsambitions have begun to be realised with a series of high-profile deals.

The company signed a joint-venture contract last Julywith Moscow Sheremetyevo International to manageand operate the airport’s new 520,000sq ft Terminal One.But the scope of the joint venture will extend beyond T1:it aims to also manage and operate T3, which is owned byTerminal OAO, a subsidiary of Aeroflot. In additionthere are plans for the joint venture to eventually manageand operate T2, which is currently undergoing expansionand refurbishment.

In December 2006 CAI clinched an 18-month manage-ment contract at Abu Dhabi International Airport, its firstmove into the Middle East. A month later it secured adeal to advise the airport on the planning of its new Mid-field Terminal Complex, which will handle up to 40 mil-lion passengers a year. The development is part of theairport’s US$6.8 billion expansion programme.

Although these two agreements don’t involve directinvestment, securing Changi’s influence in new markets iscritical, says Chow, whether it’s through consultancy orjoint venture.

“Consultancy opens doors to joint ventures,” he says,“and that is very useful to us.” That was precisely the strat-egy when CAI came to its first Chinese airport investmentin January – a 29% stake in Nanjing Lukou Internation-al. The US$138 million purchase was also the first pri-vate-equity investment deal in a Chinese airport byanother foreign airport.

“Nanjing is a very interesting case – we initially provid-ed them retail consultancy. The airport can handle overten million passengers, but right now it is handling onlyabout six million; so there’s a considerable amount ofunder-used facilities. Moving forward we will be re-plan-ning some of the existing facilities.” The agreement setsout plans for a long-term agreement to introduce bestpractice management at Nanjing and to make it “a modelairport in China”.

The challenge of China: Changi Airports Internationaltook a 29% stake in Nanjing Lukou Airport in January, aproject that began as a retail consultancy

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94 The Moodie Report

INVESTMENT • Changi Airports International May 2007

And the flurry of CAI activity wasn’t finished with Nan-jing. In February it registered a presence in another tar-get market when it signed a joint venture with India’s TataGroup to pursue airport projects in the sub-continent.Tata owns 51% of the joint venture, CAI the remainder.

“The idea is to use this joint venture as a vehicle to acquirestakes in some of the more interesting Indian airports. Of course we’re very keen on Chennai andKolkata,” says Chow. Under the Indian government’s air-ports privatisation programme, which started two years ago,those locations are among the remaining prized assets stillavailable to investors. “We’ve put on record that we seriouslyintend to develop this presence in India,” says Chow. “Wethink it is important, and we do want to be there.”

CAI already has experience in India. It acted as a consult-ant to Mumbai International Airport Limited on its mas-ter plan for Mumbai’s development, and undertook a100-day improvement programme to create a new visualimpact at the location. It also helped to improve processessuch as immigration, baggage handing and airport access.

Eventually Chow wants to establish four firm portfoliosfor his company, developing a base from its current mar-kets of Middle East, Russia, China and India. “We’re stilllooking very intensely [for other opportunities] but wewill try not to go too far away. Europe is probably the fur-thest we would go,” he says.

To realise its ambitions, CAI is now preparing thegroundwork – “building resources” as Chow puts it. “This

international dimension is very new for our people in Singa-pore. At Changi right now we have 36 million passengersa year. These three airports would give us another 16 mil-lion. It’s like doubling the workload,” he says. CAI onlyhas 30 people, and it continues to draw on Changi’s expe-rienced staff. “We have to localise a lot of the processes.We don’t intend to put our people out there,” says Chow.

Changi’s evolution into an international name in the air-ports business is not only an aspiration, it’s also a must,says Chow. “We need to carve an international footprintfrom many angles. One is growth. If we want to retain thebest people, we must be able to provide a sense that theirexperience working in this organisation will be enrichedby having different dimensions,” he notes.

The benefits CAI will bring to Changi could be signifi-cant in the long term, he adds. “Hopefully down theroad, when our portfolio of assets matures, it will give usa stream of income to supplement whatever we have inChangi – and that will advance Changi’s position.”

Not only that, but developing synergies between air-ports worldwide should be part of the industry agenda.“Nobody is a true competitor, no one is a true ally; every-one has a different shade.

“In our kind of business,” says Chow, “it’s very myopic tothink you can keep all your knowledge and expertisesecret from other airports. The more important thing isyour relationship with them. If there are issues and prob-lems, we can address them together.” �

Heading in the right direction: the international division will provide Changi Airport with a robust incrementalrevenue stream to supplement its core business in Singapore, says Chow Kok Fong

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