CORPORATISATION OF CHANGI AIRPORT AND RESTRUCTURING OF CIVIL AVIATION AUTHORITY OF SINGAPORE (CAAS) ­ CORPORATISATION MODEL ANNOUNCED ­ The corporatisation of Changi Airport and restructuring of the existing Civil Aviation Authority of Singapore (CAAS) will move into the next phase after a year of extensive review and preparations which included study trips to airports and government regulators in Europe, Australia, New Zealand, North America and Asia, consultations with CAAS employees and stakeholders in the aviation industry and an extensive review of CAAS’ existing functions. 2 Details of the corporatisation model were announced by the Ministry of Transport (MOT) today. The corporatisation process comprised three main areas of focus. These are: role allocation of the non­regulatory functions of CAAS under a new airport company which will undertake the operational functions of managing Changi Airport, running its emergency services and operations and investments in foreign airports. Strategic and regulatory functions such as air traffic services, air services negotiations, safety, service and economic regulation will be retained under the restructured Statutory Board. Corporatisation also requires the establishment of a new regulatory framework for competitive aeronautical pricing, service excellence and timely and adequate investments in capacity. Processes have been worked out to ensure successful transition management of human resources and operational continuity of Changi. 3 The new civil aviation authority will be led by Mr Lee Hsien Yang as Chairman and BG(NS) Yap Ong Heng as Director­General while the new airport company will be led by Mr Liew Mun Leong as Chairman and Mr Lee Seow Hiang as CEO1 when the entities come into legal existence on 1 Jul 09. 4 Minister for Transport and Second Minister for Foreign Affairs, Mr Raymond Lim, said, “I would like to assure Singaporeans and users of Changi Airport that 1 Refer to Annex B for their biographies. Page 1 Changi will continue to offer the same reliable, friendly and efficient services that they are accustomed to. I am confident that after the corporatisation process, Changi will emerge even stronger and be able to soar higher.” He added, “The future for employees in both entities will be bright and exciting. Corporatisation will enhance the career options of CAAS staff.” 5 A Steering Committee chaired by Minister Lim and a Design Committee chaired by Senior Minister of State for Finance and Transport, Mrs Lim Hwee Hua, were formed to provide guidance on the corporatisation exercise. The Members of the two Committees comprise senior Ministry officials and distinguished individuals from the private sector who have contributed valuable inputs and insights to shaping the corporatisation model. 6 The corporatisation exercise is on track. The entire process of separating CAAS into the two entities is targeted for completion by July 2009. In the months ahead, MOT and CAAS will further refine the details of the corporatisation model for implementation. 7 Corporatisation will strengthen Changi’s position as a premier air hub by enabling it to be more nimble to compete in today’s rapidly changing aviation landscape. We also want to give Changi greater flexibility to attract and retain top talent to compete with global airport operators. Enclosure: Annex A (Media Factsheet) and Annex B (Biographies) For enquiries, please contact: Jasmine Tan Janice Quah Tel: 6375 7881 Tel: 6375 7001 Mobile: 94500387 Email: [email protected] Email: [email protected] Page 2 Annex A MEDIA FACTSHEET Objectives of Corporatisation 1. The three key objectives of corporatisation are: a. Corporatisation will provide Changi greater impetus to capitalise on new opportunities and face rising competition. b. A corporatised entity will have greater flexibility to attract and retain top talent to compete with global airport operators. c. Changi Airport will be able to better leverage on its brand name to develop an international presence. Process 2. A Steering Committee chaired by Minister for Transport and a Design Committee chaired by Senior Minister of State for Transport and Finance were formed to deliberate on the corporatisation model and the regulatory regime. Senior Minister of State for Trade and Industry Mr S Iswaran and senior civil servants provided substantial inputs. Private sector individuals were also co­opted to participate in the committees. The private sector members in the Steering Committee are Mr Liew Mun Leong (Chairman, CAAS), Mr Lee Hsien Yang (Chairman, F&N), Mr Ng Kee Choe (Chairman, SingPower) and Mr Fock Siew Wah (Group Chairman, PSA). The private sector members in the Design Committee are Mr Ng Yat Chung (Managing Director, Temasek Holdings), Mr Dilhan Pillay (Managing Partner, WongPartnership) and Mr Jimmy Phoon (Executive Advisor, WahHin & Company). 3. MOT engaged the Boston Consulting Group as consultants for the corporatisation exercise. Regular consultations were held with various external stakeholders of the Changi Airport community. 4. Airport study visits were made to major hub airports around the world such as Schipol, Frankfurt, New York JFK, Sydney and Hong Kong International Airport, to calibrate and refine the model. Role Allocation 5. In allocating the roles between the new airport company (‘NewCo’) and the restructured CAAS (‘NewCAA’), the objective is to give NewCo maximum operational autonomy to develop and compete as a true airport operator rather than just a management contract operator. Hence only roles which are strategic or regulatory are retained in NewCAA while the rest will be grouped under NewCo. Page 3 6. The allocation of CAAS’ existing functions between NewCo and NewCAA is summarised in the following table. NewCAA – Strategic & regulatory NewCo – Operational functions functions • International relations • Airport operations and • Air services negotiations management • Allocation and licensing of air services • Operations and investments in • Safety, security and service regulation foreign airports • Air traffic services • Airport emergency services • Singapore Aviation Academy Joint Responsibilities • Seletar Airport • Air hub development • Masterplanning Regulatory Framework 7. The goal of regulation is to balance the State’s interest in strengthening Changi as an air hub against the need for NewCo to deliver sustainable economic value to its shareholders, and be innovative and creative in all its activities. To achieve alignment of interests between NewCo and the air hub, a set of economic regulatory measures will be established. The economic regulatory framework will comprise price regulation, service regulation and a joint master­planning process. 8. Price regulation. The airport has two sources of revenue, namely aeronautical and non­aeronautical revenue 2 . Price regulation will be exercised over aeronautical revenue to keep aeronautical charges competitive. The price cap formula for Changi Airport will be based on 5 core variables, namely changes in the regulated asset base of the airport, expected cost productivity, degree of subsidy from non­aeronautical revenue to partially off­set aeronautical charges, expected passenger growth and inflation. In the steady state, the price cap will be reviewed once every 5 years. However, the inaugural review will be done at the end of 3 years so that any adjustments can be made early. 9. Service regulation. To upkeep the high service level provided by Changi today, service regulation based on a combination of ex­ante regulation and ex­post monitoring will be implemented. 2 Aeronautical revenues refer to revenue derived from charges on airport customers such as airlines and passengers, which are directly connected to the provision of airport services. Examples of aeronautical revenues include landing charges/parking charges for aircraft, counter charges, fees for using the baggage system, passenger service charges, and security charges. Non­aeronautical revenues refer to revenues derived from services which are non­airport specific such as retail and F&B revenues. Page 4 10. Joint­masterplanning process. One of the key drivers for Changi’s success is the policy of building capacity ahead of time to ensure sufficient capacity for expansion, which goes against the conventional wisdom for a profit­making entity to maximise the utilisation of its existing assets. To continue to have the right trade­offs, NewCAA and NewCo will be jointly responsible for airport master­planning. Transition Management 11. As Changi Airport is a critical national infrastructure and service provider, we cannot afford any disruption to airport operations during the transition process to NewCo and NewCAA. As such, the approach towards HR transition issues is one of ensuring a seamless move into the new entities. 12. CAAS staff will be assigned to NewCAA or NewCo based on functions. This will enable a smooth manpower transition and ensure operational continuity. Staff transferred over to NewCo will be no worse­off in their employment terms at the point of transfer. Page 5 Annex B BIOGRAPHIES LEE HSIEN YANG Mr Lee Hsien Yang is currently a non­executive Director and Chairman of Fraser and Neave, Limited, an Asia Pacific consumer group with core expertise and leading market positions in the Food & Beverage, Properties and Publishing & Printing industries. Mr Lee joined Singapore Telecommunications Limited (SingTel) in April 1994 and served as its Chief Executive Officer from May 1995 till he relinquished his appointment