Changi charts new course as Singapore’s economic ‘lifeline’

As hundreds gathered at Changi Airport on May 14 for the groundbreaking of the new Terminal 5, Hirotsugu Yamaguchi spotted many familiar faces. Engineers, architects and project managers from around the world had returned, including those he worked with on earlier terminals.

“It felt like a big reunion of the world’s airport builders,” said Yamaguchi, a senior adviser at Takenaka, one of Japan’s largest construction companies and the designer of Terminal 4, which was completed in 2016. The company has been involved in most of Changi’s terminal projects since Singapore’s aviation gateway opened over four decades ago.

But the event was more than a nostalgic gathering. It reflected Singapore’s long-standing approach to nation-building: drawing on global expertise to execute complex projects with precision. A decade after Yamaguchi’s last involvement, Changi is embarking on its boldest expansion yet – a multibillion-dollar project to secure the city-state’s long-term future.

For Singapore, Changi is not just a transportation hub. In a land-scarce country with a tiny domestic market, the airport is a business that serves as a vital artery of economic activity, facilitating trade, attracting investment and enabling the seamless flow of people and goods. 

It directly supports about 200,000 jobs and contributes around 5% of gross domestic product, underpinning broader sectors such as tourism, manufacturing and logistics.

“Changi is the lifeline of Singapore,” said Shukor Yusof, aviation analyst at Singapore-based Endau Analytics. “Without a thriving, competitive airport, Singapore will collapse. The importance of Changi to Singapore’s existence can never be underestimated.”

That reliance became painfully clear during the COVID-19 pandemic. With no domestic routes to cushion the blow, border closures brought the country’s aviation hub to a near standstill. Passenger traffic plunged from 68.3 million in 2019 to 11.8 million in 2020, and just 3.1 million in 2021. 

Changi Airport Group’s (CAG) revenue dropped 78% in the year ending March 2021, and the company recorded a second loss the following year. Singapore’s economy contracted 3.8% in 2020, its worst recession since independence in 1965.

With the pandemic behind it, Changi is now scaling up. Terminal 5, the construction of which was put on hold during the global health crisis, is scheduled to open in the mid-2030s with an initial annual capacity of 50 million passengers, boosting total airport throughput by 50% to over 140 million passengers annually. 

The COVID-triggered delay allowed for a redesign. Lessons from the pandemic have been built into the terminal’s flexible layout, said Ong Chee Chiau, managing director of Changi East at CAG. With two internal train lines running through the center, either half can be shut to allow scaled-back operations during a crisis, allowing it to “operate as a flexible, smaller subterminal when needed,” Ong said. 

Allan Schule, head of the Asia-Pacific airlines, logistics and transportation sector at consultancy Bain & Company, noted that while airport hubs across Asia and the Middle East are expanding, several Southeast Asian cities – notably Jakarta, Manila and Ho Chi Minh City – are struggling to keep up. “In that light, [Terminal 5] could be both an offensive and defensive strategy to sustain regional leadership and global relevance,” he said.

Changi’s origins trace back to a bold and carefully calculated decision in the 1970s. At the time, consultants had advised expanding Paya Lebar Airport, Singapore’s main gateway since 1955. But then-Prime Minister Lee Kuan Yew rejected the plan, citing limited room for future expansion and concerns that flight paths over the city center would cause lasting noise and air pollution.

Instead, Singapore chose to redevelop a military airbase in Changi, a former Royal Air Force site. The government cleared swamps and reclaimed land, demolished buildings and relocated thousands of graves to make way for the new airport on the eastern coast. In just six years, and at a cost of 1.5 billion Singapore dollars ($1.1 billion at current rates), Changi opened in 1981 as the largest airport in Asia at the time. Lee later called it “the best SG$1.5 billion investment we ever made.”

From that start, Changi grew in tandem with the nation. Terminal 2 opened in 1990, followed by Terminal 3 in 2008 and a rebuilt Terminal 4 in 2017, replacing a former budget terminal. In 2019, Jewel Changi Airport opened as a retail and entertainment complex – complete with the world’s largest indoor waterfall – that redefined what airports could be. 

Today, Changi connects to over 170 cities and is served by about 100 airlines. Annual passenger traffic has risen from 8 million in 1981 to nearly 68 million in 2024.

But officials say rising demand, particularly in Asia-Pacific, the world’s fastest-growing region, is expected to push Changi’s current capacity to its limits by the 2030s. CAG chief executive Yam Kum Weng described Terminal 5 as a “mega terminal” that will effectively double the airport’s footprint.

Spanning 10.8 square kilometers, the project includes space for future satellite terminals. CAG aims to eventually connect Changi to over 200 cities.

While Terminal 5 is the centerpiece, the more immediate capacity boost will come from a third runway. Currently reserved for military use, it is expected to open for commercial operations by 2027.

Brendan Sobie, founder of aviation consultancy Sobie Aviation, said this would allow more flights during key connecting periods. “This is where Changi is behind,” he noted, pointing out that Hong Kong, Bangkok, Kuala Lumpur and Jakarta already operate three-runway systems. “This ensures that [Changi] will remain a leader in that space,” he said.

To support seamless transfers, the new terminal will feature a tunnel system to move passengers and baggage between terminals. Earlier this month, a SG$999 million contract for the system was awarded to a joint venture between Japan’s Penta-Ocean Construction and Singapore’s Koh Brothers Building and Civil Engineering Contractor. 

Terminal 5 and the third runway anchor the broader Changi East development, which includes new cargo and maintenance, repair and overhaul (MRO) facilities. The entire complex will be linked to nearby industrial zones, creating a logistics ecosystem to reinforce Singapore’s position in global trade networks.

The total cost of Terminal 5 has not been disclosed, but officials estimate the wider Changi East development will require “tens of billions” of Singapore dollars. Final costs will depend on upcoming tenders, including the main terminal construction package expected next year.

Despite the scale of investment, planners are confident that demand will support it. The Asia-Pacific region is the world’s fastest-growing aviation market, handling around 3.4 billion passengers last year, a 13% increase from the year before, and accounted for about 36% of global traffic, according to Airports Council International World and the International Civil Aviation Organization.

Passenger numbers in the region are expected to double by 2043, according to the International Air Transport Association. The surge will be driven by emerging economies such as Vietnam and Indonesia, as well as giants like China and India, outpacing projected growth in Europe and North America.

Aviation analyst Shukor also sees sustained growth ahead, pointing to ASEAN’s demographic trends, fueling rising travel demand across the region. 

"Demand for air travel is still growing and intra-Southeast Asia and Asia Pacific air traffic will be strong beyond 2030,” he said.

Still, the outlook comes with risks. Rising operating costs and geopolitical tensions could weigh on airline growth. 

A warning sign came a month after the Terminal 5 groundbreaking, when budget carrier Jetstar Asia announced it would cease operations in July. Based at Changi since 2004, the Qantas-owned airline operated 180 weekly flights on 16 routes and carried 2.3 million passengers last year. It cited the “unsustainable” costs of operating from Changi.

Jetstar Asia accounted for just 3% of Changi’s traffic, but its exit has raised concerns about cost competitiveness, particularly for smaller carriers in an increasingly crowded regional market. “We will monitor the routes affected … and actively engage other airlines to fill the gap,” CAG said. 

Despite headwinds, Changi remains a global heavyweight. In 2024, it ranked fourth worldwide for international passenger traffic, trailing only Dubai, London Heathrow, and South Korea’s Incheon. While competition from Hong Kong and Doha is rising, analysts say Singapore’s efficient operations and cohesive policymaking continue to give it an edge.

“Given the importance of competitive air travel to attracting highly mobile global talent and capital,” said Schule, “there’s every reason to think the airport will remain as critical to Singapore’s future attractiveness as a business and personal destination.”