Singapore here we come! As long as it is subsidised…


Yesterday, the Capital’s worst-kept secret has been confirmed: Singapore Airlines is starting a 4-day a week service from Wellington to Singapore via Canberra. But there are some pretty serious questions yet to be answered about how this miracle came about.

Singapore airlines tweet

The new ‘capital express’ service will begin in September, with seats going on sale on January 25. Return flights to Canberra will start from $587 and from $1808 for return flights from Wellington to Singapore return.

Great, but right now you can book a 14h Qantas/Emirates flight from Wellington to Singapore via Sydney for NZ$1,044 return in September…

You’re going to save a minimum of at least an hour and a half for every traveller and that’s a great benefit,” Wellington’s Deputy Mayor Justin Lester said at the signing ceremony.

Yes, maybe via Auckland but not via Christchurch or Sydney…

This is effectively a direct flight [to Singapore],” [Transport Minister Simon] Bridges said. Source

Or… really not so much – it really is a Trans Tasman flight with a transit option to Singapore…

This flight will indeed make up for some of the extra time spent in Auckland (calculated as an overly pessimistic up to 4h transit time by InterVISTAS), the need of not having to change terminals and being able to go through customs and check luggage through to and from Wellington. However, it is also $800 more expensive for only half an hour time win compared to going via Sydney. It is meant to attract 90,000 extra passengers a year, which is almost half of the most optimistic total projected by InterVISTAS (note, that they did use a market catchment of 1.1m Kiwi passengers, expecting people from Nelson to take the ferry and their car and people as far North as the Hawkes Bay from driving to Wellington (and leaving their car in the hugely expensive airport car park?) which has since been reviewed by the Council’s own experts as being ‘overly optimistic’).

InterVISTAS market catchment from presentation to WCC Oct 2015

There are another couple of lines in the report that are very interesting indeed:

Singapore Airlines has been in talks with Wellington for around two years about a route to the Capital, with the airport “gaining traction” about six months ago, Wellington Airport chief executive Steve Sanderson said, when the airline appeared to become convinced by the business case to come to Wellington.

Now, how exactly did the airline become convinced of the ‘business case’? We certainly haven’t seen a proper business case for the runway extension yet…

Mak Swee Wah, Singapore Airlines executive vice president commercial, said the airline was committed to flying to Wellington. “We are committed to the route. There is no better example than the fact that we have been in Auckland for 40 years and in Christchurch for 30 years. Certainly we wouldn’t be launching a new service unless we are committed to it.” Wah would not say how much the service relied on Wellington-Canberra demand or Wellington-Singapore other than that it was “a mixture”.

It does seem to be a lower risk proposition for Singapore Airlines to fly via Canberra, ensuring additional passengers for the route. This argument also stacks up for Canberra, which has been unsuccessfully trying for years to attract a long-haul international flight after extending its runway. Even if neither Capital may have attracted the airline on their own business case merit, together – and only together – they seem to be a good enough value proposition for Singapore Airlines. Especially seeing Singapore Airlines seem to be trying to set themselves up as a main competitor to the One World/Qantas/Emirates/Dubai alliance and hub.

What this article curiously omits, however, is the important question around subsidies. Who subsidises the airline, to what extent and for how long? We can safely assume that both Canberra and Wellington Airports have offered a sweetener to seal the deal – like waving the landing charges? Who pays for that? Surely not the airports, so is it other travellers who are not using this route? We also learned that the Wellington City Council is subsidising this route by about $9 per passenger – for the next ten years! That adds up to over $8m based on the extra 90,000 passengers per year this new route is meant to attract. Apparently, this money will not be taken out of increased rates but ‘Destination Wellington’ marketing budget and no new budget is needed for it. What exactly is ‘Destination Wellington’ other than a ratepayer-funded slush fund with little oversight? Will every airline coming to Wellington be able to expect such a deal? Wouldn’t a lot of these passengers have come to Wellington anyway, but via other hubs?

This of course means that the runway extension in Wellington is now moot, despite the mad spin that the airport is trying to roll out to ensure its corporate handout by the tax- and ratepayer is still guaranteed. This surely proves that (as noted in a number of reports) taxpayer and ratepayer money would be better spent on promoting the region so that services like this are sustainable beyond the subsidised period that Wellington Airport and the Council is providing. But it also means that Wellington’s leaders should be responsible and wait to see if this route is profitable beyond the subsidised period to determine whether committing ratepayer money for a private company’s airport extension is a good idea. An extra 10 years (which, according to the airport’s own cost-benefit ‘analysis’ will reap almost exactly the same benefits as doing the extension now) would mean that we could also wait and see what happens with regards to airplane technology, aviation emissions being included in global carbon accounting (like they already are in the EU), oil price changes and other unforeseen events, both nationally and internationally. It’s simple future- and risk-proofing, really.

We ask Wellington Airport and the Council to be up front with how much of a subsidy they are providing Singapore Airlines to fly this route. For example:

  • How much subsidy, in terms of forgone landing fees and marketing budget, has been given to Singapore Airlines by the airport to secure this service, and how long will the subsidies last?
  • Who ultimately pays for the airport providing Singapore Airlines with ‘support on using its facilities’?
  • How much support – in total – is provided by the Council, for how long and why? Will other international airlines also be able to expect similar Council sweeteners and how large is the pot in ‘Destination Wellington’ exactly in terms of giving handouts to promote for airlines?
  • How many passengers will be required to make the service viable in the longer term, as the subsidies wear off and the global aviation fuel price returns to normal?
  • How long will it be before we know if the service is going to be successful, and the assumptions around passenger demand are indeed realistic?
  • Is there an actual basis for pressing forward with the runway extension in the meantime seeing all major risks are borne by the public?
  • Given Singapore Airline’s stated position against the Wellington runway extension and ruling out direct services between the two cities, has the airport yet identified any airline that has indicated interest in using an extended runway for a direct long-haul service, let alone one willing to pay to use it without ‘bribes’ that are paid for by the public?
  • How much would such a ticket be without subsidies and how competitive is it really seeing it is STILL $800 more expensive than flying with One World via Sydney?
  • Why would the Council (or Singapore Airlines) want to attract another long-haul airline which would be in direct competition with this – publicly subsidised – service? Unless Destination Wellington is really bottomless…

We truly are happy there will now be (almost) direct flights to Singapore from Wellington. We may even use them – if they don’t stay $800 more expensive than the alternative! If the service proves to be a success – without subsidies – we can make more realistic projections about the likelihood of attracting actual long-haul airlines that would need to use a runway extension. This is by no means a reason for Wellington Airport to crow that it ‘proves a direct service to Asia is commercially viable’. As it stands, it still includes extra passengers from Canberra, and is reliant on Council and Airport subsidies. This miracle new route thus won’t have proven its viability until these subsidies are removed in ten years’ time. Which, for the time being, is why we shouldn’t risk any more public money on proceeding with the extension.