This is why it is necessary for Changi Airport to be regulated when it becomes a corporate entity, said Mr Lee Hsien Yang, the chairman-designate of the soon-to-be restructured Civil Aviation Authority of Singapore (CAAS).

CAAS will be split up next year, with Changi Airport and its operating businesses spun off into a new company to be owned by Temasek Holdings.

The authority will then be restructured and act as the regulator.

In his first comments since being appointed to head the regulatory outfit, MrLee said yesterday that as a statutory board, 'you are quite happy to raise service standards and not think so much about the economic cost'.

But, he said, a corporate entity's primary goal is economic return. As service standards are sometimes achieved at economic cost, trade-offs have to be made sometimes, he added.

For example, Mr Lee said that when economic returns are pushed very hard, 'then potentially you could say, well, 'Does it matter that I have to have the first bag on the carousel within 15 minutes or whatever is the service standard that we have? Why don't we push it 10 minutes more and it means I can have fewer staff and I can cut costs?''

He said he was pleased that Mr Liew Mun Leong, who will be chairman of the new company that will run Changi, has made it clear that service levels will not be compromised for profits. But he said some regulation would still be appropriate.

There will be penalties set for non-compliance too, but these will not be used lightly and will be reserved for 'fairly serious incidents', he said.

Apart from regulating terminal operations, Mr Lee stressed that the board, which will comprise some existing members as well as several new faces and management, will also look at other equally important areas like air traffic services and Changi's cargo business.

Long-term master-planning will be the joint responsibility of both regulator and operator.

It is an important task, he said. 'While we have done very well historically, each time we build a new terminal, we try and get somewhat better results.'

From Terminals 1 to 2 and, more recently, with the opening of Terminal 3, Changi has constantly sought to increase service standards with every expansion.

But even as the corporatisation of the CAAS aims to boost Singapore's competitiveness and attractiveness as an air hub, there are worries that the current global financial crisis, which is hurting air traffic demand, will affect Changi's future.

Mr Lee said: 'If passenger numbers drop, you have to try and attract other passengers here to make your business viable...As a regulator, we will try and work together (with the operator) to encourage passengers to come through Singapore.'

karam@sph.com.sg