Changi loses 20-year contract to operate Saudi airport

The termination notice comes less than a year after Changi Airports International and Saudi Naval Services were awarded a contract to operate King Abdulaziz International Airport.
The termination notice comes less than a year after Changi Airports International and Saudi Naval Services were awarded a contract to operate King Abdulaziz International Airport.

Changi Airport has lost a key contract to operate and manage an airport in Saudi Arabia - a major setback to its overseas ambitions.

The termination notice served yesterday comes less than a year after Changi Airports International (CAI) - Changi's foreign investment and airport management arm - and Saudi Naval Services were awarded a 20-year contract to operate King Abdulaziz International Airport in Jeddah.

While CAI has won several airport consultancy and development projects in growing aviation markets, including China, India, Russia, Brazil and the Middle East, the Jeddah contract was a significant one.

CAI owns 75 per cent of the consortium that was awarded the contract in June last year.

In a statement to The Straits Times last night, a spokesman for the consortium confirmed that the firm had received the notice of termination from Saudi Arabia's General Authority of Civil Aviation (Gaca). He added that the contents of the notice are being reviewed.

"The consortium strictly observed the request for proposal process stipulated by Gaca. It submitted all required documentation for Gaca's review and had obtained all requisite approvals prior to the award of the concession," he stressed.

StrategicAero Research chief consultant Saj Ahmad said that while the latest development will mean a loss of revenue for CAI and its consortium partner, CAI can "still look to other growth areas in the Middle East going forward".

"If anything, the Saudi authorities will be under pressure to replace Changi's presence - there's no clarity thus far on that," he added.

Spreading its wings overseas is a growing focus for Changi Airport, which has so far left its mark on over 50 airports in more than 20 countries. But business has been challenging. CAI's revenues have increased from $18.5 million in the 2012/2013 financial year to $41 million in the 2015/2016 financial year.

But high operating costs, including taxes, in an already capital-intensive industry, as well as foreign exchange losses, have put pressure on profits, which fell to $6 million during the same period.

Still, the long-term prospects are strong, experts said.

Global passenger traffic is expected to almost double from now to 2036 and this will put pressure on airport infrastructure to expand, providing opportunities for CAI and other industry investors, they said.

A version of this article appeared in the print edition of The Straits Times on February 22, 2018, with the headline 'Changi loses 20-year contract to operate Saudi airport'. Print Edition | Subscribe