Newer or upcoming airports in Hong Kong, Bangkok and Kuala Lumpur as well as other regional hubs like Dubai are posing serious challenges to Changi, which has consistently been voted one of the world's best airports by frequent travellers and industry executives.

The Singapore government is anxious to keep Changi ahead of the pack.

"Between 1990 and now, many, many airports have opened and they are all very modern, very advanced and very attractive," Transport Minister Yeo Cheow Tong told parliament on Friday, Feb 6.

"If Changi does not take steps to continue upgrading itself and keeping pace with the competition, we're going to be left behind.

"So we have no choice but to continue making sure that our facilities are tip-top, our services are tip-top so that passengers will choose to fly to Changi even if they have a choice of other airports to fly to."

Changi's swank Terminal 2, which opened in 1990, is currently undergoing a S$250 million (US$148 million) makeover scheduled to be completed in 2005.

Another $250 million has been earmarked to refurbish the older Terminal 1 building starting in 2005. The two terminals have a combined capacity of 44 million passengers a year.

The third terminal, costing $1.75 billion and with the capacity to handle 20 million passengers annually, is to be completed in 2008, instead of the original 2006 target.

Some analysts said the delay could give a headstart to Bangkok's new airport which is scheduled to open in September 2005. The airport is capable of handling 45 million passengers a year.

Changi's state-of-the-art Terminal 3 is designed to handle the world's biggest passenger aircraft, the Airbus A380, of which Singapore Airlines will be among the first customers.

The A380, designed to carry more than 550 passengers, will join the A345 long-range aircraft in the Singapore Airlines fleet.

The A345 completed the world's longest commercial non-stop flight between Singapore and Los Angeles on February 3. The flight lasts up to 16 hours.

An 18-hour non-stop flight between Singapore and New York using the same aircraft will be launched in late June, cutting travel time by six hours in both directions.

Singapore also plans to build a terminal for the fast-emerging budget airlines, signalling its determination not to be left behind in the race for a share in the potentially-lucrative budget carrier market.

Transport Minister Yeo said in December the budget carrier terminal could be operating within 18 months.

Apart from the upgrades, Changi will continue to make costs competitive and offer incentives.

Yeo announced in parliament a S$40 million "growth incentive scheme" for airlines over the next two years that will reward carriers based on the volume of passengers they bring into the country.

It will be on top of other incentives, such as the multi-million-dollar relief package implemented last year to perk up traffic after the Severe Acute Respiratory Syndrome (SARS) epidemic.

These include hefty discounts on aircraft landing fees and rentals which would last for three years from the launch.

Following the rebates, Changi now charges the second lowest rates among key Asian airports, trailing only Malaysia's Kuala Lumpur International Airport.

A third ground handler will also be introduced at Changi Airport in a bid to spur competition and lead to more competitive prices, Yeo said.

Singapore's founding father Lee Kuan Yew said lower costs were vital for Singapore Airlines and Changi Airport to compete, giving them a time frame of three to five years to meet the challenge.

Lee cited the rising reputations of Bangkok and Dubai as aviation hubs, the emergence of rival carriers such as Emirates Airlines and the expanding low-fare carrier industry as areas of concern for Singapore.

"We are not going to die but we will be diminished. To prevent that, costs must be cut by 10 to 15 percent," he said.

However, Changi, which now hosts 69 airlines and is linked to a global network of 150 cities, appears to be a step ahead of the competion.

When completed, the upgrades of Terminals 1 and 2 "will rejuvenate these buildings and give each a modern, fresh look with its own individual character," Yeo said.

Retail areas will be enlarged and reconfigured to offer a wider array of choices of shops and goods, enhacing Changi's reputation as a shopping mecca for flyers.

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