The Impact of Low-Cost Airlines on Singapore's National Economy

The low-cost airlines in Singapore have had a significant impact on the national economy by increasing access to remote areas and tourist sites, resulting in higher tax revenue for the government (Lee et al., 2014). The sector has also led to an increase in tourists visiting these sites, contributing to economic growth. However, the industry's negative environmental consequences need to be addressed through measures such as emphasizing efficient aircraft manufacturing, encouraging the use of technologically advanced and energy-efficient airlines, and designating operations to less congested airports.

IMPACT OF LOW COST CARRIERS ON TOURISM DEVELOPMENT IN SINGAPORE
Student’s Name:
Tutor’s Name:
Date:

Content
Introduction……………………………………………………………………1
The tourism sector in Singapore……………………………………………… 2
The low-cost airlines in Singapore……………………………………………..2
The impacts of the low-cost airlines on tourism development in
Singapore.............................................................................................................4
Negative impacts of the low cost airlines on tourism in Singapore…………….6
Conclusion……………………………………………………………………...7
Recommendations……………………………………………………………….8
Bibliography

Introduction
Air transport is one of the fastest growing transport sectors in the world in recent days.
Despite the rapid growth in the use of airlines in the recent days, the sector has faced declines
in the profits realised. Recently, there has been a rise in the rate at which new airlines are
manufactured especially in the Far East and Southeast Asia regions(Bieger&Wittmer, 2006,
pp.40-46). This rampant rise in the manufacture of new airlines could be associated to the
ever growing desire by human beings to travel across and view the world as the worldwide
affluence is continuously growing. The growth and expansion in the transport sector has had
significant influence on tourism development in various nations including Singapore.
Air transport is preferred over the other forms of transport in the tourist sector because it is
the only form of transport which is three-dimensional in nature and hence tourists are able to
fly over terrestrial obstacles which for a long time have served as dividers of societies over
space and time. The graph below demonstrates the rise in the number of passengers using
airlines in the Asia.
Figure 1.2: Passengers carried on scheduled air services, 1997 – 2006
(Source: ICAO website, 2007)

The tourism sector in Singapore
Singapore serves as one of the world’s most significant tourist destinations. The nation’s
unique cultural heritage, historical buildings, beautiful beaches, national parks,
archaeological sites among other interesting activities such as trade fairs and exhibitions
attracts thousands of tourists from across the world. Among the notable tourist attraction sites
in Singapore are; the Botanic Garden, Marina Bay Sands Resort, the Singapore Flyer, Garden
by the Bay among others.
The low-cost airlines in Singapore
Having realised the important role the low-cost airlines can play to the key areas of the
national economy such as tourism, the Singapore government has embraced the development
in this sector of the transport industry by putting up measures such as the development of the
airport infrastructure as well as the adoption of liberal traffic rights policies(Heng& Low,
1990, pp.246-269). Furthermore, the Civil Aviation of Singapore (CAAS) has channelled a
significant amount of resources as well as efforts aimed at promoting the low-cost airlines
industry at Changi.
Changi Airport in Singapore was the second in the Asian continent after Kuala Lumpur
International Airport of Malaysia to open a terminal dedicated to the budget traveller. The use
of low-cost airlines in Singapore has gained momentum in the recent days. For instance, in
2004, within a span of seven months, the government of Singapore set up three low-cost
airlines which started full operations to regional destinations immediately. Such low-cost
airlines included one Thailand-based airline which concentrated its services mainly to the
island city-state(Bowen, 2000, pp.25-41).

In an attempt to promote the growth of low-cost airlines, soon after low cost airlines began
operations to and from Singapore, the Singapore government designated a plot of land meant
for building a low cost airline terminal (Budget Terminal) situated in the areas near the SIA
Catering Centre. By 2006, the government had completed the construction of Budget
Terminal which they opened in March 2006. The costs of operation of Terminal 1 have
emerged to be lower than those of Terminal 2. The low costs are in line with the needs as
well as the operational costs of the low-cost airlines(Jenkins, 1980, pp.22-29). Due to the
high expectations from the project once completed, the Singapore government spend a
whooping US$30 million on the construction of Budget Terminal.
Despite the small population size in Singapore as well as the negligible domestic air travel,
there is a high consumption rate for the low cost airlines boosted by her high per-capita
income among her citizens. Today, Singapore has emerged as a major player in the field of
low-cost airlines operating giant low cost airlines such as Qantas Airways which become the
largest shareholder in 2004 in a joint venture to operate Jetstar Asia. According to the
financial reports of 2008, low-costs airlines in Singapore were doing fairly well economically
as well as had captured the regional market. For instance, in the financial year ending 31
March 2008, Tiger Airways made a profit of S$37.8 million according to reports by The
Straits Time, 7 August 2008. Similarly, Jetstar recorded a 20% increase in revenue with its
passenger load factor rising by 4% while at the same time it recorded a passenger a jump in
passenger carriage of up to 20% in the same financial year.

The impacts of the low-cost airlines on tourism development in Singapore
These types of airlines have had a big impact on the tourism sector in Singapore. The low
cost airlines’ impact on the tourism sector has been particularly more evident in the
development of tourism in less popular destinations (Francis, et al. 2006, pp.83-94).
The operation of these airlines is based on various characteristics as well as philosophies such
as; putting emphasis on cost and efficiency maximization, transfer of low costs to low tariffs
for customers, offer point to point service and not hub and spoke model, run direct flights
between given regions, utilize secondary as well as regional airports and believe in the
operation of newer, cleaner as well as aircrafts that are more efficient.
Through its weekend, city as well as short-break tourism as well as its ability to effect radical
expansion of the potential destinations, low cost airlines have a significant impact on the
development of the tourist sector(Escobar-Rodriguez &Carvajal-Trujillo, 2014, pp.70-88).
The flexibility of these airlines has extended the range of motivations as well as the
frequency of tour by individuals travelling for their private leisure reasons. These airlines
have also led to an increase in the number of people moving across the country as a way of
enjoying their leisure time.
The low-cost airlines offer luxurious services and facilities such as highly efficient internet
which can enable a traveller to enjoy services such as online booking of hotels while on
board, hire a car online while on board, buy travel insurance among other online activities.
Furthermore, they target overlapping market niche such as cultural tourism which are little
known(Akamavi, et al. 2015, pp.528-545). Just as the name low cost suggests, these airlines
charge a relatively lower travel fee. This phenomenon has made them affordable to both the

rich as well as to the middle income earners. Due to this fact, many people are able to access
tourist sites using these airlines hence boosts the tourist sector.
The flexibility nature of the low cost airlines has made them a preferred transport choice by
many tourists. These airlines do not have specific destinations unlike the traditional airline
models. They in most occasions look for niches and prefer provincial towns that have been
abandoned by the national flag carriers as well as High Speed Trains as their
destinations(Narangajavana, et al. 2014, pp.28-42).
It is the inherent nature of human beings to be curious and hence want to discover new things.
It is for this reason that many people prefer the low cost airlines in the tourism sector.
Through the low cost airlines, the tourists are able to access new and exploited destinations
for discovery. This has seen new tourist sites discovered and exposed for foreign tourism
hence increasing the national income from the tourism sector.
Low cost tourism has enhanced cultural exchange across the region. Due to the reduced costs
of travelling across the Asian region, many people are able to travel into new destinations. In
the process, many end up mixing with people of a foreign culture and thus learning about the
new culture and in some cases copying the foreign culture.Through enabling the discovery of
unexploited tourist sites, low cost airlines have promoted growth of the remote areas. Once
the areas are discovered and ear marked for tourism, the government puts up infrastructure in
such areas in an attempt to boost tourism activities. For instance, the government constructs
roads linking the remote areas to allow for access into such areas. Other facilities such as
hospitals, hotels, as well as other recreational facilities are set up in the remote areas(Fu
&Oum, 2014, pp.11-44). Through such developments, the lives of the residents of the remote

areas are impacted positively as they get access to the new developments while others are
employed in the tourism sector earning them a livelihood.
Negative impacts of the low cost airlines on tourism in Singapore
 Environmental pollution
Air transport is considered to be having the highest level of negative impacts among the
transport sector on the environment. The airlines pollute the environment through the smoke
produced as well as the noise they produce. This affects the tourist sector negatively. For
instance, the gases the airlines emit leads to acidic rains which kill the flora thus causing a
negative impact on the food chain within the ecological niche. On the other hand, the airlines
produce a lot of noise which ends up scaring and disturbing the animals while in their natural
habitat.
Conclusion
In conclusion, low cost airlines have had several positive impacts on the development of
tourism in Singapore. The influence has mostly led to the development of tourism in smaller
cities as well as in the less famous destinations which were never exploited for tourism
before. This has seen the economy of such areas grow tremendously; a phenomenon which
has an impact on the national economy of Singapore. For instance, the ability to pay taxes for
people in such remote areas are increased hence the government is able to earn higher taxes
for her economic development(Lee, et al. 2014, pp.69-75). Therefore, there is need for the
government of Singapore to invest heavily in the low cost airlines to enable her economy
grow further.

Recommendations
From the above analysis, it is worth noting that the low cost airlines have positively
influenced the development of tourism in Singapore through enabling access to more remote
and neglected areas. Furthermore, the airlines have seen the number of tourists visiting the
tourist sites increase rapidly. However, the sector also has negative consequences which
affects mostly the environment and therefore, the government should come up with measures
to help address such negative consequences and in the process make the low cost airlines
more effective.
Some of the measures that should be implemented to ensure environmental sustainability
include;
 Emphasize on the manufacture of low cost airlines with more efficient seat
configuration as well as higher load factor. Airplanes with such specifications tend to
have a lower fuel consumption rate per seat.
 The government should encourage the use of newer airlines that are technologically
advanced as well as those which are energy efficient. Such types of airlines usually
minimize the rate of fuel burn as well as reduce the noise emission.
 The low cost planes’ operations should be designated to less congested airports to
minimize congestions as this will serve to reduce noise pollution by the low cost
airlines.

Bibliography
Akamavi, R.K., Mohamed, E., Pellmann, K. and Xu, Y., 2015. Key determinants of
passenger loyalty in the low-cost airline business.Tourism management, 46, pp.528-545.
Bieger, T. and Wittmer, A., 2006. Air transport and tourism—Perspectives and challenges for
destinations, airlines and governments. Journal of Air Transport Management, 12(1), pp.40-
46.
Bowen, J., 2000. Airline hubs in Southeast Asia: national economic development and nodal
accessibility. Journal of Transport Geography, 8(1), pp.25-41.
Escobar-Rodríguez, T. and Carvajal-Trujillo, E., 2014. Online purchasing tickets for low cost
carriers: An application of the unified theory of acceptance and use of technology (UTAUT)
model. Tourism Management, 43, pp.70-88.
Francis, G., Humphreys, I., Ison, S. and Aicken, M., 2006. Where next for low cost airlines?
A spatial and temporal comparative study.Journal of Transport Geography, 14(2), pp.83-94.
Fu, X. and Oum, T.H., 2014. Air transport liberalization and its effects on airline competition
and traffic growth—An overview. Advances in Airline Economics, 4, pp.11-44.
Heng, T.M. and Low, L., 1990. Economic impact of tourism in Singapore.Annals of Tourism
Research, 17(2), pp.246-269.
Jenkins, C.L., 1980. Tourism policies in developing countries: a critique. International
Journal of Tourism Management, 1(1), pp.22-29.
Lee, C.K., Lee, Y.C., Chuang, Y.S. and Wu, W.L., 2014. The Effect of Electronic Word-of-
Mouth, Customer Expectations, and Emotions on Intention to Take Low Cost Airlines.In
Advanced Approaches to Intelligent Information and Database Systems (pp. 69-75).Springer
International Publishing.
Narangajavana, Y., Garrigos-Simon, F.J., García, J.S. and Forgas-Coll, S., 2014. Prices,
prices and prices: A study in the airline sector. Tourism Management, 41, pp.28-42.

Sinclair, M.T., 1998. Tourism and economic development: A survey. The journal of
development studies, 34(5), pp.1-51.