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This Can Be a Massive Tailwind for SATS Ltd

Singapore Changi Airport is already one of the busiest airports in the world and has won numerous accolades.

For those thinking that the airport’s happy to rest on its laurels, they’d be sorely mistaken. Chang Airport currently has three terminals, but it’s looking to more than double its current capacity with the addition of Terminals 4 and 5.

One company that’s well-positioned to enjoy a massive tailwind from any possible growth of Changi Airport would be food caterer and ground services provider SATS Ltd (SGX: S58).

Currently, SATS handles about 80% of all scheduled flights at Changi Airport and also serves 50 of the scheduled 68 airlines out of Singapore. SATS’s current entrenched position within Changi Airport makes the plans for Terminal 4 and 5 very exciting for its future.

In Changi Airport, the services that SATS provides include flight operation & load control, aircraft cleaning, baggage handling, and also ramp services. The company is also in charge of the air cargo that flows in and out of Changi Airport. Many of the passenger services within the airport are also staffed by SATS. Meanwhile, SATS also provides in-flight catering services.

Changi Airport currently handles about 54.1 million passengers a year. It’s expected that the airport can handle up to 85 million passengers annually by 2018 when Terminal 4 is ready (in 2017) and Terminal 1’s expansion works are done. This represents growth of nearly 60%.

Beyond that, Terminal 5, which under current plans will be operational by 2025, will be larger than the current Terminals 1, 2, and 3 combined. It’s also expected to be able to handle up to 50 million passengers a year by itself with the ability to expand up to 70 million if needed.

If the number of passengers flowing through Changi Airport in the future can reach the ballpark of where current estimates are, it’s possible that SATS may see huge growth in demand for its services.

Foolish Summary

All that being said, investors have to note that Terminal 5 is still only in the planning stage and no major airlines haev yet signed up to be an anchor operator in the terminal. In the meantime however, Terminal 4 already has six airlines looking to operate from it.

SATS’s future looks bright from the perspective of it possibly enjoying a massive tailwind as a result of Changi Airport’s growth. But, it’s still early days yet in determining if SATS can grow profitably if there’s indeed a rise in demand for its services that’d be an important area that bears watching in the future.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any company mentioned.