Changi Airport Group (CAG) will close Changi Airport's budget terminal in September 2012 to replace it with a larger terminal to keep up with the growth in passenger traffic.
Construction of the new terminal, called Terminal 4, will begin next year. The new terminal will have a capacity to handle 16 million passengers every year when it opens in 2017.
The capacity of the new terminal will more than double that of the current budget terminal.
CAG said that airlines currently operating out of the budget terminal will transfer to Changi's Terminal 2 from September 2012.
Terminal 4 will not have any aerobridges and will be designed for efficient passenger processing and quick turnaround of aircraft.
Changi airport's existing budget terminal handled more than 4.6 million passengers last year.
The airport operator said that the airport, with a total capacity of more than 70 million passengers per year, still has room to accommodate air traffic growth, and the new terminal would ensure there is capacity to handle further increases in traffic demand.
CAG had discussions with the airlines operating at the terminal at the outset of the plan and will work with the airlines to ensure a smooth transition of their operations.
Domestic carriers including Singapore Airlines, SilkAir, Tiger Airways, Jetstar Asia and Scoot have ordered new aircraft and foreign carriers have also expressed the desire to expand their links with Singapore.
Over the past ten years, the airport's passenger traffic has increased at a compound annual growth rate of 5.2%.
In 2011, the airport reported a 10.7% year-on-year rise in passenger traffic to 46.5 million passengers.
Image: The new passenger terminal, called Terminal 4, will replace the existing budget terminal at Changi Airport. Photo: Changi Airport