Airport architects in China know how important it is to accommodate the local bigwigs: there has to be a VIP check-in area as well as an ostentatious official lounge (smoking? No problem). A fast-track immigration channel and limousine drop-off are also de rigeur.
But keeping the officials happy is a serious issue, especially for China’s feeder airports. Without civil servant contentment, many might not survive.
Feeder airports are part of a Civil Aviation of China (CAAC) plan to broaden the country’s aviation infrastructure by two thirds. The target is 244 airports by 2020. A small group of hubs will get the lion’s share of international routes and the highest profile investment. The rest will feed passengers into the hubs, as well as offer some shorter point-to-point routes of their own.
Any self-respecting provincial official wants an airport in his own backyard (or at least somewhere close) so competition amongst municipal governments is intense.
In Sichuan province, an “investment war” is underway, reports the 21CN Business Herald. Although Chengdu and Chongqing are battling it out to become the leading western Chinese hub, at least 10 minnows are also squaring up over their own credentials, either as brand new airports, relocations from current facilities or extensions of existing ones.
Analysts question whether the scope and rate of expansion makes economic sense. A number of cities look too small to support profitable operations, especially in the more impoverished areas.
Others, like Wanzhou airport near Chongqing, have seen passenger throughput collapse after improvements to local expressways. Cost-conscious passengers seem to prefer to travel by road.
Too many of the forecasts used to fund newer airports have also proved unrealistic, says the Herald. Xichang, in southern Sichuan, has an airport designed to handle 1.1 million passengers annually. It struggles to attract a quarter of that.
Studies of small airport entrants in wealthy Jiangsu province suggest a yearly minimum of two million passengers is the break-even point. Many of the Sichuan airports will not come close, especially those with a crossover in their catchment zones, like the cities of Yibin, Luzhou and Zigong.
In a Field of Dreams-esque way the airports themselves claim that if you build it the passengers will come. After all, China’s air travel market is expanding, they argue.
True enough, passenger and cargo volumes have grown impressively in recent years. But much of the growth is weighted towards the larger hubs, and the most recent statistics have indicated a tailing off of growth in general. 2008 was a slower year, for instance, with snowstorms, Olympic security restrictions and a slowing economy all dulling demand. Passenger volumes rose a little under 5% to 406 million. Growth in 2007 had been closer to 17%.
Airports rely on aeronautical fees (passenger handling and airline landing charges) for the majority of their revenues. So weaker cargo and passenger numbers hit the bottom line hard.
The China Civil Airports Association estimates that 90% of the feeder operators are losing money – and most of the new entrants will join them.
The fall back is to turn to the government and China Business News forecasts that the CAAC will disburse at least Rmb9.3 billion ($1.35 billion) in subsidies this year.
At least in this regard the Sichuan airports are in a better position than most. The government is keen to disburse stimulus funds at the moment, and Sichuan will get a large share because of last year’s earthquake.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.