Why China Is Building Airports Like Crazy

Why China Is Building Airports Like Crazy
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When Mangshi opened its airport two decades ago, the small tropical city on China's border with Myanmar was served by few airlines. China's recent travel boom has changed that - seven carriers brought in more than 1 million visitors last year.

"We had a hard time attracting airlines in the early days," Li Ping, deputy chief of the airport's expansion steering committee, told Reuters. "Now we are struggling to accommodate flights."

Mangshi is one of more than 60 inland airports under expansion, with another 30 new regional airports being built. Government planners estimate China's airports will increase to 240 by 2020 from around 200 today.

Li Jiaxiang, head of the Civil Aviation Administration of China (CAAC), said this week the country would invest $80 billion in aviation projects this year alone.

The aviation market is being lifted by rising business travel and a surge in outbound tourism fueled by an increasingly wealthy middle class in coastal and inland cities.

The number of leisure travelers going overseas for the first time topped 100 million in 2014, official data shows. Foreign travel is tipped to grow another 10 percent this year as the United States, France and Australia ease visa policies.

That has prompted Air China, China Eastern Airlines and ChinaSouthern Airlines to fly to New York, Paris and Sydney from Nanjing, Wuhan or Chengdu, or at least with a stopover in those second-tier cities.

China's so-called Silk Road initiative is also certain to boost traffic. Under the scheme, the government aims to extend its economic and political influence to neighboring countries. A network of railways, highways and new air routes are part of the plan.

Last year passenger volumes at Chengdu's Shuangliu airport and Chongqing's Jiangbei airport rose 12.6 percent and 15.8 percent, respectively, beating Beijing's 2.9 percent gain and Guangzhou's 4.4 percent increase.

Xiamen's Gaoqi airport handled 20.9 million passengers, far exceeding its designed capacity of 15 million, while Dalian is expected to hit full capacity in 2016.

Skeptics warn about white elephant projects such as the barely used $6 million airport in Dachangshan island off China's northeast coast. Many existing airports are also in losses due to huge upfront investments.

CAAC's Li said the country's airport expansion is supported by data showing rising passenger numbers.

"Airport building should be a bit ahead of the demand. Judging from the experience of the developed world, our airport construction is far from enough," Li said. "We are still unable to catch up with demand."

Frantic boom

Earlier this month, China approved four additional new airports in provinces including Xinjiang and Heilongjiang, costing 16.3 billion yuan ($2.63 billion).

Chongqing, an industrial city in the southwest, is in the middle of a 29.4 billion yuanexpansion. A little over three hundred kilometers to the northwest, Chengdu is preparing to build a second airport with six runways and four terminals at a cost of 69.3 billion yuan.

"The Chengdu airport is very busy and discount air fares are hard to get," Rose Wang, a business woman who often shuttles between Shanghai and Chengdu, told Reuters. "Thirty or 40 percent discounts were normal previously."

On the coast, Xiamen and Dalian are creating artificial islands for new airports, with landfill effort in Dalian alone costing 26.3 billion yuan.

The aviation boom is boosting sales for global suppliers Thales SA, Indra Industries, Raytheon Co, Lockheed Martin Corp and Honeywell Aerospace.

In May, Honeywell tested its next generation GPS-based precision landing system at Shanghai's Pudong airport.

Thales has sold 40 air traffic management (ATM) radars in China. It supplies ATM systems to the crucial Beijing, Shanghai and Guangzhou sectors, and has recently added Urumqi in Xinjiang to its client list.

"Demand for navigation systems will be on the rise as more airports are built or expanded which will also result in more demands in ATM systems as well as surveillance technologies," Xia Jinsong, deputy chief executive officer with Thales China, told Reuters. "That means more business opportunity for us."

In Mangshi, where passenger volume is expected to exceed the designed capacity of its airport, a more urgent issue is at hand.

Its runway needs to be extended by 400 meters to 2,600 meters to handle Junyao Airlines' A320 and Xiamen Airlines' B737-800 jets. Only B737-700 and A319 jets can fly in for now.

"We have to keep the airlines waiting as our runway is too short and not safe enough for bigger planes," said Li of the airport's expansion committee.

(Reporting by Fang Yan and Matthew Miller in BEIJING; Editing by Ryan Woo)

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