"Hong Kong watches warily as huge new Chinese airport opens"

Thursday, August 5, 2004

Hong Kong watches warily as huge new Chinese airport opens
Agence France-Presse


GUANGZHOU, China, (AFP) - The largest airport in China opened in the
southern city of Guangzhou Thursday, establishing a giant freight and
passenger hub in the country's manufacturing heartland to rival
neighbouring Hong Kong.

Baiyun International Airport in the capital of Guangdong Province -- an
area dubbed the factory of the world which is responsible for over a
third of China's exports -- can handle 25 million passengers and one
million tonnes of cargo a year.

When an expected third runway comes online in 2010, those figures will
rise to 80 million passengers and 2.5 million tonnes of cargo.

The 19 billion yuan (2.4 billion US dollar), 15-square-kilometre airport
is poised to become a major player in the regional aviation market, most
notably at the expense of neighbouring Hong Kong International Airport.

While the former British colony's 1998-opened Chek Lap Kok airport
handles more freight than any other in the world, observers believe
Baiyun's state-of-the art facilities in the centre of China's
manufacturing engine would rob it of vital trade.

The chief executive of the Hong Kong Airport Authority, David Pang,
admitted as much recently when he said: "The two airports are
overlapping in markets and both will engage in competition for
passengers and cargo transport."

Booming Guangdong province has been waiting for years to replace its
existing airport, watching while rival cities such as Beijing and
Shanghai received major upgrades.

The new airport is China's largest, capable during peak hours of
handling 9,300 passengers and 67 take-offs and landings per hour.

But given its vast potential, it is no surprise the new airport is
causing headaches for industry officials in Hong Kong, which is little
more than 100 kilometers (62 miles) away.

Some 80 percent of all freight handled at Hong Kong's airport comes from
Guangdong, accounting for more than a quarter of the city's external
trade value. 

Sunny Ho, executive director of Hong Kong Shippers' Council, said Hong
Kong would face enormous challenges should the huge US logistics
companies, like United Parcel Service and FedEx, choose Guangzhou as
their Asian hub.

"UPS and FedEx have their own marketing teams, distribution setup
systems and their own crew. So it would be very easy for them to leave
Hong Kong for Guangzhou if they wanted to," said Ho.

"Could Hong Kong be their only choice? It would be impossible," he said.

In addition, with a new bilateral aviation agreement between the US and
China signed last week, US companies will be able to establish
operations in the mainland for the first time.

The deal will double the number of airlines flying between the two
countries, allowing a nearly five-fold increase in passenger and cargo
flights in the next six years.

FedEx, the world's largest express-delivery company, has made no secret
of its intentions to expand into China and will be adding new flights to
new destinations from the current 11 a week.

The company signed a deal last December to explore growth opportunities
in Guangdong, which generates a third of China's exports.

Rival UPS, which has seen double-digit mainland growth in the past three
years, has plans to expand its Guangzhou services and aims to set up its
regional hub there.

"China is not an option. It's a must," said Leung Kwok-kee, UPS' general
manager for Hong Kong and Macau.

"Look at its economic growth. The GDP growth in southern China is 12-13
percent and its export/import growth rate is at nearly 20 percent. Hong
Kong alone is not capable of supporting its growth," he told AFP. "There
is a need to be there (Guangzhou)."

Hong Kong's airport, which handles 35 million passengers and three
million tonnes of cargo per year, still has the advantage as China's
aviation infrastructure struggles to modernise.

Nontheless it has been forced to respond, offering reductions on landing
fees for airlines flying to new destinations.

It could also face competition for the lucrative tourism sector, which
and is only just recovering from the dire economic effects of the Severe
Acute Respiratory Syndrome outbreak last year.

About 51.4 million foreigners visited the mainland in the first half of
the year. The Spain-based World Tourism Organization has predicted China
could end up attracting more visitors than any other country within the
next decade.

"Hong Kong has to do better to maintain its high quality service. They
could be surpassed by Guangzhou in three to five years. (But) who
knows?" said UPS' Leung.


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