"The mainland's efforts to enhance its aviation market will affect Hong Kong"

Wednesday, December 8, 2004

A liberal dose of competition may cause some turbulence
The mainland's efforts to enhance its aviation market will affect Hong Kong
The South China Morning Post


THE MAINLAND'S rapidly growing aviation market and new airports springing up
in the Pearl River Delta are challenging the superiority of the Hong Kong
International Airport.

In recent years, the mainland has aggressively opened up its aviation market
to foreign countries, as evidenced by the conclusion of 12 air service
agreements with countries including Japan, Australia and Germany last year.

Thailand, South Korea and the United States signed new air service
agreements with the mainland this year.

Michael Fung Ka-yiu, associate director of the Aviation Policy and Research
Centre at the Chinese University of Hong Kong, said: "China is liberalising
its air transport market to enhance its airport network and performance.

"More international traffic will be handled by mainland airports directly
and the role of transit and transfer at Chek Lap Kok is declining."

In the Sino-Thailand service agreement, limitations on the number of
passenger and cargo flights were abolished. Flights between the two
countries are allowed to land at any airport on the mainland and in
Thailand.

In the Sino-South Korea agreement, three routes with multiple-carrier
designations are added to increase capacity.

Professor Fung said the airport was at the centre of the region, with many
surrounding airports competing for the overlapping catchment area.

"Along with the establishment of the new Guangzhou Baiyun airport, the
superiority of hardware capacity at [the Hong Kong airport] is slender," he
said.

After the completion of Baiyun's first phase, the passenger capacity of the
new Guangzhou airport was about double that of the old airport, he said. Its
capacity would be further expanded to 80 million passengers, which is close
to Chek Lap Kok's ultimate capacity.

"With a sufficient source of international traffic after the signing of a
few air services agreements between the Chinese government and other foreign
countries lately, Guangzhou airport will be a potentially competent rival of
Chek Lap Kok," he said.

Other than expansion projects to airport infrastructure and liberalising
agreements on international traffic, Professor Fung said mergers and
acquisitions among mainland airports were common.

The concept of a comprehensive airport system was being adopted by some
mainland hubs, he said.

As an example, Shenzhen airport jointly acquired shares in Chengdu airport
this year with a subsidiary of China National Aviation Corp.

Beyond the Pearl River Delta, Beijing Capital International Airport has
aggressively invested in neighbouring airports and intends to build up a
network in northern and northeast China.

The network system may enhance competitiveness by linking international
traffic from Beijing airport and the domestic market with other regional
airports in Tianjin, Shenyang, Dalian, Wuhan, Chongqing and Guiyang.

Professor Fung said Hong Kong's challenges also came from airports beyond
the mainland, as quite a number of Asian airports targeted their business
connections at China airports.

For example, Singapore's airport invested in Shanghai's airport and
Beijing's ground-handling facilities in the 1990s. The Japanese and Korean
governments have offered loans for projects at some secondary airports on
the mainland.

Also, some European airports have invested in mainland airports. For
example, Aeroports de Paris invested in the Beijing facility in 2000;
Copenhagen airport invested in Haikou airport in 2002; and Frankfurt airport
has held talks with Kunming airport about being the second-largest
shareholder.

"However, the opportunities for Chek Lap Kok in the airports of its
motherland are hindered as investment activities outside Hong Kong are
closely monitored by the airport's sole owner, the Hong Kong government,"
Professor Fung said.

He said the proposed privatisation of the Airport Authority might provide
more flexibility for business operation and investment activities beyond
Hong Kong.

"On top of the injection of capital investment into some developing airports
on the mainland, Chek Lap Kok - as a well-managed airport - is capable of
sharing its expertise on airport management, and offer training programmes,"
he said.

By contributing to its neighbours with financial, hardware and software
support, the airport could help develop a sophisticated airport system in
southern China. This would further enhance the competitiveness of Chek Lap
Kok and other delta airports.

One concern about implementing the airport privatisation would fall into the
category of setting the level of airport charges, which are tied to the
balance of business returns and social benefits, Professor Fung said.

The optimum form of regulation would be another key issue.


 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************