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China plans airport building spree
Published on: 2011-02-25
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China will build another 45 airports over the next five years, the industry regulator said on Thursday, raising fresh questions about the potential for overcapacity in the transport sector.

Li Jiaxing, the head of the Civil Aviation Administration of China, said that the new investments would take the total number of airports in the country to 220, even though most of the existing airports were losing money.

Although demand for air travel has grown rapidly in recent years as the purchasing power of Chinese consumers has risen, the expansion in airport infrastructure, which accelerated during the stimulus programme over the past two years, has become one of a number of potential sources of over-investment across the economy.

Mr Li, who used to run Air China, the country’s biggest airline before moving to the regulator, said that the government would invest Rmb1500bn ($228bn) in the aviation sector in the period to 2015, although he did not say how much of that would go to airports.

According to Reuters, Mr Li, who is also a vice minister for transport, admitted on Thursday that 130 of the country’s 175 existing airports were currently lossmaking, with the combined loss amounting to Rmb1.68bn.

While large new airports in some of China’s major cities have quickly found themselves operating near to capacity because of rising traffic, industry officials say that there are a string of new airports in smaller cities which operate only a handful of flights a week. Goldman Sachs forecasts that passenger demand will rise by 15 per cent this year, as the growing middle class in China travels more.

The rapid expansion in China’s high-speed rail network has also raised questions about over-investment, a concern that could have been connected to the news 10 days ago that the minister of railways Liu Zhijun is being investigated for “a severe violation of discipline”.

While some think high ticket prices will limit the demand for high-speed rail, supporters of the investment argue that the new expanded passenger network will free up space on the existing network for transporting cargo such as coal, much of which is currently delivered by truck. However, the new high-speed rail routes, such as the Wuhan-Guangzhou line, which cut the journey time from 10 hours to three hours, are also a strong competitor for the aviation sector.

One potential boon for China’s new airports could come from smaller aircraft, after the government announced in November that civilian aircraft could fly in airspace below 4000m. The decision could prompt a big increase in the use of helicopters and light aircraft. Sinolink Securities, a Chinese brokerage, estimates that purchases of helicopters over the next decade in China will reach 3,300.
 

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