Since January 15 this year, private investors have enjoyed equal
rights with the government in ownership of civil air transportation
enterprises. Now the General Administration of Civil Aviation of
China (GACAC) is drafting policies that will allow private
investors to build, buy or manage airports, according to GACAC
Airport Department Director Zhang Guanghui.
Zhang was speaking at the China Airport Summit held in Shanghai
on April 4.
GACAC had earlier announced that it intended to develop policies
providing legal groundwork for private buyouts of airports.
Airport construction is growing rapidly around the nation,
according to Zhang. Since the1990s, 45 airports have been newly
built or expanded, while over 90 were renovated. Some 110 billion
yuan (US$13.3 billion), mainly raised from central and local
governments, airport groups, banks and foreign investors, was spent
on airport construction during the period.
Although several private investors are already eyeing airport
opportunities, Zhang warned that they should exercise caution. More
than 70 percent of the country's airports, especially the small and
medium-size facilities in western China, are experiencing operating
difficulties. Although the large airports are usually profitable,
they are very expensive acquisitions.
Except for a few aviation hubs and some airports in popular
tourist destinations, the majority of domestic airports are losing
money, agreed Wang Shichun, an economic administrator with the
Heilongjiang Airport Group.
An airport at which a Boeing 737 aircraft can land would have a
price tag of 130 to 140 million yuan (US$15.7 to 16.9 million). The
investment might be recouped in 8 to 10 years, but only if the
annual passenger traffic exceeded 200,000 to 300,000
person-times.
Sha Hongjiang, vice director of GACAC's Airport Department,
pointed out at the summit that according to a regulation passed by
the State Council in March 2002, the government will end its
subsidies to domestic airports by the end of this year.
They will basically have to introduce strategic investors and
sink or swim as joint-stock companies, he said.
Most domestic airports are now managed by local governments.
Construction and expansion projects have taken a toll on local
budgets.
Wang Shichun said that Heilongjiang Airport Group's annual
expenditure is about 280 million yuan (US$33.8 million), while
total revenue is about 210 million yuan (US$25.4 million). For the
past two years, the airport has received a subsidy of 66 million
yuan (US$8.0 million) annually. Clearly, it relies on the
government handout to offset losses.
The group owns five airports, with total assets of 1.7 billion
yuan (US$205.4 million). Buyouts or stakeholdings by strategic
investors offer possible solutions to its operating
difficulties.
Assistant President Wang Jinsheng of the Yunnan Airport Group
said his company is also considering strategic investors, but only
those on a carefully selected shortlist. The Yunnan group is
primarily interested in foreign investors who can bring with them
more advanced technologies and management experience.
Sha Hongjiang said recent amendments to the Regulation on
Foreign Investment in Airports, which was first promulgated in June
2002, will allow foreign investment in newly constructed
facilities.
Some listed airports have already brought in foreign investment,
and some foreign companies have set up service-safeguarding joint
ventures with airports.
"The maximum permitted shareholding and field for foreign
investment will open further," Sha promised.
(China.org.cn by Tang Fuchun April 7, 2005)