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)
