China Airport Boom: Will There Be a Bust?

Only four years after Beijing Capital International Airport expanded by adding its massive Terminal 3, which can process 40 million passengers a year, the sprawling air hub has run out of capacity. To cope, Beijing will this year begin construction on its third airport in Daxing district, on the southern outskirts of the capital. According to the official blueprint, Daxing airport will cover more than 90 sq km and boast nine runways by 2030, with an annual capacity of 80 million passengers. At that size, it would surpass both Hartsfield-Jackson Atlanta International Airport and London’s Heathrow Airport to become the busiest aviation hub in the world. Daxing’s price tag? $12.66 billion.

Daxing airport is just one example of an airport-construction boom occurring in China. Faced with a slowing economy, the Chinese government has reached for its favorite prescription: more money for lavish infrastructure projects. On July 20, the Civil Aviation Administration of China (CAAC) announced that China would build 82 new airports and expand 101 existing ones across the country from 2011 to 2015, in order to form a national airport network that will cover 89% of the country’s total population by 2020. By the end of 2015, there will be 230 passenger and cargo airports in China, up from 182 now.

China’s civil-aviation industry has been developing at a double-digit clip over the past three decades, but growth is now soaring even higher. In 2010, air-passenger traffic and air-cargo transport increased 93% and 82%, respectively, compared with four years before, according to CAAC statistics. At a press conference in July, Li Jiaxiang, director of CAAC, emphasized the necessity of building more airports: “America has about 19,000 airports, while even Brazil has about 700,” he said. “How many do we have? Just 182.”

The airport-construction binge is spreading across the country. In May, the northwestern region of Qinghai, which is famous for its Tibetan grasslands and remote mountains, announced it would expand its two existing airports and build another six feeder airports within the next four years. Another vast northwestern region, Xinjiang, will soon construct four airports. Chongqing, a megalopolis in western China, said early this year that it would build two new feeder airports. And at least 10 airports in smaller cities have announced they will add second terminals.

“For a local government, an airport is not merely a vanity project but also an economic engine,” says Li Xiaojin, director of the institute of air-transport services at the Civil Aviation University of China. His research suggests that investment in an airport can produce an output eight times that amount for the local economy.

The small resort town of Mohe illustrates the economic benefits an airport can bring. Located near the China-Russia border in Heilongjiang province, Mohe is famous for its ice carvings and the opportunity to see the aurora borealis, or Northern Lights. But the local economy struggled without an airport to deliver tourists. In 2008, a new airport opened. “The local officials told me that now the government generates more money in one day than it did in one whole year in the past,” says Professor Li.

But with new airports mushrooming across China, there are concerns about safety, especially inexperienced pilots and ground crew. In 2010, an airplane crashed when it tried to land at the Yichun airport in Heilongjiang province, killing 42 people. A government investigation later blamed an unseasoned pilot for the tragedy. “The safety issue is always a big challenge in this industry, especially during a period of fast development,” says Professor Li.

And despite the potential boost that an airport can bring for a local economy, most Chinese airports are money sinks — a fact that’s been glossed over in the airport-construction rush. In fact, CAAC reported that last year around 130 of the 182 existing airports in China were losing money. A Chinese airport must handle at least 1 million passengers annually to make a profit, according to Professor Li’s research. “Unfortunately, about 80% of the Chinese airports cannot make [that target],” he says.

For the future Daxing airport — a hub to be located in the booming capital of the world’s most populous country — attracting enough passengers shouldn’t be a problem. But it faces another dilemma common in China: limited airspace. The Chinese sky is under the control of the country’s air force, which hogs around 80% of the total airspace, with the civil-aviation industry taking the rest. With flight demand soaring, Beijing is already suffering from serious air-traffic congestion. “About 400 flights are denied a slot every day at Beijing’s existing airports, because the airspace is filled to its capacity,” said CAAC director Li in July.

Over the past several years, the civil-aviation industry has called for reform of the present airspace-management system, but the air force appears unwilling to loosen its grip. Indeed, construction on the Daxing airport was supposed to have started by now. One reason for the delay, according to Professor Li? Worries that Daxing won’t be given a big enough slice of the sky to warrant such an expensive new infrastructure project.