Jonathan Campbell, a London-based investment manager, had lived in Beijing for four years during the 1970s when his father, an Irish diplomat, was posted there. Jonathan never had the opportunity to revisit the city until April 2007, when he accompanied his wife, a lawyer expecting the couple's third child, on her first tour of China.
A couple of days later, when the Campbells checked out Le Royal Meridian, a swanky new hotel overlooking the Bund in Shanghai, Ben Lao, vice president of Ricondo & Associates, an airport planning consultancy in the U.S., and a frequent visitor on business trip to China, checked in. "So many people have not visited China yet," he said, referring to people like Mrs. Campbell. "The Beijing Olympics will bring them here, and you are going to need lots of airports," he said with a chuckle.
Indeed. Nearly 125 million visitors travelled to China in 2006, according to the General Administration of Customs. Further, during the high-level China-U.S Strategic Economic Dialogue led by Chinese Vice Premier Wu Yi and U.S. Treasury Secretary Henry Paulson, a much-watched bilateral aviation agreement was announced on May 23, which is set to double the number of passenger flights between the two countries by 2012.
China's civil aviation industry is already at full throttle. In 2006, according to the Civil Aviation Administration of China (CAAC), China accommodated 160 million passengers and 3.49 million tons' cargo and mail, 15.9% and 13.9% higher respectively than the previous year. These numbers are set to grow by 16% and 12% in 2007. China's passenger turnover is growing 9.8 percentage points faster than the world average.
The Beijing Olympics in 2008 and Shanghai World Expo in 2010 are expected to attract an unprecedented numbers of overseas visitors to China. These will probably number in the millions. Add to the equation enthusiastic domestic travellers and the ever-swelling shipments of goods from China to world markets, and it is clear why observers expect to see hectic airport expansion and construction for many years.
CAAC: Sky-High Ambitions
The CAAC, the top regulator for civil aviation in China, is spearheading this great catch-up effort. Minister Yang Yuanyuan has made China's aviation ambitions amply clear on various occasions. "China will migrate from an 'aviation giant' to a world-class 'aviation power' in 20 years' time," said Yang at the China Civil Aviation Development Forum held in Beijing on May 9-10, 2007.
Tian Baohua, Dean of CAAC College told China Knowledge@Wharton that in terms of numbers, this vision translates into an airport for every 100-km catchment area (one-hour drive) in advanced regions and one in every 300-km catchment area (three-hour drive) in western regions. Today, China has 147 airports with a total passenger throughput of 332 million (defined as passenger number doubled) in 2006. The "vision" is to hit a passenger throughput of 1.54 billion passengers by 2020, said Tian.
In formulating its vision, China is benchmarking against the U.S., the No.1 aviation country in the world with 600 airports handling 740 million passengers a year. Other U.S. numbers are also referred to by decision makers as well as observers to justify the need to build (and sometimes not to build) airports in China. For example, there are 8.4 airports per every 100,000 square meters in the U.S., 4.5 times that of China.
When speaking about the airport density of the Yangtze River Delta (YRD) region, which has the most robust economy in China, critics often say that there are too many airports in that area. However, supporters counter that parts of New York state, the area around Chicago in Illinois, and areas in Southern California in the U.S. that have even higher density of airports and aircraft movements.
Words like "international hub" and "regional hub" frequently appear in China’s media these days, inspired by the American hub-and-spoke model. "More than 20 hub airports of varying scale and operating complexities are active in the U.S.," according to Ben Lao.
Local Governments Driven by Economy Boom
Local governments are just as enthusiastic about airport construction and expansion, if not more so. Airports are perceived as great drivers of local economies in China. Take the YRD region, for example. It has 10 airports, and almost all are being expanded. Shanghai is positioned as an international hub with two airports -- Pudong will achieve 80 million-passenger capacity and Hongqiao 30 million by 2016.
But it is obvious that the pair of airports in Shanghai alone cannot meet the growing demand of the whole YRD region. According to "China YRD Aviation Infrastructure Development Study" completed by Garfinkle & Wang Associates (G&W), a Virginia-based aviation consultancy, YRD airports will have to handle 240 million passengers (up from 67.35 million today) and 10 million tons’ cargo (less than 3 million today) by 2020.
Southern Jiangsu, the greater Suzhou-Wuxi-Changzhou (SXC) region already has a GDP equivalent to 95% of Shanghai. The plan to build Sunan (southern Jiangsu) Airport has been heatedly debated for years, starting soon after Shanghai moved all international flights to Pudong from Hongqiao, immediately adding at least 2 hours' extra journey time (ground traffic is notoriously congested) to export cargo generated from the Greater SXC regions.
Suzhou, Wuxi and Changzhou all vowed to build an international airport. It seems that Wuxi came out on top. Yang Weize, party secretary general of Wuxi City, while attending the National People's Congress (NPC) in March 2007 in Beijing confirmed that Wuxi had been picked as the site for Sunan Airport, a medium-sized hub with international flights. Li Xian, director of the Liaison Office of Wuxi Airport Company, confirmed to China Knowledge@Wharton that the airport was an expansion of the old Shuofang Military Airport and the designed passenger handling capacity stands at 3 million right now.
Planning vs. Reality: Hard to Catch
The rush toward new airport construction extends beyond the YRD region. The demand is real and growing. But airports are costly and take a long time to build. Amid this great drive to expand, visionaries, cheerleaders and skeptics within the academic and consulting communities as well as the media have begun to question the pace and scale of many projects.
"It appears that more intensive, methodical and meticulous planning efforts would be needed in China," says Ben Lao, the airport planning consultant. Lao has been involved in the planning of over 70 airports internationally. As a lead lecturer at Harvard Design School's Executive Education Course on Airport Planning and Passenger Terminal Design, he is especially concerned with terminal functionality, flexibility and affordability to maximize passenger comfort and convenience. "Some U.S. airports were initially planned at the infancy of the aviation industry," said Lao, "Their plans and designs were initially focused on aesthetic forms that do not lend themselves easily to operational efficiencies and customer friendly features, and had to undergo costly retrofit program." He named JKF, Los Angeles, Houston and Washington Dulles as examples and hoped China could learn from these cases.
Other critics are much harsher. "Strategic planning has not been a strong aspect of Chinese airports," G&W wrote in its study on YRD aviation development, "Only a few YRD airports have made even partial efforts in this regard".
According to G&W, which has spent nearly a year on in-depth study of YRD airports, each airport in the region should have distinctive positioning – Shanghai Pudong, YRD gateway and major China hub; Hongqiao, Origination & Destination (O&D) and a component of Pudong hub; Nanjing Lukou, East China cargo gateway and China's north-south hub; Hangzhou Xiaoshan, O&D; Ningbo, O&D and international airport; Wuxi – need to resolve structural, airspace control and land-for-expansion issues before being properly positioned; Nantong and Changzhou, low-cost airline airports.
But in China's reality, lack of planning and intra-regional coordination has led to missed opportunities. For example, the two airports in Shanghai accounted for 71.2% and 86.2% of passenger and cargo traffic in 2005. "Given the fact that YRD has developed the sixth-largest metropolitan region in the world, Shanghai Airport Authority (SAA) had a golden opportunity at the initial stage of airport decentralization to become a regional airport management company like the British Airport Authority (BAA)," wrote G&W.
"It could have greatly increased the overall efficiency of all airports in YRD and reduced the costs of airport construction and expansion." Unfortunately, SAA has failed to play an effective region-wide leadership role, points out G&W. In contrast, many international airport management companies have been active in the region. As a result, SAA's impact on regional airports is expected to decline.
Present and Future Challenges
YRD integration is far from being a new concept. It was defined as a national strategy in November 2004. On an aviation forum in the same year, "YRD Airport Alliance" was already being fleshed out, and eight airports expressed interest. The initiative was also welcomed by East Regional Administration of CAAC.
But in reality, local governments seem to be only paying lip service. "There has been no substantial progress on YRD integration," wrote Yang Jianwen, a policy advisor to the Shanghai Municipal Government. "YRD integration becomes urgent and breakthroughs have to be made." Mr. Lu Xiongwen, Dean of Management School of Fudan University suggests local governments should "give up a bit of control, local interests and short-term measurements."
If only it were so easy. "If YRD were truly integrated, the international hub shouldn’t have been built in Pudong. It should have been by the side of Lake Tai (NB: Lake Tai is in the south of Jiangsu Province, which conjoins the three provinces), and there wouldn’t be a need for Sunan Airport at all," an industry expert, Zhang Fan, told China Knowledge@Wharton. "Shanghai is definitely favored as far as national economic policies are concerned, and Shanghai cared too much about itself when planning for Pudong Airport. It is so far away and inconvenient for Zhejiang and Jiangsu. That's why the call for Sunan (southern Jiangsu) Airport is high. Local governments care about their own political records, and otherwise people would complain their government was not doing a proper job." Zhang told China Knowledge@Wharton that Sunan Airport had not been officially approved yet.
On YRD aviation integration, Xu Changle, executive deputy dean, Institute of Yangtze River Region Development, calls for patience. "People need to build a consensus. Then we can sit down to talk and try to get the approval from the Central Government," said Xu to China Knowledge@Wharton. "Integration cannot be achieved overnight. YRD integration has been planned for a long time. It is faster in certain industries and slower in other sectors. Airport construction in YRD has to be forward-looking, but not too forward-looking." Xu's enigmatic words leave lots of food for thought.
Military control of the airspace and inadequate development of regional airlines further constrain airport development. "In the U.S., airspace if free and open when there are no wars. U.S. Air Forces exercise over sea and desert," Tian Baohua, dean of CAAC College told China Knowledge@wharton, "Chinese air force bases are close to cities, and there are limited corridors in the sky for civil aviation."
Another distinctive characteristic of the U.S. is the partnership of airports and airlines and the great role regional airlines play in developing the whole aviation system. "The fate of hubs is often tied to that of the airlines operating them," Ben Lao explained. Regional airlines account for 20% of the passenger traffic in the U.S. vs. 6.8% in China, which explains the lack of traffic in smaller airports. China, which is historically at an early stage of its economic boom and which likes to benchmark against the U.S., still has a long way to go.