Posted by: mulrickillion | October 15, 2011

Ready for takeoff

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By Meng Jing, China Daily, 2011-10-14 —

Foreign firms step in as Chinese airports chart modernization path

Though air travel is booming in China, only a handful of the airports are actually in the black. But with China planning to invest some 1.5 trillion yuan ($236 billion, 174 billion euros) over the next five years to develop infrastructure at its airports, fortunes could change for many of them even as multiple windows of opportunity open for foreign companies to cash in on.

Between 2006 and 2010, nearly 250 billion yuan of the total outlay of 1 trillion yuan for the aviation sector in China was spent on infrastructure construction, including 33 new airports and improved facilities at over 142 airports, according to the Civil Aviation Administration of China (CAAC).

Under the 12th Five-Year Plan (2011-2015), China plans to expand as many as 91 of its existing 175 airports, while 56 new ones have been planned and 16 earmarked for relocation.

Though higher revenue is the prime objective of the airport modernization program, it draws on the desire of many Chinese airports to become major global transshipment hubs for passengers and cargo replete with facilities that outstrip major Western airports.

While some expansion plans veer toward renovation of existing passenger/cargo terminals or building larger ones, others hinge more toward building new runways and other airport related infrastructure.

But for overseas investors, it is the big retail push unleashed by these programs and the need for technology solutions that offer the most promise.

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With China becoming the biggest luxury market in the world, the expansion plans open up the booming domestic retail market for a host of foreign companies and brands. At the same time foreign companies can also look for other retail opportunities as Chinese airports metamorphose into airport city models for sustained revenues.

The airport city model is based on the concept that airports can do more than the traditional aeronautical services, by evolving new non-aeronautical commercial facilities. Airport city models can be best illustrated by the success story of the Amsterdam-based Schiphol Airport.

Wang Jian, secretary general of the China Civil Airports Association, says that many cities and gateway airports in China are moving in a similar direction. "It is a big opportunity for Western companies. They have got several decades of experience. What we don’t have and don’t know is the business potential," Wang says.

"In Amsterdam, people go to the airport using trains and other means just for shopping. The airport has lots of nice shops and restaurants, and a host of office buildings in which several people work, making the whole facility an integrated one," says De Haas Albert, the transport and water counselor at the Netherlands Embassy in China.

Haas says that though China has several airports with shops, none of them are airport cities yet.

"The proposed second international airport in Beijing has plans to be an airport city. Right now it is still on paper and all you will see is just the corn. But in five years, who knows," he says.

Of the world’s leading 500 global luxury brands, over 70 percent are present in China and looking to grow further, according to industry estimates. Prominent among them are big-ticket brands like Giorgio Armani, Jimmy Choo, Cartier, Tod’s, Dior, Fendi, Burberry, Hugo Boss, DKNY, Ravissant and Louis Vuitton.

What makes the airport pitch interesting for many of the companies is the relative infancy of luxury brands at major Chinese airports. Though some of the brands have a fledgling presence in some airports such as Beijing and Shanghai, none of them can boast of the kind of shelf or store space they enjoy in airports such as Hong Kong and Kuala Lumpur.

With wealthy Chinese being the major shoppers at many leading international airports, the brands are now looking to boost their clientele in China. For many of them an airport presence is the easiest ticket for market entry in China. . . . 

Ready for takeoff|Cover Story|chinadaily.com.cn

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