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China’s small and medium airports operating at 80% loss

12/03/2015| 6:02:11 PM| ChinaTravelNews 中文

CAAC distributed a total of RMB1.211 billion in subsidies to 146 airports. In 2014, 135 small and medium airports received a total of RMB1.079 billion in handouts.

The Civil Aviation Administration of China (CAAC) will provide total subsidies of RMB1.314 billion to 152 small- and medium-sized airports next year, it has been stated in the "2016 budget proposal for small airport subsidies". The subsidies are calculated based on the output of civil airports during the second half of 2014 and the first half of 2015 and are determined based on the guidelines of the Civil Aviation Development Fund.

Medium and small airports in the China heavily rely on State subsidies

“The proliferation of small airports is a contributing factor for the ongoing increase of airport subsidies year after year,” Civil Aviation Resource Network of China analyst Maogong Zou said. Under the 2015 subsidy plan, CAAC distributed a total of RMB1.211 billion in subsidies to 146 airports. In 2014, 135 small and medium airports received a total of RMB1.079 billion in government handouts.

The number of airports in China stood at 202 in late 2014. The target for 2015 is to increase the airport count to 230, according to CAAC's 12th Five-Year Plan.

CAAC’s director Jiaxiang Li has stressed that China has plenty of room to grow service standard and  aviation development. “We don’t have too many airports (in China). In fact, we are far from having enough to meet demand,” he said.

However, the performance of a large number of China’s small and medium auxiliary airports is far from reassuring. Data reveals that over 190 airports in the country recorded massive losses of up to 70%-80% and only around 50 airports are profitable.

“Actually this estimate may still be conservative, and losses should be around 80% as airports are receiving subsidies from various government levels on top of the CAAC subsidies. Over the past two years, regional governments have placed a strong emphasis on airport construction, and that has drawn investment and accelerated expansion. However the majority of these airports are being constructed in the mid-western region where low traffic hampers profitability,” an industry observer said.

However, it is still vital to develop small and medium airports. OPCO vice president and logistics industry expert Weihui Xie thinks that from a strategic viewpoint, having small and medium airports will help even out the distribution of airports around China. The industry adopts a generally-agreed standard that the ratio of investment against output for an airport can reach 1:8 if an airport is properly utilized.

“Although building airports won’t bring direct economic benefits, it can improve the region’s business environment and visibility while offering logistical resources. So from this perspective I would say State subsidies are a positive thing,” Mr. Xie said.(Translation by David)

TAGS: CAAC | airport construction | subsidies | investment
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