There has been a dramatic upsurge in airport building and expansion across Asia but the 'if we build it, they will come' philosophy has not proved true for all
Barring a few notable exceptions, most major airports in Asia provided poor facilities before the mid-1990s. There were few amenities and scant regard for appearances, with many hubs barely able to provide adequate accommodation for their passengers.
But times have changed dramatically, and recent years have seen massive developments across the region, which now boasts a growing number of impressive gateway airports. Hong Kong, Kuala Lumpur, Macau, Seoul and Shanghai are but a few of the cities that now have grand new airports. They have sparked an increasingly hard-fought battle for "hub" status as governments have realised the importance of these facilities as potential generators of economic growth.
And the region's building boom is by no means over. Major new airports are under construction in Bangkok, Guangzhou and Nagoya, and plans are afoot to extend more airports elsewhere. New or expanded terminals have also opened in recent years at several other capital city airports in the region.
Why the building boom? One simple reason is that Asia's air traffic is growing quickly - faster than in any other part of the world - and many of the old facilities were bursting at the seams, requiring modernisation or outright replacement. But there is more to the development run. In the past, many of Asia's governments failed to see the economic benefits associated with hub airports. They have now seen the light.
Not all has gone to plan, as the "if you build it, they will come" phenomenon has not proved true for some. Osaka's Kansai airport, for example, which opened in 1994 to great fanfare, has failed to attract expected traffic levels. The same applies for Kuala Lumpur International Airport in Malaysia, which opened in mid-1998 but which has suffered from the embarrassing withdrawal of several high-profile customers, such as All Nippon, British Airways, Lufthansa, Northwest and Qantas Airways.
The Centre for Asia Pacific Aviation, an Australia-based consultancy, believes that not all hub facilities will be as successful as forecast. It argues that the post-11 September industry downturn highlighted fundamental issues that should, at least in the medium term, be addressed by some Asian governments and airport operators.
Centre managing director Peter Harbison observes that, during the downturn, many carriers increased intra-Asia flights, where business held up better than on inter-continental routes. This, he says, may have changed some airlines' focus for good, and as a result, some airports aiming to be major international hubs should now be focusing attention more on developing point-to-point traffic, and perhaps ultimately reworking investment plans.
But not all agree, in part, because traffic has rebounded more strongly since the start of this year than most had foreseen. And the building boom seems set to continue, with no governments or airport operators announcing any real scaling back of their grand plans.
Observers say that, generally, the region's major airports should be able to handle traffic demands for at least the coming decade after the current boom eases around 2005. Most of the new airports, such as Incheon outside Seoul, have ample room for growth to allow them to handle traffic needs for decades to come. But one question-mark hanging over the ambitious plans is their funding. One answer is partial privatisation: this is a trend that began several years ago and is likely to continue.
Auckland airport in New Zealand was the first in the Asia-Pacific to be publicly traded, after the New Zealand government decided to sell its majority holding in 1998 through an initial public offering (IPO).
Kuala Lumpur International Airport operator Malaysia Airports Holdings is also partly in private hands, after the government diluted its holding late in 1999 through an IPO. More state-held shares are earmarked for sale to a foreign partner, although talks to dispose of a sizeable stake to the Schiphol Group failed earlier this year.
Fundraising
Beijing airport's operator, Beijing Capital Airport, sold 35% of the facility through a successful IPO in Hong Kong early in 2000. The funds raised were used to reduce the airport's debt and help pay for renovation of the old passenger terminal. More shares may be sold in future to help finance purchases of other Chinese airports, which is part of the operator's expansion strategy.
Other governments are expected to follow the partial privatisation path. Singapore, for example, has toyed with the prospect of listing Changi Airport, while Hong Kong has talked about the possibility of its airport authority being privatised. Guangzhou authorities are planning an IPO to help cover costs for a new airport now under construction in the southern Chinese city.
With so much expansion and so many airports fighting for hub status, there will clearly be winners and losers. As Malaysia's woes show, building an impressive new airport does not automatically lead to huge traffic growth. Many airport operators are now offering incentives such as reduced or waived landing charges to lure traffic away from rivals and to their landing strips.
Whether such incentives will prove successful in the long term remains to be seen, but one thing is clear: the building spree will not be coming to an end anytime soon.
Source: Airline Business
