China’s Airports – Maxed Out

Thursday, February 14, 2008 22:43
Posted in category Uncategorized

In China, it really is difficult to imagine all the behind the scenes planning going on every 5 years in Beijing. But, the evidence is very visible. New government buildings in many city, airports, ports, roads, metro, and so on. It is an infrastructural orgy of investment, and as we have seen over the last 10 days, it is still not enough.

As if we needed another reminder of just how the transport systems in China are being pressed to the max, this Aviation Week article provides as interesting look at the aviation industry in China and how it just cannot grow anymore without the addition of more infrastructure.

With regard to the recent air capacity issues, this is a situation that was horrible 18 months ago. Planes were consistently 1-2 hours delayed, lines were long, and even getting a cab from the airport seemed to take a half day (unless you took the gypsy cabs). A large part of this was the number of airplanes available for commercial airliners, and the fact that any weather delays forced the system to a halt as new lanes could not be made available.

There has been some improvement over the last year as a few “guaranteed” lanes between the major cities have been established, and as they are the most heavily traveled lanes it has provided some relief. However, as a recent announcement to build 97 new airports indicates, there is still a lot to do.

What I find interesting about this situation is that while oil prices are increasing, and traffic has never been higher, the prices are still going down.

With all that China has grown, it is fairly easy to get lost in the glitter and believe that things are more stable that they really are, and the last week has really shown this. There has no doubt been unprecedented growth and investment in many areas of the economy, but things are still very fragile in certain areas and will require more time before fully balancing. The airline industry is one of those

Both comments and pings are currently closed.

2 Responses to “China’s Airports – Maxed Out”

  1. ShaMao'er says:

    February 15th, 2008 at 6:55 pm

    Interesting post. A typical example of over-investment with no market demand basis. Can find it in segment after segment in China, driving down prices for a wide range of goods and services.

  2. Rich says:

    February 15th, 2008 at 7:36 pm

    ShaMao,

    I am not sure that there isn’t demand. Last night I flew in from Munich on Lufthansa and there were no available gates.

    To your point about driving down prices, I think that if it is the intention of the government to get people off the trains and into the air, then this is a good policy. New airports will be built to support, but that takes time.

    At some point, I think airlines will be forced into raising prices a bit, but it you look at price to distance, China really isn’t that far out of whack with the US (I cannot compare to EU).

    R