FLUG REVUE September 2002: Shanghai airport expands to meet boom

PUDONG AIRPORT SERVES BOOMING REGION

By Heiko Stolzke

Two years of planning, two years of building. Then the first aircraft will take off. What European airport managers can only dream of is the order of the day in Asia. Five major hubs came into existence between 1994 and 2001: Hong Kong Chek Lap Kok, Osaka Kansai, Kuala Lumpur International, Seoul Incheon and Shanghai Pudong. The tortuous process which German airport planners have to undergo in order to gain the necessary approvals is quite alien to Asian airports: they have been built on artificial islands or far away from the population centres and do not have to endure the protests of local residents.

Today China plays a key role in the Far Eastern network of airports: in 2001, 64 million passengers used the three hubs of Peking, Hong Kong and Shanghai. While the airport in the capital city serves as gateway to the north of the country, Shanghai covers the eastern part of this vast country. Meanwhile Hong Kong serves southern China. Moreover, the airport which is the home base of Cathay Pacific also has the advantage of being the classic transfer node serving south-east Asia and Australia.

The market potential in the "Middle Kingdom” is enormous: of the 129 commercial airports in China today, 23 are designed to handle aircraft up to the size of the Boeing 747, while 103 can take Boeing 737's or Airbus A320's. A further 40 airports should be finished in the next four years alone. For once Boeing and Airbus are agreed about something, namely the development forecasts for air travel in China: both companies view the Chinese market over the next decade or so as the region with the second best sales prospects after the United States. The Chinese aviation authority, the CAAC, estimates a requirement for 1,600 passenger aircraft by the year 2020.

At the international level, growth factor number one in the next 15 years will be Pudong airport, Shanghai. Just how rapidly the Chinese aviation culture has altered over the last 30 years becomes apparent when one compares Pudong and Shanghai Hongqiao, the former central airport for the metropolis. Narrow corridors, musty hangars and a baggage handling system which can barely cope with the volume of luggage found on a Boeing 747 – this is the reality at the old airport in this city of 16 million inhabitants. By contrast, modern architecture, short routes and rapid check-in are the salient features in Pudong. The short construction period for the project would no doubt reduce planners in Frankfurt or London to tears. Design of the new airport began in 1995. The first cut of the spade followed two years later. Then on 1 October 1999 the first international flight took off.

At present the airport is above all a gateway for direct connections and transfers to other destinations in China. However, in the future increasing numbers of transfer passengers bound for other Asian countries will travel via Shanghai. In the first phase of expansion, which was commissioned three years ago, up to 20 million passengers a year can be handled at the airport. By 2005 another terminal and a second runway will have been added. This will double capacity overnight. By the end of the project there will be four terminals and four runways. Up to 80 million passengers should then be able to take off from Pudong every year. There will be no colourful mixture of terminal architecture, such as is fashionable in many large European and American airports. Instead, the new terminals will have exactly the same design as the existing terminal. Only the interiors will differ slightly.

The economy in the Shanghai region is booming. A large number of German companies have opened offices and/or plants in the 150km x 100km sized city. From Siemens to Volkswagen, west-east co-operation extends to virtually every technology field. Prestige project number one is currently the high-speed railway link that will connect Pudong airport to the city centre. The 30km distance between an underground terminus and the terminal should enter service in the next year. At present Hongqiao airport still has the edge with regard to connections: as a result of the rapid growth of the city, today it is situated right in the centre. Transfers to the centre take just 15 minutes. For this reason there is no question of closing the airport.

The main beneficiary of the presence of German companies is Lufthansa. Lufthansa currently operates ten flights a week to Shanghai. There is a daily Boeing 747-400 service from Frankfurt. Three times a week an Airbus A340 flies to Pudong from Munich. "We have extremely good growth potential,” says Don Bunkenburg, General Manager Eastern China at Lufthansa, assessing his market. This applies not just to passenger transport. Lufthansa operates the Pudong International Airport Cargo Terminal (PACTL) jointly with the Pudong airport company and a Chinese transport agency. "Shanghai is the production centre of China. This is our key advantage,” says cargo specialist Nils Reu. On the apron next to the cargo terminal, transport aircraft belonging to all the big names are to be seen: ANA, UPS, LH-Cargo and FedEx.

When it comes to connections to the "Middle Kingdom”, Lufthansa also benefits from a teaming agreement with Air China. Since October 2000, the two airlines have been operating codeshare services between Frankfurt and Peking and Shanghai. "In this area business has gone extremely well on both sides,” says the director of Lufthansa's Chinese operations, Peter Emmerich, in Peking. He believes that the main growth potential in the coming years lies in Chinese customers. "Affluence is growing from year to year in China and, along with it, the potential for business and tourism flights.”

In 2001, some 12.1 million Chinese people travelled abroad, spending an average of around $2000 per head. In addition to the co-operative agreement with Air China, Lufthansa also has a partnership with regional carrier Shanghai Airlines. This company operates some 80 domestic routes to 27 Chinese metropolises with a fleet consisting of Boeing 737's, 757's and 767's. This partnership has the additional advantage that Shanghai Airlines is also a codeshare partner of Air China.

When it comes to making growth projections, Shanghai can rely above all on a gigantic domestic market. Transfer connections to the central region will also increase further over the next few years. However, the competition for the top positions among the aviation hubs of Asia will be intense.

For example, Hong Kong has a long tradition of being a popular transfer hub for passengers heading for south-east Asia. However, this airport in the former British crown colony is viewed by management at Pudong more as a partner in a common Chinese hub system (see interview with the President of the Shanghai Airport Authority). Here they are expecting developments to mirror those of Munich and Frankfurt.

On the other hand, the competition in Korea and Japan is unlikely to be so co-operative. The aspirations of the toughest competitor, Incheon Airport near Seoul, are particularly grandiose. In its present stage of development the airport that was only opened in 2001 can accommodate 27 million passengers per year and 170,000 departures on two runways. Between now and 2020 two more runways and new terminals will create capacity for up to 100 million passengers per year. In Korea the inducements being used include a favourable charging policy (a $2,800 landing charge for a Boeing 747-400 in Incheon, compared with $4,600 in Hong Kong and ca. $5,000 in Shanghai).

However, when one considers the size of the airports in relation to their domestic markets, then the Chinese are holding all the trump cards. Whereas about 11 million people live in the Seoul region, Shanghai already has 16 million inhabitants. When one moves on to compare the national populations, the picture becomes even more clear-cut: South Korea has a mere 44 million inhabitants compared with China's 1.3 billion. Even if Korea is at present the more affluent of the two, this fact is also likely to change in the medium term. But one thing is certain: the airport infrastructure in China will be prepared for the growth.

From FLUG REVUE 9/2002, page 80

Last updated 9 August 2002

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