The central government has set limits on the scale of airport construction
for the next five years, but that isn't stopping investors from Hong Kong to
Amsterdam from seeking a piece of eastern China's airports.
While the government warns that some of China's airports are being sustained
by state coffers, there's been a recent flurry of deals in the sector. That
could spell short-term losses for investors, say analysts, but the injection of
foreign cash and skills might eventually pay off.
Foreign investors will bring advanced management experience and help local
airports strengthen their cost control, says Xu Changle, deputy director of the
Shanghai-based Institute of Yangtze River Basin Development.
Earlier this month, the Shanghai Airport Authority (SAA) announced that the
Hong Kong Airport Authority (HKAA) may sign an agreement with SAA this month to
buy a stake in Shanghai Pudong International Airport's new freight zone to
participate in its freight-handling business.
The size of the stake has not yet been decided and other airlines can still
bid for a share in the freight zone, Hong Kong-based newspaper Wen Wei Po quoted
SAA's vice-president Li Derun as saying.
Though the SAA is not in need of capital, it still "agrees in principle" to
the HKAA purchase, considering its "strong interest" and the Closer Economic
Partnership Arrangement (CEPA) between Hong Kong and the Chinese mainland, Li
says.
The new freight zone, Freight Zone Phase Two, is currently under construction
in the west of the Pudong Airport and is to be completed in 2007. It is expected
to extend to 2 kilometres in length and have the capacity to handle 3 million
tons of freight when it's finished.
The existing freight zone is 51 per cent-owned by the SAA, 29 per cent by
German airline Lufthansa, and the rest is owned by Shanghai-based joint-venture
freight forwarder JHJ International Transportation Co.
Taiwan-based Eva Air is another investor who is interested in the air cargo
business in the Pudong airport.
Last month, Eva Air announced that it has received approval from the Taiwan
Investment Evaluation Committee to purchase 25 per cent of the shares of
Shanghai International Air Cargo Co Ltd held by Sino Prime Ltd at a total cost
of US$3.88 million.
Based in Shanghai's airport, Shanghai International Air
Cargo Co Ltd was issued an Air Operator's Certificate and Operation
Specification from the General Administration of the Civil Aviation
Administration of China (CAAC) East China Bureau at the end of June.
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