China currently owns and operates 202 commercial airports and 300 temporary landing strips across the nation, serving a region of 9.6 million square kilometers and 1.3 billion people. In the last decade, China has retrofitted, expanded, and newly built 10 to 15 regional airports per year. This sector’s speed will be maintained in coming years, and will be accompanied by other new developments in China’s major hub and general aviation airports.
China's central government has approved the construction of a second hub airport in the nation’s capital, the New Beijing International Airport, which is expected to be put into commission in 2019. At the same time, the CAAC announced that China will build 2,800 GA airports in total, located in each of China’s 2,800 counties before 2030. This wave of construction will keep GSE manufacturers and suppliers busy for quite some time.
The New Beijing Airport is designed to accommodate 45 million passengers annually on its opening date in 2019, eventually reaching 72 million passengers annually in 2025. Four runways and a 700,000-square-meter terminal are central components of the project, and the final phase of construction will result in a total of seven runways and 100 million passengers annually.
However, since China’s low altitude airspace has not yet been opened to general aviation activities, there are no GA airports currently operating in China. This has greatly affected China’s capacity for training new pilots, developing remote areas, and building an adequate GA industry. Most of all, this has delayed China’s capability and response time for emergency rescue services that are needed in the event of natural or manmade disasters. Nevertheless, China’s government has recognized the need for general aviation and has proven itself willing to take the lead in building this long overdue industry by determining to build GA airports in each of China’s 2,800 counties.
Opportunity abound – maybe.
What does this means for GSE makers and suppliers? Possibly everything, and possibly nothing. China is famous for building everything on enormous scales, including its international hub, regional, and GA airports and terminals. The New Beijing Airport presents many business opportunities for equipment manufacturers and suppliers that specialize in equipment that accommodates the special needs of larger airports. Local manufacturers cannot produce or supply equipment for these large airports, leaving only international manufacturers to fill that gap. However, as I’m sure you already know, such equipment is not necessarily needed by smaller regional airports, and the equipment they do use is already made by local manufacturers that can provide similar products at more affordable prices.
The continued construction of 10 to 15 regional airports per year and the appearance of a great amount of GA airports in next 15 years create another scenario that may make you reconsider the Chinese market for your products and services. Simply not going into the Chinese market because somebody has already copied your products or you are afraid somebody might copy them in the future is certainly an option, but it is one that will not help your business at all. Even if you stay out yourself, if the market demand is attractive enough for a company to consider local assembly and manufacturing, somebody else will eventually do it themselves.
Take advantage of the situation
While China is encouraging its local governments to involve themselves in the building of its aviation industry, many local governments are also providing special subsidies or land benefits to aviation-related manufacturing projects and businesses. This provides both international and local GSE manufacturers and suppliers an opportunity to take advantage of the situation by working together to build products and services that meet international standards while still being affordable enough for local airport operators.
The continued growing pace of China's market forces one to reconsider their strategy for customer support and service in such a marketplace; a strong local after-sales service and technical support team should not be too far away from local assembly and manufacturing facilities.
If you are not selling to China yet, perhaps considering the potential market size will help you recalculate your chance of success, and there is no better way to do this than by teaming up with some local Chinese market players to lower your operational and production costs.
The situation in China for the airport GSE business today reminds me of the similar situation of the small aircraft manufacturing industry in the last 20 to 30 years, during which the FAA insisted on high standards for aircraft certification. Due to the advanced technology of materials, CAD/CAM, and production and engineering management factors, aircraft made according to ASTM standards from other countries very quickly came to surpass FAA certified aircraft in economy. Now the FAA also has categories for aircraft made according to ASTM standards.
New CAAC Regulations
While a vast amount of information is available on the Internet, access to almost every technology is also available off-the-shelf, making it easier than ever before for competitors to make a product similar to yours. Given that, here is another reason to consider local assembly and manufacturing (if the idea of subsidies and land benefits is still not convincing enough) - in March 2015, the CAAC announced new regulations on the approval of organizations that inspect and certify specialized airport equipment to be used in China, which means that if you are not certified by the one of the CAAC's accredited organizations, in the future your products might not be able to sell in China at all.
Anybody who follows up on the story of China's development of EMAS for runway safety will understand how market factors and complexities in local certification can cause you to lose control of the market if you fail to adequately team up with local Chinese players already familiar with the system. This strategy may seem unethical, but it has proven itself to work well in protecting local competitors. While I am certain this strategy did not originate in China itself, Chinese companies are nonetheless implementing it very successfully in many areas to their own advantage. At this point, the steady growth of China’s airport market in the next one or two decades may give you the opportunity to leverage all the challenges of doing business in China into success for your company. Finally, do not forget the subsidies and land benefits that will be offered to you if you consider teaming up with a local manufacturer to work toward your mutual benefit.
Francis Chao is the Managing Director of Uniworld, LLC, The China Business Specialist, and Publisher of the China Civil Aviation Report. He can be reached at [email protected] or by visiting www.UniworldUSA.com.