Other businesses buoy airports

Strong revenue growth witnessed in non-aviation sectors at major centers

Large-scale airports posted more sales revenue from their non-aviation business, especially in duty-free retail stores catering to affluent international travelers, helping to offset slower passenger throughput growth at major hubs in the country.

In the first half of the year, Hong Kong-listed Beijing Capital International Airport said in its earnings report that non-aviation business sales hit 3.35 billion yuan ($474 million), up by 24.8 percent year-on-year. Aviation-related sales though stood at 2.03 billion yuan, down 23 percent year-on-year.

"In recent years, the growth rate of passenger throughput at major domestic airports is around 5 percent, and it won't grow significantly. Besides, the fee charging standard of aviation business is strictly controlled by the authority, and airports are unable to increase the prices willfully," said Lin Zhijie, an aviation industry analyst.

"The revenue growth of airports will mainly rely on non-aviation business in the future. Prices of non-aviation business depends on market demand. Hub airports have ample passenger flows, including more high-value international transfer passengers. With better business layout at airports and their increasing profit-making ability, the growth potential of non-aviation operations is huge," he said.

For airports, aviation income mainly comes from charging fees for aircraft parking, the takeoff and landing of aircraft, and services such as the use of corridor bridges. Gains from non-aviation business come from the rent charged for various shops, restaurants and duty-free stores.

The capital airport said the fall in aviation income mainly came from the cancellation of airport fees levied on passengers. Non-aviation income, which now accounts for 62.19 percent of total revenue, has become a critical way for airports to turn a profit.

In February last year, the new operating contract of duty-free shops significantly boosted the proportion of revenue collected by airports. The growing number of international travelers and an increase in their consumption ability fueled the growth of duty-free shops, the capital airport said in a statement.

Under the new agreement, duty-free operators at the capital airport will share 42.5 percent of their sales revenue with the airport operator, up from the level of around 30 percent in the previous arrangement.

For Shanghai Pudong International Airport, where more than half of total passengers take international flights, its non-aviation business revenue in the first six month made up 62.9 percent of the total.

From January to June, the Shanghai-listed Pudong airport gained revenues from its catering and retailing business of 2.77 billion yuan, jumping 46 percent year-on-year, its earnings report said.

In the fourth quarter, Pudong airport will launch a mid-field satellite terminal to increase its capacity. By then, the areas of duty-free shops will be expanded further and sales from those shops will naturally increase, a research report by Minsheng Securities explained.

Last year, spending on luxury products by Chinese consumers reached 770 billion yuan, and nearly 540 billion yuan were spent abroad. By opening more duty-free shops at the airports, it can help to redirect the spending on products like cosmetics, perfumes, bags and accessories to domestic retailers.