Work is underway and a BCIA source confirmed that, even if it meant operating three shifts a day, the airport would be ready on time.

Eric Sauvalle, chief representative and project director of ADP in Beijing, said: 'It's a very ambitious project and the difficulty is that it all has to be built at once, there is no phasing.'

But the land acquisition - which involved relocating 18,000 people and nine villages - was underway, he said.

Unlike at Tokyo's Narita airport, where farmers blocked the land sale for a new runway, Beijing villagers had not objected, he said.

'They have no real property rights and in most cases prefer the option of a moving to an apartment,' he said.

The Games will be used as the initiative to launch the Beijing Capital City Airport Plan, which involves extensive development in the airport area. Under the master plan, 100 sq km has been earmarked for Capital Airport City, with 1,000 sq kms tagged for associated infrastructure.

This includes a ring road around the Capital Airport City, schools, housing, recreational amenities such as theme parks and golf courses, conference and exhibition centres, finance, transport, business and shopping centres, as well as logistics and other associated transport facilities.

It will include the first Chinese air free-trade zone, which the authorities see as a blueprint for world air free-trade zones. Located adjacent to the airport, it will be the first inland free-trade port in China, with key international links. The authorities envisage the ambitious plan making BCIA the largest logistics hub in the Asia-Pacific region. A total of 24 sqkm has been allocated for the airport zone, which will be the main base for China's aviation industry. The new terminal would add extra capacity for 31 million passengers to existing facilities for 30 million, said Mr Sauvalle. One hundred new aircraft stands will be added to the current 80.

The challenges lay in building a new airport right beside an existing one, with a single airport authority, Mr Sauvalle said.

The terminal will be the hub for Air China. This would require close co-operation with the airport authority on how best to maximise its use, he said. As its hub, Air China will be responsible not just for aircraft handling but also for passengers - arrivals and departures. 'There is still a lot to be done sorting out how that will work,' Mr Sauvalle added.

Air China is not a shareholder in the government-backed Beijing Capital Airport Holding, of which BCIA is a subsidiary. BCIA retains 65 per cent of its stock, with 35 per cent publicly held shares listed in Hong Kong. ADP has a 10 per cent stake. For the new terminal, BCIA would operate and buy the facilities from the mother company, Mr Sauvalle said, although no formal way of financing the project had yet been finalised. Any loans to BCIA could be in the form of shares.

The airport authority was keen to separate operations in the new terminal from management and one of the pressing tasks was to clarify who would do what, he said.

Presently, BCIA runs some non-aeronautical services itself, including retail, and has recently taken restaurants back from concessionaires. But in the new building, BCIA wanted to shift from operations mode to management mode with fixed contracts, Mr Sauvalle said. 'They are thinking, 'why do everything ourselves when we can contract it out?' - maybe having subcontracting and formalised contracts will prove to be more effective. That poses the big question - how do you have good contracts which ensure good services?'

How retailing would be run had not yet been decided but concessionaires would be sought for bars and restaurants, Mr Sauvalle said.

BCIA has seen rapid first-quarter growth of 16 per cent year on year for Hong Kong and Macau traffic, with strong domestic growth boosting overall numbers by 15 per cent for the first three months, compared with the pre-Sars period of last year.

But the 15 per cent overall figure masked a 3 per cent fall in international passengers in the same period, Mr Sauvalle said. The first quarter saw 7.4 million passengers.

BCIA has budgeted for 30 million passengers this year, with forecasts for 32 million by next year, 50 million by 2010 and 64 million by 2015.

Far from a boom, the Olympics would create only a temporary blip in inbound passengers, said Mr Sauvalle. 'It will be the same as Sars in reverse,' he said, with a strong temporary boost in the six months before and during the Games.

Long term, growth in Beijing's traffic would come from outbound mainland traffic, not a huge increase in inbound international passengers, he said.