Across The BorderHow booming outbound tourism is making China’s airports an attractive investment
The mainland’s major airports look set to be granted additional flight capacity as demand for air travel rises
Rising demand for air travel in China as outbound tourism booms is making airports an attractive investment, according to analysts.
Mainland tourists could make 200 million outbound trips by 2020, according to CLSA, while JP Morgan sees growth of 10 to 12 per cent in the coming two years. Outbound trips increased 4.3 percent to 122 million in 2016, data from the China National Tourism Administration show.
“We expect airports to be a better play on the growing tourism theme given that their earnings model is volume-driven with operating leverage gains, which should drive margin expansion,” said Karen Li, an analyst from JP Morgan in a report.
Driven by China’s rising tourist numbers, revenue passenger kilometres (RPK) - a measure of traffic for an airline flight - is expected to grow 16 per cent year on year in 2017, according to a forecast by BNP Paribas.
The bank sees airport capacity, or the number of slots available for flights, as the critical factor that could limit passenger growth, but industry insiders say the country’s major airports are likely to upgrade their capacity in the coming year.
“With continued strong demand for air travel [in China], we expect airport capacity to quickly become the bottleneck such that any increase in capacity, particularly slot capacity, becomes the main determinant of traffic growth,” said James Teo, an analyst from BNP Paribas.