Xiamen airport has become China's test case for finding new funds. After Cathay Pacific's retreat last December ended the first attempted airport development with a foreign investor, Xiamen has now taken the lead again and become China's first airport to make a public offering. But foreign equity is proving elusive.

Xiamen's airport authority went public with a share offering on Shanghai's stock exchange in mid-April, planning to raise nearly $28 million from domestic investors for a quarter of its share capital. The authority plans to use the proceeds to help construct a third terminal.

Beijing is desperate to find alternative funds. An official from the Civil Aviation Administration of China is quoted in the China Daily as saying that this year's 30 per cent increase in state funding for airports is still 'far from enough.' Most of this year's $1.1 billion is earmarked for major airport upgrades, leaving smaller provinces and cities largely on their own. Thus, Shenzhen and Zhuhai airports have both announced plans for share offerings.

Yet even the big cities are scrambling. Guangzhou recently created a quasi-public investment company to raise a third of the $1.8 billion needed for its new airport through a public offering. Shanghai is soliciting foreign investors to put up $1 billion for its second airport at Pudong.

Foreign governments have provided or guaranteed debt financing for a number of Chinese airports, with Japan, France and Kuwait leading the way, but foreign equity remains elusive. Inadequate airport revenues is the reason most often cited for this lack of interest.

David Knibb

Source: Airline Business