TOP 10 AIRPORTS: SHANGHAI PUDONG
night slots for domestic flights during the peak season to ease congestion,” explains Wong: “This most likely allowed the airport to stretch further beyond its designed capacity in January and February. “New contracts offering higher
commissions at Terminal 1 should have mitigated against the impact of reduced traveller shopping budgets.” In fact, the new rates that
applied to the Terminal 1 duty free concessions (which account for 40% of total airport duty free space) from January 2019, actually contributed to a 46% surge in commercial rental income in the first half of the year. New duty free contracts across the
airport offer average commissions of 42.5% and a 2.3x surge in minimum annual guaranteed revenue from 2019-2025. Shanghai Airport revenue could, therefore, resume a steady retail revenue rise in 2021, even amid a slow recovery in air travel. Currently, it is unclear if lead
operator China Duty Free Group (CDFG) has requested rent relief due to the pandemic. Nonetheless, CDFG is unlikely to exit a concession that drove 32% of its revenue in 2019. However, if the airport has been
pressured into providing rent relief or fee discounts for retailers, airlines and other service providers, profit could decline faster than other
Chinese airports due to disruption caused by Covid-19.
Rent negotiations? On the topic of rent relief at Chinese airports Wong says: “Duty free operators in China will try to negotiate rent relief. Airports have told retailers to refer to their contracts and argued contractual obligations should be respected, but without a doubt, retailers will try to negotiate some kind of relief.” Pressed by TRBusiness on whether
Shanghai Airport or CDFG would have the stronger bargaining power, Wong remarks: “I am not sure, as both parties are state-owned. It is a little tricky. If you are waiving the rental fee it is like passing funds from one pocket to another. It is all state money.” All things considered, Shanghai
Pudong International Airport should deliver a more sustainable rise in retail revenue than Beijing Capital International Airport, fuelled by the new duty free contracts. However, Shanghai Pudong could
face stiff competition for airline seat capacity from Beijing’s new Daxing International Airport, which opened in September 2019. Beijing Daxing may appeal
more to foreign airlines looking to expand their Chinese presence, with
“New contracts offering higher commissions at Terminal 1 should have mitigated against the impact of reduced traveller shopping budgets.”
Denise Wong, Bloomberg Intelligence
flight slots allowing more flexible schedules. The airport also has a centralised layout for efficient check- in, customs operations and transfers. Shanghai Pudong does not have
its own check-in facilities and some transfers require long walks or even a train ride between terminals. Wong suggests the city’s
internationalisation will boost air traffic. “Shanghai is likely to build a strong non-transit international passenger base as it develops into an international business and financial centre,” she says. “Rising numbers of foreign
residents, a rapidly growing presence of foreign enterprises and accelerated internationalisation of Chinese firms should provide a greater and regular flow of people and goods. “Shanghai Pudong Airport has
been designated by the government to serve long-haul international flights, and comparatively, would benefit most when more Chinese fliers venture overseas.” «
PVG – Shanghai, CN
AUGUST 2020
TRBUSINESS 31
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