SECTION A - CASE ANALYSIS (TOTAL 70 MARKS) China domestic traffic grows; new Chengdu airport opens 2021 By CAPA Centre For Aviation Updated: 2021-03-19 13:00 A year after the pandemic started there are clear signs of strong domestic traffic growth at the point of origin, in China, along with an announcement that a new airport serving one of the major cities in western China, Chengdu, will open on schedule in Jun-2021. While the signs are positive, it must be realized though that growth is only in the domestic segment, since international travel is still suppressed, and the new airport is meant to handle international services. In some ways, the acid test will come when a big international sporting event is held in the city later in the year, and it will be measured by the capability of the airport and event organizers to handle the visitors safely, and by whether they show up at all. Summary . A new airport will open in China in June, serving the country's seventh largest city, Chengdu. Chengdu will become the third city in China to have two international airports, although the existing one will handle mainly domestic services. The air transport recovery in China is taking place almost exclusively in the domestic segment, where passenger numbers are very high compared to numbers in Feb-2020, the first month of the pandemic. But international traffic shows no sign yet of recovery, and that is what this new airport was designed for. Many more new airports are scheduled to open over the next two years in China, including in major cities, like Chongqing. Chengdu Tianfu International Airport to be commissioned in Jun-2021 The pandemic may have started in China just over a year ago, but while it may not yet quite have ended, yet there is the fact that an opening date has been set for a new airport at Chengdu. Chengdu is China's seventh largest city, with a population of more than nine million, and the project is at least one indicator that an economic recovery is possible, and in the air transport sector. Moreover, air traffic statistics from China for the first two months of 2021 also add weight to the recovery trajectory, even if it is probably the only country so far to record positive gains compared to 2020. Domestic traffic is rising sharply throughout China. Chengdu Tianfu International Airport (CTIA) has announced that it is scheduled to be commissioned on 23-Jun-2021. Accordingly, Chengdu will become the third city in China to be equipped with two international airports, after Beijing and Shanghai (although the latter's Hongqiao airport's international capacity is currently a miserly 0.1% of the total, and Beijing Daxing absolute zero). The airport is located approximately 50km southeast of the city of Chengdu, at the junction of Jianyang City and Jintang County. CTIA is an airport development project designed to provide the city of Chengdu and its surrounding areas with a second major airport. It will serve mostly international services, so one can reasonably expect there to be a lengthy soft opening as international services are only slowly returning to China. A major commercial city in Western China Chengdu is a 'sub-provincial city that serves as the capital of the Chinese province of Sichuan. It is one of the three most populous cities in Western China, the other two being Chongqing and Xi'an. While the urban population is more than nine million, the administrative area houses more than 14 million inhabitants. Chengdu is considered a World City with a "Beta +" classification (pairing it with Barcelona and Washington, D.C.), according to the Globalization and World Cities Research Network. In 2020, Chengdu ranked 43rd in the Global Financial Centers Index. Chengdu, considered to be one of the most livable cities in the country, is one of the most important economic, financial, commercial, cultural, transportation, and communication centers in Western China. Its economy is diverse, characterized by the machinery, automobile, medicine, food, and information technology industries. The city also hosts many international companies and foreign consulates. There are 270 Fortune 500 companies that have established branches in Chengdu. Chengdu Shuangliu International Airport was the 24th busiest airport in the world in 2019, and the Chengdu railway station is one of the six largest in China. The city will host the FISU Summer World University Games in Aug-2021 an international multi-sport event and the first world-class sports event to take place in western China. It will be a test not only for the city's organizational abilities, but also a test of China's competence to host public attendance events on a large scale in the aftermath of the pandemic, and one that will involve substantial incoming international travel. Some international conferences have already been held. Built at a cost of USD12 billion, the airport will handle up to 90 mppa The total cost of the new airport project was forecast initially (2014) to be CNY71.8 billion (then USD12 billion). The new airport will cover an area of 30sqkm and will feature three runways in phase one, and then a further three in phase two. Once completed, the airport will have capacity for 90 million passengers (more than twice that of Chengdu Shuangliu International Airport [CSIA), six million tons of cargo, and 850,000 aircraft movements per annum, making it the largest airport in China's western region and the nation's fourth largest international hub. The minutiae of its financing have not been made public, but as with all airports in China now, there is no foreign involvement. A series of loan announcements were made in 2015, including one from Agricultural Bank of China, which committed to a CNY12 billion (then USD1.9 billion) loan to be used for the construction of the airport. CTIA's phase one construction project was expected to complete basic construction in 2020, with plans to begin operation in 2021. Despite the pandemic, that timescale has been kept to, along with the budget. Indeed, the timeframe was shifted forwards from the original date to 2019, but then put back again to 2021. Regulatory approval was granted in Jan-2015 and the initial projection was for three runways capable of handling 40 million passengers, 700,000 tons of cargo and 320,000 aircraft movements upon its completion in 2025. It was to be constructed according to a code 4F standard, with a 520,000sqm terminal building and a 157 aircraft parking bay apron. Further expansion would take it to six runways with the capacity to handle 90 million passengers per annum. The new airport's terminal size will be 1.8 times that of terminal two at CSIA. Construction work began on 27-May-2016, the airport's feasibility study report having received National Development and Reform Commission approval on 18-Apr-2016. Highways, subways, and intercity railways were also planned, to link the new airport to downtown Chengdu and other parts of the city. Construction work was only temporarily halted by the pandemic, in Feb-2020 and Mar-2020. Building work on the main terminal had already been completed, in Dec-2019. Airport will handle mainly international services Test flights began in Jan-2021. The airport will primarily handle international services, with the current Chengdu Airport to handle domestic services. At present (week commencing 15-Mar-2021), the allocation of capacity at Chengdu Shuangliu International Airport (CSIA) is weighted 99.1% domestic and 0.9% international, thus barely justifying its International' tag. But in normal times there is a greater international capacity ratio. CSIA is an important hub in southwest China. The airport serves as a base for Air China and Chengdu Airlines, and many of the major Chinese airlines have a presence. CSIA is classified as a 4F facility, capable of handling widebody equipment. The rationale behind the development was the usual one namely, that Chengdu Shuangliu International Airport was almost running at full capacity, but that passenger volume has kept rising in recent years. It was forecast that the volume in Chengdu would reach 62 million by 2020, hence the need for a larger airport in the city. Existing airport's growth trajectory had tailed off That forecast did not happen, and not only because of the pandemic. Since 2014 when the new airport was first announced annual passenger growth rates have twice exceeded 12% per annum. But that was in the first two years. Since then, the growth rate declined in each successive year through to 2019. Had it continued at the 12% rate, then it would have reached 62 million earlier than 2019. However, the growth rate was still sufficiently high to merit a new airport, as opposed to a substantial extension of the existing one. Question 1(a) You are required to conduct an effective risk assessment process for Chengdu Tianfu International Airport. Your assessment must be able to help in identifying what risks have become issues throughout the project. In the meantime, you must also explain could these have been identified and/or managed more effectively. (40 Marks)