Beijing Capital International Airport performed without fault in the lead-up to and during the 2008 Summer Olympics, with reports the 'mass exodus' after the Closing Ceremony is also progressing smoothly. This is a great credit to the planning and execution of airport officials.

But, as predicted in the Monthly Essential China, 2008 is proving a challenging year for Beijing Capital International Airport Co Ltd (BCIACL), as rising costs and slowing traffic take the shine off the airport operator's earnings.

Just days before the Games' Opening Ceremony, on 29-Jul-08, BCIACL issued a profit warning, stating net profit for the six months ended 30-Jun-08 "may decrease significantly" as compared with the CNY567 million net result in the previous corresponding period.

The company was quite explicit in the reasons behind the expected fall in profit, including:

*  The implementation of the restrictions on flight throughput of the Beijing Airport by the CAAC in the first quarter of 2008;
* The weakening of aviation transportation demand, due to the slowdown of the global economic growth;
* The cancellation of flights or the postponement of increase of flights by certain airlines due to the high price of jet fuel; and
* The substantial increase in operating costs of the Company, due to the commencement of operation of Terminal 3 (T3) and related facilities of Beijing Airport.
* In Jan-08, BCIACL announced plans to invest CNY26.9 billion to acquire T3 from its parent company.

Traffic continues to weaken

The weakness in traffic reported by BCIACL continued into Jul-08. The airport operator reported (21-Aug-08) the following traffic highlights in Jul-08:

* Passenger numbers: 4.9 million, -4.6% year-on-year;
     Domestic: 3.8 million, -4.6%;
     International: 1.1 million, -4.5%;
* Cargo volume: 105,000 tonnes, +1.3%;
* Aircraft movements: 38,900, +6.7%.

Domestic throughput has been bouncing around in negative territory since Feb-08, but the international slowdown has occurred more recently and is of concern.

Undoubtedly some of this reduction can be attributed to restrictions on inbound and outbound travel during the period, but cargo volumes have also slowed, rising just 1.3% in Jul-08.

Aircraft movements however continue to pick up, suggesting carriers are either operating smaller aircraft more frequently to/from Beijing, or suffering load factor reductions – or both.

In contrast to Beijing, Athens enjoyed a pre-Olympics traffic surge, while Sydney's traffic prior to its Olympics in 2000 was consistently positive.

Overall, BCIACL expected to handle about 5.56 million people during the Olympic Games – or growth of around 8% on Aug-07 throughput. It remains to be seen if traffic will hit these targets, with indications from airlines that bookings for travel during the Olympics period had fallen short of expectations. Both Sydney and Athens reported further growth in demand after the Olympics – a situation many officials in Beijing will be hoping is repeated in 2008.