The Asian Development Bank (ADB) is making its first foray into the airport business in China, said the Manila-based lender in a press release on Friday.

The project will involve a 50-million-US-dollar equity investment from ADB in HNA Airport Holding (Group) Co. Ltd., a private company primarily invests in airports and airport operations.

ADB is co-investing in HNA Airport Group with funds managed by Pacific Alliance, including ARC Capital Holdings Ltd. and Pacific Alliance Asia Opportunity Fund Ltd., said the multilateral development finance institution.

The investment will assist HNA Airport Group secure the confidence of international investors and attract more funds to continue expanding in the airport sector. While the company has already achieved significant success and has established a sound reputation in the industry, it is still at the onset of its planned expansion.

The project will support HNA Airport Group's expansion and capital expenditure plan to privatize, rehabilitate, expand, upgrade and operate small- and medium-sized airports in the less developed central and western regions of China, ADB said.

"Private sector participation accompanied by funding and experience is clearly needed in the development of the airport sector in the country, especially in the central and western regions," said Sherwin Pu, investment specialist of ADB's Private Sector Operations Department.

Experienced foreign operators focus on large airports in the coastal region to create synergies with their existing operations and minimize investment risks. As a result, potential investors and operators of small- and medium-sized airports are likely to come from the domestic side of the industry. But local industry members are typically new with limited financial resources, and this constrains their capacity to develop a large number of projects. Priority needs to be given to qualified local investors, particularly in the central and western regions, said the bank.

"The country currently has the second largest civil aviation market in the world, after the United States. The demand for travel, for both work and leisure, is projected to increase at an unprecedented pace due to increased labor movement flexibility and disposable income growth," said the specialist.

China's air passenger transportation throughput, measured in revenue passenger-kilometers, will grow 8.4 percent annually during 2007-2026, while air cargo transportation turnover, measured in freight ton-kilometers, will increase at an annual rate of 10.5 percent, ADB said.

As of the end of 2006, the country has 146 civil airports in operation. The government's 11th Five-Year Plan (2006-2010) requires the construction and expansion of some 60 airports, mostly in the western region. Some US$17.7 billion in capital expenditure is needed for civil airports under the 11th Five-Year Plan.

(Xinhua News Agency January 5, 2008)