China’s Chengdu Shuangliu International Airport terminal two (T2) facility will officially commence operations on 09-Aug-2012, according to a Chengdu Business Times report. As previously reported, the CNY12.8 billion (USD2.0 billion) project commenced trial operations on 28-Jul-2012 and includes a 3600m runway. The project is expected to increase the airport’s capacity to 50 million passengers p/a.
Chengdu Shuangliu International Airport T2 to commence operations on 09-Aug-2012
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Chinese long haul secondary city air routes: BA's Chengdu exit does not reflect the broader market
The fastest long haul airline growth is not occurring with Gulf airlines but rather, with services to and from secondary Chinese cities. It is not a secret that local incentives and subsidies, generally common in any market, are especially large in price and duration for secondary Chinese cities. An airline might expect over a third of revenues to be subsidised. This drastically alters the business case in a low-margin industry, hence the proliferation of secondary city services. This extreme dependence on subsidies raises the question of how long governments are willing to issue generous subsidies, and how many routes can be sustainable without them.
British Airways' decision to exit its only secondary Chinese route to Chengdu, in Jan-2017, might suggest the music is ending and the secondary long haul bubble is popping. There is added colour given the recent UK-China air service agreement expansion, and Brexit/British pound depreciation overhangs.
BA's exit does confirm market fundamentals: secondary city yields are low, and some routes are ahead of their time. Yet a number of factors unique to British Airways suggest caution in concluding that BA's Chengdu exit could foreshadow other withdrawals.
Airports - subject as always to the vicarious uncertainty of airline fortunes
CAPA’s 2016 outlook was against a background of unusually high levels of profitability for airlines.