Wealthy Nations Daily Update - Manchester Airport

With the British Government's continuing inability to make a decision on airport expansion in the south-east of England, Manchester Airport has not been slow to see this as a window of opportunity. Being one of only two British airports with 2 runways, the other being Heathrow, and with a catchment of 22 million people within 2 hours travel time (which equates to a third of the UK population), the airport achieved a rolling 12-month passenger tally above 23 million for the first time in its 77-year history. Its Managing Director Ken O’Toole said in statement “With no new runway capacity coming into the southeast in the next 15 years, if ever, Manchester is now the focus for growth,” adding “We’ll reach 25 million passengers in the short term, and we think the airport has the potential to get into the mid 30 million by the late 2020s or early 2030s.”

In his state visit to the UK in October this year China’s Prime Minister Xi Jinping announced that Hainan Airlines would begin direct flights between Manchester and Beijing. The initial plan is for direct flights between the 2 cities, or #Manchester2Beijing as its known, 4 times a week, thus allowing the 100,000 passengers to avoid the inconvenience of changing planes at another airport.

Hainan Airlines is a privately owned airline and China’s fourth largest. We are holders of the 3.625% 2020 issue, rated A1, which trades ~4 notches cheap on a best rating basis according to our RVM models. The airline operates over 500 routes from the island of Hainan and 9 other locations from the Chinese mainland. This year alone, as well as the #Manchester2Beijing route, it has also launched Chongqing-Rome, Beijing-San Jose, Shanghai-Boston, Shanghai-Seattle and Beijing-Prague direct routes.

Other Chinese airlines are also keen to get in on the act. Last week Air China filed an application with the Civil Aviation Administration of China to fly between Manchester and Shanghai, China’s biggest city and a global financial hub. The application applies for four direct flights a week starting in 2016. If approval is granted in China, the airline would still need to apply to the UK Department of Transport, however there is little doubt it would be approved as it would help the Chancellor George Osborne’s ‘Northern Powerhouse’ rhetoric.

However, for Manchester Airport this could be just the start. At the moment, even with its huge catchment area, it is only operating at 50% capacity. As Charlie Cornish, CEO of Manchester Airports Group sees it “Manchester Airport is the global gateway for the Northern Powerhouse”. The Airport says it could support 25 more long haul routes, double the current number. With lead times for airport expansion running into many years, maybe the British Government knows the longer it takes to make a decision on airport expansion in the south-east, the more time it gives its “Northern Powerhouse” to take root.

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