The massive reform is expected to open the door to foreign investors and spark a wave of consolidation and restructuring in the industry.
"The central government knows they need to rapidly expand and improve the airport system in China and this transfer is undoubtedly intended to lure foreign capital and expertise," said Liz Bosher from Landrum Brown Worldwide Services, a private US-based company currently bidding for the contract to extend Beijing Capital International Airport. But so few of the smaller airports are making money and to attract investors they have to be able to show they can at least wipe their own noses.
According to media reports, 90 percent of domestic airports are losing money and many local governments are unable to provide further subsidies to cover costs. By handing administrative control of airports to provincial governments, the central government is expecting a wave of mergers and acquisitions along with significant foreign investment.
Foreign investors are currently allowed to own up to 49 percent of domestic aviation companies and airports, although further regulations are being drafted by the CAAC. China has historically been very wary about allowing foreign investment in its airports and relinquishing any control over key strategic assets.
A number of airports in China are already listed in Hong Kong, including Beijing Capital International and Hainan's Haikou Meilan Airport. Both of these companies have shown keen interest in acquiring smaller airports around the country.