On March 27, 2007, Beijing introduced the 2008 Olympic Games with a series of "500 Days to Go" promotion activities.

The next day, by coincidence, is the third anniversary of the beginning of the Beijing Capital International Airport expansion construction project. With a budget of 27 billion yuan (US$3.4 billion), the expanded construction project includes a third terminal and runways, a car park building, a traffic control center and relevant technologically advanced facilities.

Will the new Beijing Capital International Airport meet the requirements for the 2008 Olympic Games? In an interview, Dr. John Kasarda, Director of the Kenan Institute of Private Enterprise at the University of North Carolina shared his views on China's airport construction and airport economy.

Beijing Review: As an expert on airport construction, you are widely regarded as the creator of the concept "Aerotropolis." What does an "Aerotropolis" look like?

John Kasarda: To be honest, I'm not the creator but an elaborator of "Aerotropolis"; maybe I'm considered its creator because I've done much more than others in promoting it since the mid-1990s.

The first time I heard "Aerotropolis" was in 1994 when I was working on a new airport development strategy with officials in Zhuhai, southern China.

An "Aerotropolis" is an aviation-linked urban form consisting of an airport surrounded by tens of thousands of acres of single and multiple-family housing, office space, light industrial space, restaurants, upscale retail mix, hotel accommodations, entertainment venues, and even golf courses.

Beijing Review: Can I say that today's airport, according to your explanation, is much more than a place where aircraft, passengers, and cargo arrive and depart?

John Kasarda: Yes. First, let me tell you about my work in China. I worked on the Shanghai Pudong, Beijing Capital, and Zhuhai airports. China is placing emphasis on being the hub in the global supply chain. The supply chains are increasingly connected by air. These supply chains need to be operated very efficiently. Whether it is micro-electronics, pharmaceuticals or digitized components, all those products move around the world by air. Thus, the airport becomes much more than infrastructure where planes land and people and cargo are moved; it also provides a tremendous competitive advantage for a locality.

So if you can improve your accessibility, speed, and agility, you improve your competitiveness. In the 21st century, connectivity and speed are as important as the quality of your product.

How can you improve these elements in a "flat" world so that companies can deliver their products on time to customers all over the world? I work with countries to show them how to improve their airport enterprise so that it can become more attractive to business and industry.

Beijing Review: There are two complaints related to airport service that are widely discussed in China. One is the mandatory "airport construction fee" that each passenger is charged. Another is that high cost of merchandise in the airport sometimes two or three times higher than street prices. What's your comment on these phenomena?

John Kasarda: First, let me clarify your question. When you travel in the U.S., the "airport construction fee" is already included in the price of the ticket. It has been this way for decades. The passengers just don't realize it. The "airport construction fee" is turned in to the U.S. federal government, which then redistributes the fees to the airports for their construction and expansion. The U.S. has the same kind of passenger fee as China, it's just more subtle about drawing attention to it.

Regarding the price of food and merchandise, such a situation also existed in the U.S. for a long time. The cost of food in the airport would be twice as expensive as street prices. Now this has changed with the introduction of "street pricing." BAA USA, a subsidiary of the British company that owns and operates airports in London, developed the Air Mall concept of "street pricing" - prices no higher than in comparable stores in the surrounding area. The move is designed to dispel the price-gouging image that airport shops have earned over the years.

This concept is now recognized in China as larger and larger percentage of airport revenue comes from non-air related business - commercial related services. Air travelers tend to be a selective group. Their incomes are 2 to 4 times higher than the national average, and they purchase goods at a higher value. Look at Hong Kong airport, there are lots of luxury stores because there are more wealthy passengers.

Beijing Review: Airport plays an important role in making the first impression of a city or the country on visitors. With the development of China's economy, large cities such as Beijing, Shanghai and Hong Kong have built world-class airports. However, many small and medium cities in China do not have an airport. How important is airport construction to a local economy?

John Kasarda: It is essential for small cities and outlying areas to have airports. China is very fast in building certain areas of infrastructure, however, the logistics are still far behind what is needed to be globally competitive.

The country still faces the challenge of the lag between coastal areas and inland cities. If the inland cities can have their own airports, and be intimately connected to hub airports in Beijing, Shanghai, and even Hong Kong, they will be able to receive and ship goods quickly and efficiently through the air-network. If inland cities have their own airports and are able to build supporting industrial and commercial areas around them, the large influx of migrants to the costal cities can be decreased.

Some people, especially local officials in small cities, are worried about the flow of passengers. What will they do if it is found that their airport is not going to be used very frequently?

These arguments should be looked at very seriously. Primarily it is because of the passenger traffic. If you just look at the problem from the passenger side, most small cities don't have the income level to be able to fly very frequently. But as China develops, more and more people will reach the income level. This is the 21st century; we should not just look at the next five years, but the next one hundred years. You want to keep these inland cities connected.

There is another thing I often mention, "highways." When you construct a highway on the ground, it requires billions of government dollars. However, a "highway" in the sky is paid for by an individual company. There are as many "highways" in the sky as a company can afford. They connect very quickly and efficiently. The key to commercial success is no longer location, location, location, but accessibility, accessibility, accessibility. The three "A"s are replacing the three "L"s. This is an understanding of airports.

Beijing Review: Logistics has become a rising industry with the development of economic globalization. The Kenan Institute, where you currently work, and China's top university Tsinghua have established a joint research center that focused on logistics and economic development. The main courses include supply-chain management, corporate governance, logistic infrastructure and networks and so forth. In your opinion, how are these programs working?

John Kasarda: The government is allowing international giants, FedEx, UPS, and DHL to come in and set up their operations. The government is also involved in the training programs where they are using the latest tools and software. It has encouraged partnerships between domestic and international trucking firms. I would like to see a growing bilateral relationship between China and the Western countries. China's advancement in logistics will place it in a much better position on the global stage.

Beijing Review: Beijing Capital International Airport is currently under expansion for the 2008 Olympic Games. The whole expansion project will be expected to be completed by the end of 2007. The Kenan Institute has co-hosted a forum in Beijing to help Chinese officials do preparation work for the logistical challenges of the Olympic Games. What do you think is the most pressing issue about logistics? Do you think Beijing is ready?

John Kasarda: Beijing is not ready now, but Beijing will be ready in 2008. The Chinese government is putting in place the infrastructure. They want the people-athletes, observers - to move around very efficiently. Anticipating problems is the issue of crisis management. So if something happens in terms of natural disaster, the central government is working diligently so that the games would still continue.

Will there be challenges? Absolutely! Millions of people will come in. I have confidence that the Chinese government will minimize the problems and optimize the chances everything going on smoothly.

Profile of Dr. John Kasarda

Dr. John D. Kasarda is an expert on aviation infrastructure, logistics, demographics, urban development and commercial real estate. Up till now, he has published nine books and over 80 academic articles. He is considered to be the leading developer of the "Aerotropolis" concept defining the roles of aviation and airports in shaping the 21st century urban growth.

He was elected a fellow of the American Association for the Advancement of Science for his research on airport-driven economic development and is a senior fellow and trustee of the Urban Land Institute.

Dr. Kasarda has offered numerous executive programs on logistics, global supply-chain management and new air transportation infrastructure to multinational firms such as FedEx, DHL, Caterpillar, Prudential Real Estate, Bank of America, etc. Under his leadership, the Kenan Institute was named the world's top air logistics educational institution by the International Air Cargo Association (IACA) for its work on airports and industrial development.