The new terminal at Baiyun International Airport in Guangzhou has finally opened. The $2.7 billion project is designed to handle 100 million passengers from China’s “Great Bay Area” annually and threatens to further shift the center of southern China’s air travel from Hong Kong to Guangzhou.

The new terminal at Baiyun effectively triples the airport’s designed passenger capacity

Despite Hong Kong’s relatively small population of less than 8 million, the city has long served as the main hub of international travel in southern China, with flights from China’s smaller airports often connecting via Hong Kong to long-haul destinations. The new Baiyun International Airport further reduces the need for transfers in Hong Kong for Guangdong’s 100 million residents.

The opening of the new Baiyun terminal is perhaps the most troubling for Hong Kong’s flagship carrier, Cathay Pacific. Despite the explosive growth of outbound Chinese tourism, Cathay Pacific has struggled to maintain growth in revenue. Part of the issue is that Cathay’s premium travel brand is less attractive to more budget-conscious Chinese travelers.

The new terminal is yet another blow for Hong Kong International Aiport and Cathay Pacific

Cathay has opted to stay out of the budget market altogether. However, even if Cathay were to change course and pursue that market, there may not be enough capacity at its main hub, Hong Kong International Airport, for enough low-end flights to make the venture prudent.

The company has had a change in fortunes of late, in large part due to increase revenue from cargo fares.

The obvious winner, in this case, will be China Southern, China’s largest airline. The state-owned flagship’s primary hub is Guangzhou, and the new airport will only cement China Southern’s dominant position in long-haul travel out of southern China.

Baiyun’s older terminal, opened in 2004, has been operating way over its intended capacity for some time. Last year it had a passenger volume of 65.84 million but was only designed for 35 million.

China Southern, China’s largest airline, stands to gain the most from the expansion of Baiyun

The new terminal will allow China Southern to expand both its domestic and international routes. Baiyun also acts as one of Hainan Airlines’s major hubs.

Another potential winner with the expansion of Baiyun are the numerous popular destinations for Chinese travelers in Southeast Asia, and there will likely be an ever-growing number of affordable flights from Guangzhou to Vietnam, Thailand, Indonesia, etc.

While Guangzhou has long been a major hub for routes to North America and Europe from China, it’s unclear to what extent this expansion, or other like it, will promote a drop in prices. Regardless, the capacity for more routes will undoubtedly be there.

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