Late last month, Shanghai KFC Co. Ltd., which runs 90 outlets citywide, signed an agreement with Pudong International Airport to open a new branch there by the year's end shortly after the local government shifted all international flights from Hongqiao Airport to Pudong.

Covering 400 square meters, the store will become KFC's first "airport outlet" on China's mainland.

"This is a completely new challenge for us. Consumer response will guide our future course," said Wang Qi, Shanghai KFC general manager.

McDonald's - KFC's biggest domestic rival - opened its first airport outlet nine months ago at Hongqiao Airport.

"Frankly, sales at the airport just reached the average level among our 60 city stores," said Shi Wenzhe, general manager of Shanghai Hualian McDonald's Co., Ltd., without elaborating.

Although called airport outlets, which industry officials hope will challenge the high-price tradition at other airport restaurants, both fast-food giants have been allowed to locate their stores beside the airports rather than in the terminals.

"At present, nearly all the restaurants in the terminals are wholly or partly owned by the Shanghai airport authority. There are no signs that the situation will change in the short term," said an official with Pudong International Airport, who declined to be identified.

He added that in the past, air travelers were considered to be an affluent group hence food prices at airports were higher than normal.

Usually, food prices at airports are about three times more than outside. For example, a bowl of noodle costs around 40 yuan (US$4.8) at Hongqiao Airport, compared to about 10 yuan at outside restaurants.

"The food market should be open to all investors and not be dominated by any one entity," said He Yizhao, president of the Shanghai Catering Trade Association. "To secure the airport operators' benefit some other strategies can be adopted, such as higher rental fees or finding a reasonable profit distribution scheme."

(eastday.com November 4, 2002)