Date
23 November 2017
The Airport Authority plans to charge departing passengers a HK$180 fee. Photo: Bloomberg
The Airport Authority plans to charge departing passengers a HK$180 fee. Photo: Bloomberg

Why it matters how the third runway is financed

The Executive Council has approved the HK$141.5 billion third runway for Hong Kong International Airport, construction of which could start as early as next year.

The Airport Authority proposes to pay for the new runway out of its annual surpluses, new user charges and funds from external sources, such as bank loans and bonds.

The funding plan has elicited much criticism from the public.

The third runway will raise the ceiling on traffic at Chek Lap Kok from 68 flights an hour, the government said. 

The airport is already handling 66 flights an hour, very close to its limit. The government expects the airport to reach its maximum capacity this winter.

It says the third runway is necessary to maintain its competitiveness.

However, the public have questioned whether a new runway will fix the capacity problem. Some noted that the designed maximum capacity of the airport is more than what the government claims it to be.

Lok Kung-nam, the former director general of Civil Aviation, said Hong Kong has never done any real-time tests with Shenzhen on sharing airspace. Given the limits on airspace, Lok said, a third runway might even worsen air traffic congestion and turn into a “white elephant”.

Lam Chiu-ying, the former director of the Hong Kong Observatory, said the shortage of airspace is why Guangzhou’s recently opened third runway has been able to add just 10 flights a day.

Therefore, the government should not rush to push for the project before tackling the key issue of limited airspace.

It’s similar to the high-speed railway project, construction of which has been subject to delays. One unresolved issue is the co-location of the immigration and customs facilities of Hong Kong and Shenzhen.

As regards the financing model for the third runway, huge savings in interest could be made if the project is funded by government money as usual.

Since the Airport Authority has a AAA credit rating, would it be possible to issue its bonds to the government’s foreign exchange fund? If so, the interest expense will become government income.

It’s inaccurate to say the authority’s proposed financing arrangements will not cost the government any money.

The authority plans to stop paying annual dividends to the government, which would eliminate about HK$47.2 billion of revenue for the government in the next decade.

Also, the authority plans collect an “airport construction fee” of about HK$180 from each departing traveller. That would shift the financial burden to travelers and reduce the airport’s competitiveness.

Fewer travelers would choose to use the airport, reducing the amount of fees envisaged in the financing model.

The government has opted to bypass Legislative Council approval for the project, after the bitter lesson it learned from the high-speed railway project.

At the time, 1,700 people besieged Legco, and violent fights between police and citizens ensued.

What worries ordinary Hongkongers most is that the government might set a precedent of circumventing due supervision of project financing by Legco, which could give rise to corruption.

This article appeared in the Hong Kong Economic Journal on March 20.

Translation by Julie Zhu

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JZ/MY/FL

Young Accountants Association of Hong Kong

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