Why HK needs to support aviation industry growth

November 29, 2018 15:45
As is the case with the sea port, Hong Kong’s airport is being challenged by rivals in nearby cities in the region. Photo: HKIA

I recently wrote about the maritime industry, and how the government is looking at tax incentives and other ways to maintain Hong Kong as a hub for the industry in the face of growing overseas competition.

It might be interesting to take a similar look at the aviation industry.

Like the shipping industry, aviation is a key part of our overall transport and logistics sector. And just as our sea port faces competition from elsewhere in the region, Hong Kong’s airport is challenged by rivals in nearby cities.

Hong Kong’s aviation hub role can be seen from the fact that its airport is the world’s third busiest for international passenger numbers, and number-one for cargo. Let’s look at some numbers.

In terms of passenger traffic, the airport handled some 73 million travelers last year. Just around 50 percent of them were coming to or from Hong Kong, while 20 percent were coming to or from surrounding areas in the Pearl River Delta, and 30 percent were transferring to other international or mainland flights. Around two thirds of passengers are coming or going to the Mainland and Southeast and Northern Asia, with the rest on longer-haul routes.

Hong Kong is also a major hub for air cargo. Of freight volume in Hong Kong last year, 3.7 million tons went by air, versus 138 million tons by sea – that’s 2.3 percent by air versus 84 percent by sea (the other 22 million tons, 13.5 percent, was by road). Yet the value of the freight carried by air was HK$3.4 billion, or 42 percent of the total. (This isn’t counting airmail.)

These figures reflect the airport’s importance as a regional and international gateway. This makes it a major contributor to the economy, and it directly and indirectly creates around 148,000 jobs – a number that is forecast to rise to over 280,000 by 2030. Hong Kong is also the home base of six airlines, including the major international carrier Cathay Pacific and one all-cargo operator.

The indirect benefits are perhaps hard to measure accurately. But we can get an idea if we imagine the airport as one of the factors companies consider when they decide to locate here. The multiple daily services to cities around the world – over 1,000 flights a day to some 220 destinations – and the efficiency of the airport are key to an attractive business location. Even the accessibility of the terminal – a half-hour high-speed train ride from Central – is a real advantage over many other cities.

Broad regional and global economic trends suggest that the aviation industry here can look forward to continued growth. The Asian market in general looks set to expand, and the economic integration of the Greater Bay Area offers some specific opportunities.

In terms of capturing market share of traffic, Hong Kong faces two challenges – limited capacity at the airport, and growing competition from other airports in the Pearl River Delta.

The third runway and the expansion of terminal and other facilities will help ease the capacity problem in the next five years. The expansion of airport capacity at other regional cities, like Guangzhou, is inevitable given the economic and population growth. But it will also potentially lead to waste and inefficiency. Part of the rationale for the Greater Bay Area idea is to improve coordination of infrastructure development. Such coordination is likely to help the more prominent airports, like Hong Kong’s, consolidate their position.

As with the maritime industry, this is not simply about logistics and transport activity. It is also about the service industries associated with aviation. On the financial side, for example, the government has taken steps to encourage aircraft leasing business in the city.

This leads to another potential challenge, namely the availability of skills. Aviation covers specific engineering, customer-service, IT, marketing and other disciplines. To meet the industry’s needs, Hong Kong has been proactive in establishing an International Aviation Academy under the Airport Authority. So far, most of its 6,500 students have been airport staff upgrading their skills. The plan is to offer more professional and management training programs in the future.

Hong Kong has been a shipping center since at least the Song Dynasty, and the modern city developed around its port. Aviation is a relatively newer industry (though Cathay Pacific was founded in 1946). Of the two, aviation has the bigger long-term growth prospects. It makes sense, therefore, for the policymakers to ensure it has sufficient physical infrastructure, human skills and official support at regional and international levels.

– Contact us at [email protected]


Executive Council member and former legislator; Hong Kong delegate to the National People’s Congress