Is investment in Zhuhai airport a smart idea?

Mark O'Neill December 21, 2020 09:46

The Hong Kong International Airport (HKIA ) will acquire an equity stake in Zhuhai airport, the Chief Executive said in her policy address. Is this a good idea?

Last year Zhuhai airport handled 12.3 million passengers, ranking 35th among airports in China and compared to 71.5 million at Hong Kong airport. It has 80 mainland routes and no international ones. Since 2006, Airport Authority Hong Kong (AAHK) has managed Zhuhai airport through a management joint venture with the city government.

The airport does not have a good location – Sanzao township, 37 kilometres from Zhuhai city centre and 33 km from Macao. It began as a military airport built by the Japanese in World War Two; planes that bombed Hong Kong during the invasion of December 1941 took off from there. British intelligence did not know of the airport because of its remoteness.

This location and the lack of international flights mean that many people in Zhuhai, Zhongshan and Jiangmen do not go there and prefer to travel on the expressway to Guangzhou’s White Cloud airport, which offers a wider range of destinations, at home and abroad.

Zhuhai airport opened in 1995, with a total investment of six billion yuan, and lost money every year until 2008. Beijing designated it as a local airport and awarded international routes to the other big airports in the Pearl River Delta – Guangzhou, Shenzhen and Macao. It hosts the mainland’s only international aerospace trade show, in November each year – but not in 2020 because of the pandemic.

Zhuhai airport is not an attractive alternative for those flying to or transiting through Hong Kong. After leaving the airport, they must drive the 33 km to Macao, go through customs and immigration and then cross the bridge to Hong Kong. The third runway at HKIA will be completed in 2022, greatly increasing its passenger capacity.

The big potential is cargo. HKIA has for 10 consecutive years been the busiest cargo airport in the world, handling 4.8 million tonnes in 2019. “Zhuhai is a better option to handle cargo than Shenzhen or Guangzhou airports because of the HK-Zhuhai-Macao bridge, which will help lower the cost of transporting goods,” said Fred Lam Tin-fuk, chief executive of AAHK, which runs HKIA.

“Our goal is not only to complement each other on the basis of our existing flight networks, but set sight on over 160 airports in the Mainland which have no international border facilities, and over 130 new airports under construction,” Lam said. “We aim to attract passengers from those markets to Zhuhai Airport, and onward to HKIA via HZMB for international air travels. This is an enormous potential source of passengers. In parallel, strengthening collaboration with Zhuhai will extend our air cargo services to the broader inland markets. These new sources of business will benefit our business partners, in particular the airlines and logistics industry.”

HKIA is building a new HKIA Logistics Park in Dongguan. Cargo operators from Dongguan can also choose an airside intermodal cargo handling facility, near the third runway, and re-export goods without the need to enter Hong Kong.

Zhuhai airport offers new capacity in handling import and export cargo through Hong Kong. In building it, the city government defied the instructions of Beijing which ordered only a regional-size airport. Instead, it built one of international size, with capacity of 12 million passengers and 600,000 tonnes of cargo. This overspending was a major reason why Premier Zhu Rongji fired then city Communist Party chief Liang Guangda.

It took 24 years for the airport to achieve its capacity of 12 million travellers. Cargo in 2017 reached 37,379 tonnes; its target in 2027 is 104,000 tonnes. For HKIA, this excess capacity is a blessing. It can use Zhuhai airport to land goods destined for the mainland market.

Business jets are another potential to grow HKIA’s business. It has a Hong Kong Business Aviation Centre with 16,000 square metres, an executive terminal and three hangars. It needs more space and Zhuhai could provide it, for businessmen who want to visit cities in the mainland. For those wanting to come here, however, it is too inconvenient.

So the business case for an equity stake in Zhuhai looks good. The price will be substantially lower than a stake in a major mainland airport. Let us hope it was the initiative of HKIA itself, for business reasons, and not an order from Beijing to increase the city’s involvement in the Greater Bay Area.

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Mark O'Neill

A Hong Kong-based writer, teacher and speaker.