Source: Airport Authority Hong Kong Author: 06/25/2008
Subject Concerned: Government Airport
On June 25, Airport Authority Hong Kong announced a profit attributable to equity shareholder of HK$2,273 million for fiscal 2007/2008, ended on March 31, 2008, up 18% from 2006/07. The final dividend declared to the Government of the Hong Kong Special Administrative Region increased 25%, to HK$2,000 million. Return on equity rose to 6.5%, from 5.6%.
The continued growth in net profit was attributable to higher revenues, effective cost controls and productivity gains during the year. Operating margin improved slightly, from 60% to 62%, as revenues grew faster than operating expenses.
Revenue for the year rose 11%, to HK$8,577 million, primarily due to expanding air traffic and higher retail sales. Passenger and cargo throughput at Hong Kong International Airport (HKIA) increased 8% and 6%, respectively, to 48.9 million and 3.8 million tonnes. Air traffic movements grew 6%, to 300,000.
Revenue from airport and security charges grew 8%, to HK$3,855 million, while earnings from airside support services franchises - primarily cargo handling, aircraft catering, aviation fuel and aircraft maintenance - rose 11%, to HK$1,404 million. Retail licences revenue increased 15%, to HK$2,389 million, mainly because of higher passenger spending and new sources of advertising income.
Airport Authority Hong Kong's Chief Executive Officer Stanley Hui Hon-chung said, "Our short-term outlook is cautious, due to soaring oil prices and growing inflationary pressures. Weekend direct charter flights across the Taiwan Strait, which are scheduled to begin in July, also present new challenges. However, our medium- to long-term prospects remain encouraging, especially given the continued expansion of global trade, sustained economic growth in Hong Kong and on the Chinese Mainland, and government efforts to increase aircraft movements at HKIA to 68 per hour by 2015."
To strengthen Hong Kong's position as a leading international and regional aviation hub, Airport Authority Hong Kong will soon commission Master Plan 2030, a 20-year development blueprint. "Master Plan 2030 will examine whether and how our infrastructure - including airport access, terminal and apron facilities and a new runway - should be developed to support the economic growth of Hong Kong and the region. Environmental impact and engineering feasibility studies for a third runway will start later this year," added Mr Hui.
Meanwhile, HKIA is undergoing a series of facility and system improvements that will maintain the airport's operational efficiency, service standards and earnings growth in a rapidly changing and increasingly competitive environment.
Following the opening of Terminal 2 last year, a HK$4.5 billion enhancement programme for Terminal 1 and the airfield is now underway. The new North Satellite Concourse, with 10 bridge-served parking bays, will begin receiving narrow-body aircraft by the end of 2009. The airport's baggage handling system and security and immigration facilities are being upgraded to boost passenger handling capacity and efficiency. And in late 2009, the permanent SkyPier will enhance cross-boundary ferry service between HKIA and the Pearl River Delta (PRD).
Growing traffic and new infrastructure have created additional demand for capital investment and higher depreciation charges. However, as a result of disciplined cost control, operating expenses before depreciation and amortisation increased 7% in 2007/2008, compared to a corresponding 14% rise in operating profit before depreciation and amortisation.
Airport Authority Hong Kong's Executive Director, Finance & Investment, Raymond Lai Wing-chueng, said, "With annual passenger traffic approaching the 50 million mark, HKIA is at a critical point in its development. We remain committed to making the airport bigger and better in a cost-effective manner that will maximise the value for our shareholder. As our new facilities become fully operational and reach optimum usage levels, we are confident that HKIA will maintain sustainable growth in profitability."
A pillar of the Hong Kong economy, HKIA is both a premier international aviation hub and a key gateway of the Chinese Mainland. As a result, Airport Authority Hong Kong is dedicated to supporting Hong Kong's economic integration with the Mainland, particularly the PRD, by strengthening co-operation with the Mainland's aviation sector.
Airport Authority Hong Kong's Mainland projects made steady progress during the year. Fuelled by a robust local economy, Hangzhou Xiaoshan International Airport (HXIA) saw passenger and cargo throughput reach 11.7 million and 196,000 tonnes in calendar 2007, up 18% and 6%, respectively, from 2006. HXIA contributed HK$89 million to Airport Authority Hong Kong's after-tax profit in 2007/2008.
HXIA will see a significant increase in capacity when the second phase of its expansion programme is completed in 2011. This will further enhance HXIA's financial value to Airport Authority Hong Kong.
At Zhuhai Airport, passenger volume soared 30%, to over 1 million, in calendar 2007. Since October 2006, the number of airlines operating from Zhuhai has increased from four to nine, while the number of commercial franchises at the airport has risen from 22 to 32. Zhuhai Airport's financial performance continued to improve, with an after-tax loss of HK$22 million for 2007/2008.
During the year, Airport Authority Hong Kong provided management and training consultancy services to support Beijing Capital International Airport (BCIA) as it launched a new terminal ahead of the 2008 Olympic Games. Terminal 3 opened successfully, with airlines relocating to the new facility in February and March 2008.
Mr Hui noted that HKIA must foster closer relationships with PRD airports to ensure optimal use of resources and enhance regional competitiveness. Last month, Airport Authority Hong Kong signed a new agreement with Shenzhen International Airport to facilitate passenger flows and leverage the two airports' strengths.
"We fully support government initiatives to foster closer co-operation between HKIA and Shenzhen International Airport, including the proposed high-speed rail link between the two airports. Enhanced co-operation will contribute to the long-term prosperity of Hong Kong and the Pearl River Delta," he added.