The success of Hong Kong's Chek Lap Kok, due to open on 6 July, will depend on keeping costs down
Paul Lewis/HONG KONG
Hong Kong's new international airport makes its operational debut on 6 July - the culmination of a remarkable eight-year undertaking.
The $20 billion infrastructure investment was initiated under one sovereign power and inherited and completed by a second. Hong Kong, despite the political crossfire of its 1997 handover from the UK to China, has managed to complete one of the largest civil engineering projects ever in less time than it takes other nations to complete a public planning inquiry.
Testament to the complexity of the Chek Lap Kok development programme are its many engineering superlatives. Accomplishments range from the unparallelled 31-month reclamation of the 1,250ha (3,080 acres) airport platform, to the construction of an adjacent 260,000-inhabitant new town, four underground and cross-harbour tunnels, a six-lane highway, 31km (20 miles)-long railway and five bridges - including Tsing Ma, at 1,377m (4,500ft) the world's longest road/rail span.
Pride of place goes to the airport itself, which boasts a marble-adorned passenger terminal, complete with nine banks of 288 check-in counters and a 19,200-bag/h-capacity luggage handling system with conveyor belts stretching for 20km. The nine-floor facility, designed to handle a throughput of 35 million passengers a year, also has a 1.27km long Y-shaped passenger concourse served by 48 moving walkways and a first floor level automated shuttle train.
The airport will open for business with one 3,800m-long runway (southern), 38 terminal air bridges and 40 remote stands, including 13 for cargo. The scheduled completion of the northern runway in December will be followed by the opening of the north-west arm of the passenger concourse and the addition of 10 gates by mid-1999. By comparison, Hong Kong's soon-to-close Kai Tak Airport has only one, very congested, 3,390m runway, eight air bridges and six luggage carousels (half the number available at Chek Lap Kok).
TRAFFIC CONTRACTION
Ironically, the inauguration of the new airport comes at a time of declining traffic and when Kai Tak, for the first time in years, is actually operating close to its design capacity of around 28 million passengers a year. The Hong Kong Airport Authority (HKAA) estimates that, with an end to Kai Tak's 0100-0600 curfew and the new airport operating for 24h, traffic will total around 30 million passengers in the first 12 months, "but not significantly more than that".
HKAA chief executive Dr Hank Townsend says:" Airlines are already taking steps to adjust to the new airport in terms of co-ordination of schedules worldwide and, of course, there has been continued growth in cargo operations in and out of Hong Kong. The common view is that we should see a steady growth in aviation. It is ideally situated in the global network of airports and we anticipate that, after the economic slowdown, we'll be well positioned to recover. The only question is when."
Intractably linked to the issue of projected traffic is the payback period on the HK$49.8 billion ($6.4 billion) the HKAA has poured into the first phase of construction. Under the 1995 Financial Support Agreement (FSA), which required 50 months of acrimonious debate between the Chinese and UK Governments to hammer out, HKAA borrowing is capped at HK$11.6 billion and must be repaid by September 2001. The Hong Kong Government is promised a 5% return on its HK$36.6 billion-worth of equity.
Townsend acknowledges that air traffic in the last quarter of 1997 and first quarter of 1998 was down, but adds: "We're not concerned about it. We haven't really borrowed that much money. We've arranged some HK$8 billion in financing to complete the airport and have not gone to the full amount allowed under the FSA. All the scenarios we're looking at indicate we shouldn't have any difficulty in meeting our targets."
The Authority has secured a further HK$4 billion syndicated loan to underwrite the second runway, north-west concourse and any new post-opening capital expenditure, such as an HKAA headquarters to replace its current Portakabin encampment and a post-2005 remote passenger-concourse. This constitutes a separate Phase 2 work package and so falls outside the FSA. The authority is raising additional funds through a HK$5 billion note issuance, the first HK$500 of which was placed recently.
The HKAA has tried to limit its reliance on airport user charges by tapping revenue streams from other sources, including terminal real estate, franchising and retail licences issued to 150 shops and food outlets. Nevertheless, it will derive 37% of its income from landing, parking and terminal building charges (TBCs) in the first 1998-9 financial year of operation.
Although the airlines have grudgingly agreed to what the HKAA claims is no more than a 20% aggregate hike in charges compared with those levied at Kai Tak, the imposition of HK$39 per head TBC has proved particularly contentious with home carrier Cathay Pacific Airways. The charge is levied on departing passengers and and those transferring between aircraft, but excludes transiting traffic where there is no change in flight number.
"Cathay, by definition, doesn't have transit traffic, so we're going to have to pay," says airline chairman Peter Sutch. "The object is to build a hub, and who's going to build that hub but the home carrier, which will be penalised to the tune of some HK$300 million a year."
The HKAA counters that the scheme was agreed only after eight rounds of talks with airlines and is intended to be simple, non-discriminatory and based on the principle of "the user pays". HKAA corporate development director Clinton Leeks adds: "Transfer passengers tend to spend longer, use facilities more and go landside."
Battle will be rejoined in 12 months' time when the two sides will review the situation. The Hong Kong authority says that, by then, it will have a better idea of its actual costs and whether or not the charges can be "adjusted".
Pressure on the HKAA is mounting because of tumbling traffic figures and growing regional competition, with neighbouring Macau announcing a 50% cut in night landing fees and, from 20 June, ending departure charges for passengers staying less than 24h. "The dialogue will be re-opened with enthusiasm," says Sutch.
The move to Chek Lap Kok signals the end of some support service monopolies, which the HKAA believes should spark greater price competition. As well as incumbent Hong Kong Aircraft Engineering, which has built a three-bay hangar at Chek Lap Kok, line maintenance licences have been granted to China Aircraft Services and Pan Asia Aviation Services.
FACING COMPETITION
Hong Kong Air Cargo Terminals has built a new 2.6 million tonnes a year capacity facility, but now faces competition from newcomer Asia Air Freight Terminal. Three flight catering franchises have been awarded - to Cathay Pacific Catering Services, LSG Lufthansa Service and Swissair's Gate Gourmet. Ramp handling services have also been opened up to a choice of three operators.
"We have to be able to deliver value for money," says Townsend. "We will rely on market competition to set the prices for these types of services." At stake is Hong Kong's fundamental competitiveness and future role as Asia's "pre-eminent" international air transport hub, whose success or failure will have a direct bearing on the 45,000 employed at Chek Lap Kok.
Competition from South-East Asia is heating up, with the 27 June opening of Malaysia's new $3.1 billion Sepang International in Kuala Lumpur and the planned third passenger terminal at Singapore's Changi. A major new Asian gateway at Inchon in South Korea will be open for business in 2001, and new international airports are on the cards for neighbouring Gaungzhou in southern China, Bangkok in Thailand and Manila in the Philippines.
Therein lies the challenge for the year old Hong Kong Special Administrative Region. The past year has delivered a painful reminder to the territory and its 6 million inhabitants that its position as an international financial focal point cannot be taken for granted. It is this that will ultimately determine the future success of Chek Lap Kok. As Townsend says: "People don't fly to airports, they fly to markets."
Source: Flight International
