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LCQ7: Financial arrangement of the three-runway system project at Hong Kong International Airport

     Following is a question by the Hon Regina Ip and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (April 22):


     On March 17 this year, the Chief Executive in Council affirmed the need to expand the Hong Kong International Airport into a three-runway system, the construction cost of which is projected to be around $141.5 billion in money-of-the-day prices. Based on a "joint contribution and user-pay" principle, the Airport Authority Hong Kong (AAHK) has put forward its funding proposal for the project.  It has been reported that AAHK will seek to fund the project through three channels: (i) about $53 billion (38%) from bank loans and bonds issued, (ii) about $47 billion (33%) from the cessation of payment to the Government for 10 years of dividends in relation to airport's operational surplus, and (iii) about $42 billion (29%) from the fees and charges to be imposed on airport users (including introducing an Airport Construction Fee (ACF) of $180 per departing passenger). In this connection, will the Government inform this Council:

(1) given that quite a number of comments have pointed out that the ACF of $180 to be charged on each departing passenger is too high, and that AAHK is currently awarded the highest AAA credit rating by Standard & Poor's, an international rating agency, whether the authorities will discuss with AAHK the raising of the proportions of funds to be financed through the first two channels in the above funding proposal, with a view to lowering the rate of or even dispensing with the introduction of ACF, so as to avoid undermining the competitiveness of the local aviation industry; if they will, of the details; and

(2) given that the Government lowered the rate of air passenger departure tax from $100 to $50 in the 1998-1999 financial year in order to assist in the recovery of the tourism industry, whether the authorities will make reference to this practice by lowering the rate or even suspending the imposition of the tax, so as to alleviate the burden posed by ACF on passengers; if they will, of the details?



     Air traffic at Hong Kong International Airport (HKIA) has been growing significantly over the past few years. According to the latest projection, the existing two-runway system (2RS) would likely reach its maximum practical capacity of 420 000 air traffic movements (ATMs) per annum in 2016 or 2017, a few years ahead of the original forecast in the HKIA Master Plan 2030 released by the Airport Authority Hong Kong (AAHK) in 2011. Besides, Hong Kong is facing intensifying competition from airports in neighbouring cities such as Singapore, Seoul, Shanghai, Guangzhou, Shenzhen, etc. All the airports in these cities have already committed/planned or are in the course of implementing major airport expansion plans. Without major expansion plans like the three-runway system (3RS) at HKIA, Hong Kong will eventually lose out on the development of our aviation business, as well as affiliated sectors particularly in logistics, tourism, trade and retail, to our major competitors. There is an urgent need for the implementation of the 3RS project to meet Hong Kong's long-term air traffic demand and to maintain our overall competitiveness.

     As the proponent of the 3RS project, AAHK has drawn up the financial arrangement of the project and submitted a proposal to the Government. As set out in its proposal, AAHK will finance the 3RS project by making use of internal sources of funds, external borrowings and charging airport users (including the adjustment of airport charges payable by airlines and the collection of Airport Construction Fee (ACF) from departing local and foreign air passengers). This proposal, which is a three-pronged approach under the principle of joint contribution, is more equitable than asking tax payers at large to pay for the construction costs through direct government funding out of the general revenue. AAHK will ensure the cost-effectiveness of the 3RS project and endeavour to exercise good project management and cost control.

     Our reply to the question from the Hon Regina Ip is as follows:

(1) In response to the views of the Government and the general public, AAHK is now reviewing its proposed financial arrangement with a view to maximising borrowings from the market and lowering the charging level of the proposed ACF so as to lessen the burden of air passengers.  AAHK will announce its findings upon completion of the review.

(2) Air Passenger Departure Tax (APDT) is one of the sources of Government's revenue.  Similar to other Government taxation, the APDT received will be transferred to the Government's general revenue for paying various government expenditures. As the construction of the 3RS project will be self-financed by the AAHK, the Government has no plan to lower or suspend the imposition of APDT for the purpose of the 3RS project.

Ends/Wednesday, April 22, 2015
Issued at HKT 14:01


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