South China Morning Post – 30 June 2011
Bumpy ride ahead for Chek Lap kok operator despite strong rebound in passenger and cargo throughput
Hong Kong airport made a record profit of more than HK$4 billion last year following a strong rebound in passenger and cargo throughput, but expansion plans could make for a bumpy ride in the years ahead.
Even without building a third runway – which is still in the planning phase – depreciation and amortisation of the HK$9.3 billion midfield expansion programme due to be completed by 2015 could drag the Airport Authority into the red.
“If you only look at the [financial] statement, there will be fluctuations, or even losses,” said William Lo Chi-chung, the authority’s executive director for finance. “However, we have a very strong cash flow. If we maintain that, we shouldn’t have problems handling any future projects.”
It will have to deal with a funding shortfall of HK$102 billion if the third runway goes ahead, but chief executive Stanley Hui Hon-chung said it had no plans yet to raise landing and parking charges for airlines.
Even though the authority projects an annual increase of 3 per cent in airport charges until 2030 in its estimated future cash flow, the airport has not raised the landing and parking fees for airlines in 13 years. Fees, in fact, were cut by 15 per cent during the economic downturn of 2000, with another temporary reduction in 2009 following the credit crisis, which has now been reinstated.
Record passenger and cargo throughput last year plus strong growth in rents, retail licences and advertising revenues pushed the airport’s revenue up by 17.4 per cent to HK$10.58 billion. Helped by good control over operating expenses, net profit jumped 41.9 per cent to HK$4.04 billion.
The operating margin also rose to 66.3 per cent in the 12 months to March from 62.3 per cent a year ago – the highest among utilities investments, while return on equity reached double digits for the first time, at 11.1 per cent.
Hui said if passenger throughput continued to grow at an annual clip of 3.2 per cent, Hong Kong might overtake Heathrow as the airport handling the most international passengers by 2015.
Despite the record profit, the government will only receive HK$3.1 billion in ordinary dividends, less than the HK$4.5 billion from an ordinary and a special dividend in 2009. There is no special dividend this year.
While Japan’s natural disasters and political unrest in the Middle East pushed cargo throughput down by 1.2 per cent in the first five months of this year, passenger and aircraft movements saw year-on-year growth of 5.4 per cent and 12 per cent respectively. Despite a high base, Hui said, Hong Kong airport should end the year with moderate growth.