HONG KONG STRATEGY. Submission on the Three Runway System at Hong Kong International Airport

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1 HONG KONG STRATEGY Submission on the Three Runway System at Hong Kong International Airport 8 September 2015 Hong Kong Strategy ( HKS ) is firmly in support of the construction of three-runway system ( 3RS ) at Hong Kong International Airport ( HKIA ) without further delay. We believe that this is the only viable way to ensure the long-term competitiveness of Hong Kong as a premier aviation hub to support international trade, logistics, tourism, MICE, finance and professional services. Our views are set out in the following deliberations: 1. Enhancing Hong Kong s Competitiveness Global aviation connectivity is of utmost importance to Hong Kong s role as an international business hub. Considering the fact that the neighboring airports, such as Singapore Changi Airport, International Airport in Seoul, Shanghai Pudong International Airport, Guangzhou Baiyun International Airport and Shenzhen Bao an International Airport are actively expanding, HKIA is currently facing a fierce competition. Guangzhou Baiyun International Airport has already put its third runway into service. Its expansion work of 4th runway, 5th runway and a new terminal will be carried out timely. It is expected that the total passenger traffic of Guangzhou Baiyun International Airport will exceed HKIA. At the same time, the Terminal 3 of Shenzhen Bao an International Airport has already been in service. Taipei Taoyuan Airport is now renovating its runways and taxiways to accommodate larger aircrafts. With such a fierce competition, if our existing two-runway system of HKIA is saturated, it is likely that other international airlines will choose to land on other neighboring airports instead of HKIA. Hong Kong, having been famed as international business hub, would lose its competitive edge and economic benefits. 1

2 Since 1998, HKIA has been the world s busiest airport. In 2014, HKIA handled 63.3 million passengers, 4.38 million tons of cargo and 391,000 flight movements, representing annual growth of 5.7%, 6.0% and 5.1% respectively. IATA Consulting expect by the time 3RS is put into service, HKIA will handle more than 100 million passengers, 9 million tons of cargo and 607,000 flight movements. Without the 3RS, HKIA would not be able to enhance the number of flight movements to meet the needs of aviation services. The saturation status would pose a significantly negative impact to the airport and diminish the aviation network. By that time when the aviation services cannot meet the demand, the pricing of flight tickets will hence increase, deterring overseas travelers from all over the world to visit Hong Kong. In long run, it would diminish the competitive advantages that HKIA as an international aviation hub. An example is that the declared runway capacity of Heathrow Airport in London has just reached 98%, it was found that the number of international flights has been switching to use other airports such as Frankfurt, Paris, etc. The role of Heathrow Airport being the international aviation hub is now weakening. 2. Creating Impetus to Economic Growth HKIA brings enormous economic value to Hong Kong and provides important support to the four economic pillar industries of Hong Kong financial services, trade and logistics, tourism, and business and professional services, which accounted for 57.8% of GDP in The development of these industries all depends on the smooth and efficient passenger and cargo flows of HKIA. Currently, the airport offers more than 65,000 direct jobs, and nearly 190,000 indirect jobs in hospitality, catering, tourism and retail industry. The total number of jobs generated is accounted for more than 5% of the total employed population. After the completion of the third runway, Hong Kong's GDP is predicted to increase 4-5%. The additional economic benefits will account for HKD450 billion and the 3RS development will create over 100,000 new jobs. In addition, a total of 139,000 construction-related jobs will be created during the construction period of 3RS, increasing a large number of employment opportunities. On a macro level, the building of a third runway, alongside a number of cross-boundary infrastructure projects such as the Hong Kong Zhuhai-Macao Bridge, and the Guangzhou- Shenzhen-Hong Kong Express Rail Link, will be an integral move for Hong Kong to capture the 2

3 enormous opportunities in China s rapid economic and social transformation. More importantly, it will help prevent Hong Kong from being marginalized by other Mainland cities in the long run. In essence, we are positive that the construction of the third runway will bring substantial tangible benefits to a wide spectrum of sectors such as logistics, tourism, retail, catering, hotel, convention and exhibition and more, which in turn will create multiplier effects on the economy. At the same time, it will strengthen Hong Kong s status as an aviation and logistics hub, and help drive constantly our productivity, efficiency and economic growth. 3. Boosting the growth of Retail, Tourism and MICE Development HKIA plays a pivotal role in supporting Hong Kong s tourism and retail industry. Altogether, the two industries contributed 8.6% of our GDP, and employed 520,000 persons in Since the implementation of Individual Visit Scheme (IVS) in 2003, inbound tourist spending has been taking up a much larger proportion of Hong Kong s total retail sales. In 2004, the shopping expenditure of visitors only made up of 20.3% of the total retail sales (HK$38.9 billion out of HK$191.6 billion), while it has surged to 38.3% in 2013 (HK$189.4 billion out of HK$494.5 billion). Visitor arrivals by air transport also registered impressive growth over the past few years, and such a trend is expected to grow at a much faster pace in the years ahead. In 2013, total visitor arrivals to Hong Kong increased 11.7% to 54.3 million, while visitor arrivals by air transport grew 6.7% to 12.3 million, which constituted 22.7% of total visitor arrivals (2012: grew 4.8% to 11.6 million, representing 24% of 48.6 million total visitors). For the first seven months of 2014, visitor arrivals by air already reached 7.4 million, which accounted for 22% of 33.9 million total visitor arrivals. Despite Hong Kong remains as a single place receiving the highest number of Chinese visitors, we are facing slower tourist growth and spending, as well as cut-throat competitions in the region. In 2013, we registered 40.7 million mainland tourists at a growth rate of 16.7%, which however was much slower than the 2012 rate of 24.2%. In contrary, many of our rival destinations have liberalized their visa policies and uplifted tourist facilities in a forceful manner. As a result, they have experienced impressive growth in China visitors. For example, South Korea registered a 52.5% growth in China visitors to 4.3 million in 2013; while Thailand a 70.2% to 4.7 million Chinese visitors. Both of them turned out to be the top performers in achieving highest growth rate in mainland tourists in

4 With this irrevocable trend of immense regional competition, Hong Kong needs to step up our efforts to expand tourist facilities and enhance their experience, otherwise, we will be losing our long-claimed attractiveness, especially our appeals to the burgeoning high-spending visitors travelling via air traffic in the years to come. In addition, it is a known fact that HKIA has been experiencing heightening pressure on its capacity and service quality due to the accelerated growth of international and regional tourism in recent decades. We should also devise macro plans of how to integrate hospitality, catering, MICE industry, logistics, so as to maintain Hong Kong s leading role as an international hub for businesses. 4. Environmental Impact to the Community Hong Kong Strategy welcomes the completion of the environmental impact assessment (EIA) study. We trust that the EIA process is well-established and comprehensive in assessing the environmental aspects of building the third runway, covering aircraft noise, air quality, marine ecology and the Chinese White Dolphins habitat. In order to arrive at a public consensus for the third runway project promptly, we view that HKIA may have to further step up its engagement exercise with different stakeholders on the EIA through a comprehensive communication and engagement plan. Our Concerns about the Three-runway System (3RS) 1. It was understood that Hong Kong International Airport (HKIA) cannot accommodate the 4th Runway system in the future. Based on the fact that the three-runway system (3RS) would only postpone the time of reaching the saturation of the existing airport to 2030, so what is the long-term plan for HKIA? In which direction Hong Kong shall develop its aviation after the saturation of the expansion of the 3RS? If the possibility of building a four-runway system in the future is not high, will we consider to build a new airport? If so, would it be wise to build a new airport right away instead of the 3RS so as to meet the long-term needs? 2. Can we explore more possibilities of cooperation with neighboring airports (i.e. Shenzhen airport and Macau airport) as an alternative to the 3RS? Is it possible to fully utilize the existing resources via actively promote co-operation and exchange in regional air traffic management to rationalize flight routes and flight procedures design 4

5 with the neighboring airports instead of spending a great deal of money to build the 3RS? 3. Demand for skilled construction workers will surge due to the 3RS construction. Yet, the problem of chronic construction worker shortage already exists in Hong Kong and is there any solution to solve this problem? Would this problem lead to another controversial labor import issue? 4. Increase of visitors is the result of the 3RS, and thus a wide range of supporting facilities including the transport system, tourist facilities and hospitality and service support are needed to cater to their needs. Yet, can Hong Kong host such a high number of visitors based on the existing facilities? If not, is there any relevant enhancement plan and discussion with Tourism Board and Hong Kong Hotels Association for that? 5. There is no any concrete evidence provided by the Government or the Airport Authority Hong Kong ( AAHK ) that the invisible wall restrict can be solved and this factor may affect the anticipation of the economic benefit brought by the 3RS. Although AAHK and the Civil Aviation Department emphasized that permission for Hong Kong flights to use part of the airspace in Shenzhen will be granted once the 3RS is built, there is no guarantee for such agreement at the moment. Would it be possible to disclose more concrete details and information regarding the air space using agreement so as to allay public concerns? Conclusion and Recommendations: Hong Kong Strategy believes that the construction of a third runway is extremely important for the long-term development of Hong Kong, subject to the clarification and satisfactory resolution of the concerns raised in the above paragraphs. It is noted that according to AAHK, the construction cost will increase at least HKD7.0 billion for every one year of delay. It also estimated that even if the reclamation plan can begin smoothly in 2016, the 3RS will come into operation by 2023 at the earliest. Therefore, Hong Kong Strategy believes that the key question is NOT about whether or not we should build a third runway system, but "HOW to reduce the cost of construction and minimize 5

6 environmental impact. The earlier we start the implementation of 3RS, the more the advantages Hong Kong will be benefited in general. The construction of the 3RS will undoubtedly pose a negative impact to the environment of Lantau Island. AAHK should meet all the EIA requirements. It is necessary to strike a balance between development and conservation. The public should be provided with a transparent report with explicit explanation on the environmental protection measures during the construction and the operation phases of 3RS. A cross-sector industry discussion on how to integrate hospitality, catering, MICE industry and logistics facilities for the implementation of 3RS should be arranged, so as to maintain Hong Kong s leading role as an international hub for businesses. With the implementation of 3RS, Hong Kong needs to step up our efforts to expand tourist facilities and enhance travelers' experience. Otherwise, we will be losing our competitiveness and attractiveness, especially our appeals to the burgeoning high-spending visitors travelling via air traffic in the years to come. - END - About Hong Kong Strategy Hong Kong Strategy is a group of Hong Kong citizens with a common background - all are either serving or former members of the Central Policy Unit of the HKSAR. We have no political party affiliation but we share a common interest - the love of our country and our concern for Hong Kong's future well-being. With our diverse experience in different fields, we have banded together to form "Hong Kong Strategy" to contribute ideas, opinions and advice on public policies both current and long-term to the community and the government in the hope of making Hong Kong a better home for us all. Written by 1. Ir S.H. CHAN, JP Vice-Chairman of Hong Kong Strategy 2. Mr. Kai-man FOK Young Strategist of Hong Kong Strategy 3. Mr. Eddie KAM Young Strategist of Hong Kong Strategy 4. Ms. Camille LAM Young Strategist of Hong Kong Strategy 5. Mr. Rex WONG Young Strategist of Hong Kong Strategy 6. Mr. Solomon YUNG Young Strategist of Hong Kong Strategy 6

7 Contacts: Chairman : Mr. David Fong Man-hung, BBS, JP Contact Person : Ms. Camille Lam Telephone : Fax : camillelam@hshd.com.hk Address : 23/F, Hip Shing Hong Centre, 55 Des Voeux Road, Central 7

A THIRD RUNWAY AT HONG KONG INTERNATIONAL AIRPORT IS CRUCIAL TO HONG KONG S ECONOMIC FUTURE

A THIRD RUNWAY AT HONG KONG INTERNATIONAL AIRPORT IS CRUCIAL TO HONG KONG S ECONOMIC FUTURE Cathay Pacific firmly believes that a third runway at Hong Kong International Airport (HKIA) is a vital component