Cover story PROJECT RUNWAY Flights to and from Hong Kong will almost double by 2030, bringing in business vital for the city s future. But Chek Lap Kok airport can t cope. Marvin Cheung, chairman of the Airport Authority, tells Heda Bayron how the authority hopes to raise a runway from the sea in Hong Kong s most expensive infrastructure project ever 24 July 2011
A PLUS COLIN BEERE July 2011 25
Cover story n 10 years Hong Kong International Airport could reach its saturation point. Chek Lap Kok would have to turn away passenger and cargo traffic because its facilities can t cope with demand. That is a big threat to the city s future, according to airline executives and the Airport Authority. But the solutions being proposed by Marvin Cheung, chairman of the Airport Authority and a past president of the Hong Kong Institute of CPAs, are proving controversial and not just because of the HK$136.2 billion price tag. His preferred, and most radical, solution is to build a third runway, even though this would be Hong Kong s most expensive public works project ever, involving a highly technical, and environmentally controversial, land reclamation project. We need to remain competitive to attract international travel because this supports our four pillar industries of financial services, trading and logistics, tourism and professional services, Cheung tells A Plus. Not surprisingly, this proposal is causing a heated debate. The three-month consultation on the proposal, part of the airport s 20-year plan, ends in September, and Cheung is set for a rough ride. We re not sitting on our hands doing nothing. We re telling you the demand is there, but we cannot meet the demand with our existing infrastructure, he says. Do you want to do the business? If you don t want to do the business, that is fine. But if you want the business, we have to act now. Stats for the stacks Last year the airport handled 50.9 million passengers, 4.1 million tonnes of cargo and 306,500 take-offs and landings. By 2030 these numbers are expected to increase to 97 million passengers, 8.9 million tonnes of cargo and 602,000 air traffic movements. John Slosar, Cathay Pacific s chief executive officer, says the airport is a victim of its own success. The existing runways are already so heavily used through most of the operating day that finding take-off and landing slots for additional flights is increasingly difficult, he says. The experts say that as traffic grows in tandem with the Chinese economy, Hong Kong s airport facilities will become ever more strained. This could lead to delays to flights and baggage delivery, and even to reduced routes as airlines switch to other airports in the region. Right now, mainland airports are expanding. Guangzhou s Baiyun airport plans to add three runways to its current two, while Shanghai Pudong airport will add two more runways to its existing three by 2015. Elsewhere in the region, Bangkok s Suvarnabhumi Airport plans to add a third runway under its 2011-16 development plan. It hopes that this will enable it to serve 80 million passengers a year. Cheung does not think Hong Kong is losing market share to other airports, but says it might happen. I think we are in a good position, but it s difficult to maintain that if we run out of capacity. Traffic will be forced to look for an alternative. It s easy to lose our existing strong position. And once you lose it, it s very, very difficult to get it back, he says. Cheung points to what happened when Kai Tak Airport, which had a single runway, couldn t keep up with demand; some airlines operating long-haul flights from Europe and North America moved to Singapore as their regional hub and they remained there even after Chek Lap Kok opened in 1998. So Cheung has put forward two options. The first involves maintaining the current two runways, but investing an estimated HK$42.5 billion (adjusted for inflation) in terminal and apron facilities, including a new passenger concourse, automated people movers and baggage handling systems. This, the authority warns, is a Band-Aid solution because it doesn t address the fundamental lack of runway capacity. The second preferred, but far more expensive option is to reclaim about 650 hectares of sea to build a third runway. This would take capacity up to a maximum of 620,000 flight movements a year, which could maintain Hong Kong s position as a network hub possibly beyond 2030. The billion dollar questions The third runway s HK$136.2 billion price tag (adjusted for inflation) is staggering, and Cheung admits it could go even higher when a final design is drawn up after the environmental impact assessment. But he says he wants to be upfront with the Hong Kong people. This is the best estimate we have today. There is no point in me giving you a lower 26 July 2011
A PLUS Hong Kong International Airport Last year By 2030 Passenger traffic 50.9 million 97 million Cargo throughput 4.1 million tonnes 8.9 million tonnes Air traffic movements (take-offs and landings) 306,500 602,000 AIRPORT AUTHORITY HONG KONG We re telling you the demand is there, but we cannot meet the demand with our existing infrastructure. Do you want to do the business? If you don t want to do the business, that is fine. But if you want the business, we have to act now. July 2011 27
Cover story COLIN BEERE 28 July 2011
A PLUS number to entice you to choose this option. You d better be aware, if you want to do that, it s going to be expensive, he says. One reason why the third runway is so expensive is the proposed method of land reclamation. Called deep cement mixing, it is aimed at preventing the destabilization of contaminated mud pits in the area to avoid ecological problems. This is why some people have suggested that it would be cheaper to build a shorter runway. Can we build it cheaper? Can we build a shorter runway? The short answer is, it is possible but not advisable, Cheung says. We can save costs at the expense of quality, but that would result in a lower level of service. A shorter runway will result in lower capacity which will not be sufficient to meet the anticipated demand. It will also make the whole airport operation inefficient. Moreover, he says, the cost difference is quite small. He argues that it would be penny wise and pound foolish to pursue these options. While the authority generated HK$9 billion in turnover in 2009-10, building the third runway would be beyond its means, especially since it is already expanding the airport s mid-field. Solutions include reducing the dividend it pays the government, asking the government to cover the funding gap by injecting capital, advancing further the user-pay principle or finding other financing solutions. It will discuss all of these with the government if the consultation concludes in favour of the new runway. We haven t ruled out any funding possibilities, Cheung says. Dead in the water? But environmental issues could sink the plan. Green groups say that the reclamation will harm marine life, particularly the habitat of Chinese white dolphins. The Hong Kong Dolphin Conservation Society has complained that the dolphins habitat in North Lantau overlaps the third runway site. The potential blockage of these travelling corridors can have a serious impact on dolphin movements within Hong Kong and could potentially discourage them from using Hong Kong waters in the long run, the society says. The World Wildlife Fund says the reclamation will result in the direct and Ultimately the Hong Kong people and the Hong Kong government will decide which option to choose. I m not the decision-maker. I m only the implementer. permanent loss of the Chinese white dolphins habitat. Other green groups warn of increased air and noise pollution in the area. Cheung says the Airport Authority acknowledges the environmental issues, but says it is up to the Environmental Protection Department to judge the materiality of these issues and whether the proposed mitigation measures are adequate in the environmental impact assessment. He says the authority will work with the department to find solutions to any issues identified. We have done preliminary studies of these aspects and we are satisfied that these are manageable. We can do mitigating measures to bring them within acceptable limits, Cheung says. A lot of green groups argue that these measures may not be enough. But there is no point in us entering into detailed discussions with them on these issues. Even if we reach an agreement, it will be irrelevant in the environmental impact assessment exercise. This is because we have to satisfy the Environmental Protection Department eventually. The department may not accept those agreements as satisfactory and may ask us to do different measures from those agreed with the green groups. He also points out that mitigation measures will need to be factored into the cost of building the third runway, so the more mitigation measures, the higher the final cost. The Hong Kong Dolphin Conservation Society, however, says the authority must address the environmental issues now. If the authority waits for the environmental impact assessment the problems revealed may be insurmountable and any mitigating measures proposed by the assessment made moot, it warns. Cheung disagrees. If we don t pass the environmental impact assessment, it s a deadend, he says. There s no way we can build it we can t overwrite the regulations. Preparing for take-off Assuming the public consultation supports a third runway and the government approves the plan, it could still take up to two years for construction to start, both to allow for the environmental impact assessment and to create a detailed design. If Hong Kong is going to maintain its competitive edge and take further advantage of new growth opportunities, work on constructing a third runway really needs to start quite soon, given the long lead times involved, says Andrew Herdman, directorgeneral of the 17-member trade group Association of Asia Pacific Airlines. Airlines including Cathay Pacific and airline industry groups are championing the third runway proposal. The bigger question is, will Hong Kong taxpayers support it? Recent large public infrastructure projects such as the Hong Kong-Macau-Zhuhai bridge and the Guangzhou-Shenzhen-Hong Kong Express Rail Link have encountered public opposition and legal challenges for reasons including cost, environmental damage and displacement of residents. Albert Lai, an opposition lawmaker who spoke out against the bridge project, says his party will keep an open mind about the runway project and urged the government to lay out all the options. Cheung says he s ready for the worst. In any major project there s not going to be 100 percent agreement from all the people of Hong Kong. So I have to ask what the nature of the objection is? Is it related to specific aspects of the project? If so, a sensible discussion can take place to explore alternatives. If the reason for the objection is related to other factors, then it is pointless to argue the specific aspects, says Cheung. Ultimately the Hong Kong people and the Hong Kong government will decide which option to choose. I m not the decision-maker. I m only the implementer. July 2011 29