"Hong Kong airport listing will test confidence"

Wednesday, August 6, 2003

Hong Kong airport listing will test confidence
United Kingdom - The Financial Times


Hong Kong's airport is to be privatised in 2004, in one of Asia's largest
listings of the past few years that could value the territory's hub at some
$6bn.

The privatisation of the Airport Authority, the operator of Chek Lap Kok
airport, would provide a boost to investment banks and investors in Asia who
have suffered from a slowdown in corporate activity in the region.

It would also help the Hong Kong government reduce the territory's budget
deficit, which is estimated to reach $11bn this fiscal year. Hong Kong has
pledged to sell assets worth HK$112bn (US$14.3bn) over the next five years.

Henry Tang, the new finance secretary, yesterday said proposals for the
listing of Chek Lap Kok airport would be put to the territory's legislature
in the first half of next year.

The Hong Kong government declined to comment on the stake to be sold on the
Hong Kong stock exchange or its price. But people close to the discussions
said the government would probably float a 49 per cent stake and keep a
majority holding.

Bankers, who were invited to pitch to advise the government and the
authority at meetings on Tuesday and yesterday, said the operator could be
valued in line with its assets. The authority had assets of HK$48.9bn in the
2002-2003 financial year.

This would make the offering of a 49 per cent stake one of Asia's largest
listings of the past few years and a crucial test of investor confidence in
the region's stock markets.

The largest recent flotation was last year's $2.8bn public offering by Bank
of China's Hong Kong arm.

However, bankers warned that estimating the value of the authority was
difficult as there were few listed airport operators in the world. Last
year, the company had a turnover of HK$5.4bn and an operating profit before
depreciation of HK$2.6bn. The Hong Kong airport opened in 1998 and is the
world's fifth-largest. It handled more than 34m passengers last year.

The privatisation of Chek Lap Kok could be opposed by leading airlines amid
fears a publicly-listed operator would raise landing fees and other charges.

This week, Giovanni Bisignani, director general of the International Air
Transport Association, told an aerospace forum in Hong Kong, that the
territory should not rush into privatisation. He said that when governments
were "greedy", privatisation was a disaster because official monopolies
turned into private ones, citing Mexico City as an example.

However, James Hughes-Hallett, chairman of Cathay Pacific Airlines, said
yesterday: "Cathay's closest business partner is the Airport Authority, so
we will provide input for the planned IPO. But I can't promise we'll buy
shares."


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