"An airport that will let your imagination fly"

Monday, July 12, 2004

An airport that will let your imagination fly
United Kingdom - The London Financial Times


THE manager at Hong Kong International Airport (HKIA) was telling us
about the nine-hole golf course that was planned within the airport
grounds. I wondered why an airport would invest money in a golf course.
This was the land they have for future expansion, he explained, and they
initially planned to landscape it so it would look nice. Then they
decided that they would earn some money on it in the meantime and so
decided to put a golf course in. People in transit with a few hours to
spare would pay to putter around a nice golf course.

It is this kind of thinking that has earned HKIA several accolades. In
2004, for the fourth consecutive year, it was voted the world's best
airport based on a survey by Skytrax, an independent aviation research
organisation. It was also named Cargo Airport of the Year in 2002, it
has scored second place for overall passenger satisfaction from the
International Air Transport Association in 2001, and so on.

Building and running an airport is a complex affair. An airport is not
just a place to handle planes, passengers and cargo. It has become a
window and a door to globalisation. It is a critical piece of
infrastructure for a nation on the move. HKIA does not define itself as
an airport that meets the needs of Hong Kong's seven million population.
It instead has figured that it has half the world's population of about
three billion people living within five hours' flying time of HKIA. That
gives it a different outlook and a different purpose for its existence.
More immediately, it wants to continue being a significant airport to
serve the needs of the rapidly-growing Pearl River Delta region of China
and has air, road and sea transport links with various cities in the
region.

The airport has a vision that goes beyond that of what you would expect
of an airport. It sees itself as providing a total airport experience,
which includes shopping, hotels, leisure activities, as well as
conference and exhibition facilities.

Edith Penrose, an English economist, proposed a theory of the growth of
the firm which explained that the spare resources of the firm drove its
direction of growth. Thus, if a business software firm had a few
brilliant designers who had spare time on their hands and were also
avidly interested in video games, you may find the firm wandering into
the entertainment line of business too. The mind power of the software
engineers is a resource that would be employed to develop new products
in areas that they would be fruitful.

Infrastructure plays a similar role for a nation. When there is excess
capacity in roads, railways, ports, telecommunication, and so on,
economic activity seems to grow to make use of it. If there is a road
going into the village, then traders are tempted to go in and sell a few
things as much as the villager is tempted to go out and find a new
market for his products.

HKIA, which began in July 1998, has an existing air cargo capacity of
about three million tonnes and is already operating close to 2.6 million
tonnes. Hence it has plans to expand to about nine million tonnes. About
29 per cent of Hong Kong's total external trade is air- borne cargo. In
the face of the growing importance of Shanghai as a major business
centre in that part of the world, HKIA is keenly aware of its need to
keep facilities at the top to tap into the needs of half the world's
population that it is eyeing. Other initiatives on the cards include a
dedicated express cargo facility, and a logistics centre for processing
time-critical cargo. This latter would allow for logistics and supply
chain management services.

HKIA has a present capacity of 45 million passengers and operates at
about 70 per cent of capacity, but has plans to expand up to 87 million
as the need arises. Over 75 airlines serve more than 140 cities
worldwide from here. By its present reckoning, it will reach capacity by
2020 and will start expansion well before. And all built on a man-made
island, with land reclaimed from the sea.

The airport has contracted out most services, including baggage
handling, security, operation of shuttle trains to focus on its main
business. While owned by the government, it has plans for privatisation
to recover the investment. HKIA also has a fast and efficient train that
connects the airport to the city.

In contrast, Los Angeles airport, another major hub of the world, is
finding it difficult to keep pace with the demands placed on it. It was
rebuilt to serve the needs of the Los Angeles Olympics in 1984 and is
now one of the busiest airports in terms of passengers beginning and
ending travel there. Yet, systems are creaking and capacity is being
stretched to its limits. For example, the air-conditioning system is so
over loaded that huge fans are brought in to help. The authorities have
been working on a master plan for over 10 years and there is still not
one that is ready or approved. Residents of Bangalore know how that
feels. They have also been hearing of a proposed international airport
for a decade that they will believe it only when it happens. Meanwhile,
the loss of business for the region must be incalculable.

Perhaps you need to be a small city-state to feel claustrophobic and,
thereby, let your imagination fly through the means of a world-class
airport. Dubai, although in the midst of oil-rich West Asia, has not
been similarly blessed. Oil and gas only contributes about 6 per cent of
its output and reserves are low and expected to be exhausted in about 10
years. So, the nation has been using its income from oil to reinvest in
other businesses that would support tourism and make it a business hub.
And a world-class airport is one of them. After all, it calculates that
there are 1.5 billion people within two hours of flying time. So its
airport capacity is being tripled to handle about 60 million passengers
a year. When Dubai began building its capacity in infrastructure, there
were plenty of sceptics. The container port and the dry dock that were
built are now doing great business although at that time seen as white
elephants.

I ran into a sceptic of excess capacity in infrastructure while talking
about the magnetic levitation train in Shanghai. Too expensive for the
purpose, he complained. Perhaps. Shanghai's train connects the swanky
new Pudong airport with the Longyang Road Station, on the outskirts of
the city. It whisked me through a distance of about 30 km in eight
minutes, reaching a maximum speed of 430 km per hour. Sure, the distance
was such that it reached peak speed for just about three minutes. And
the trains were almost empty. The fare is 50RMB (Rs 270) one-way and the
government is giving a discount of 10 RMB if you have a ticket to fly
that day. But give it just a few years and you can be sure there will be
a line to get a ticket and we will all wonder what we did before that
train was put in.

When it comes to infrastructure, excess capacity, in itself, generates
growth.

(The author is professor of international business and strategic
management at Suffolk University, Boston, US.


 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dcfp/dcboard.php


*****************************************