"Government tries to ease Hong Kong airport fears"

Tuesday, November 23, 2004

Ip tries to ease airport fears
China - The Hong Kong Standard


The government has sought to reassure legislators about the future of Hong
Kong International Airport, saying it will not jeopardise its
competitiveness by raising fees to make it a more attractive candidate for
privatisation.

Legislators questioned the administration's intentions after it issued a
consultation paper last week suggesting the profitability of the Airport
Authority was too low and it might be necessary to raise fees to airlines to
make it appealing to investors.

``We will absolutely not sacrifice the airport's competitiveness, as it is
so important to the Hong Kong economy,'' Secretary for Economic Development
and Labour Bureau Stephen Ip told the Legislative Council's economic
services panel on Monday.

``We are not saying we have to raise charges. This is only a consultation
paper. We are seeking the public's views on the issue and have no final
decision yet.'' Wrestling with a budget deficit, the government has said it
hopes to privatise the Airport Authority via an initial public offering in
2006. But the government is ``in no rush'' to privatise, Ip told
legislators. ``We will continue improving our airport's position and
competitiveness in the future.'' The consultation paper said although the
authority posted a record profit of HK$502 million for the year ended March
2003, its return on equity of less than 2 per cent would be considered
inadequate in the private sector.

However, lawmaker Howard Young, who represents the tourism sector, said
airlines have already expressed concerns about the level of fees for
landing, parking and terminal use.

``We need to know how much charges will go up by and how that will affect
competitiveness,'' Democratic Party lawmaker Fred Li said.

``The airport's competitiveness will be on the line if airport charges are
too high,'' Chan Kam-lam of the Democratic Alliance for Betterment of Hong
Kong said. ``The government must solve the issue before floating the
authority.'' The Airport Authority has argued that there is room to raise
some fees without damaging Hong Kong as a travel destination.

According to the consultation paper, the fees, which generate 45 per cent of
its revenue, are comparable to those of Singapore and below those of Seoul,
Bangkok, Taipei and the mainland. And on average, the paper said, airport
fees constitute only 4 per cent of the operating costs of airlines.

Legco's economic services panel will meet again in January to discuss the
privatisation, while the government consultation will end on February 28.


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