"Hong Kong airport seeks stakes in Chinese hubs"

Wednesday, December 8, 2004

HK airport seeks stakes in Chinese hubs
United Kingdom - The Financial Times


HONG KONG, Hong Kong's airport is in negotiations to take equity stakes in
smaller hubs around China, as part of a plan to extend its reach deeper into
the mainland.

The talks, which also include other types of cooperation, come as Hong
Kong's discussions with rival airports in southern China's Pearl River delta
have run into difficulties.

Hong Kong has been seeking to invest in Shenzhen and Zhuhai airports ahead
of its own planned 2006 privatisation in order to address investor concerns
about regional competition. These fears intensified this summer with the
opening of a new Rmb20bn (USDollars 2.4bn) airport in Guangzhou.

Hong Kong is understood to be talking to airports in second-tier cities,
including Chengdu in south-western Sichuan province, according to people
familiar with the negotiations. The talks are a sign the territory's hub is
looking beyond neighbouring areas in its bid to become the airport of choice
for the whole of China. Under Hong Kong laws, Hong Kong's airport is banned
from investing in airports outside China.

The airport said in a written reply to questions that "we will continue to
seek opportunities for co-operation with airports on the mainland, including
the hub airports, with a primary objective to enhance flow of people and
goods. We are exploring all forms of co-operation." Stakes in regional
airports would help Hong Kong tap a much wider market of potential
passengers and cargo from different parts of China.

Although the former British colony's airport is still the region's main
cargo hub, there is growing competition for international passenger travel
from Beijing and Shanghai.

Last year, the number of mainland Chinese travelling overseas hit 20.2m. The
World Tourism Organisation estimates this figure could rise to 100m by 2020,
making it the world's fourth-largest source of tourists after Germany, Japan
and the US.

Hong Kong has been trying to make itself more accessible to travellers in
mainland China by launching ferry and bus services from cities in the Pearl
River delta. It is also discussing what it calls an "air bridge" service to
link it with Shanghai and Beijing airports.

However, Shenzhen and Guangzhou are at the same time gearing up to handle
more international passengers and cargo. Shenzhen has formed a joint venture
with Lufthansa Cargo, the world's largest cargo carrier, to set up a cargo
handling facility. Guangzhou is trying to lure foreign passenger and cargo
airlines, and attempting to persuade FedEx to invest in a hub there.


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