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Hong Kong Airport Authority Pays HKD2bn Dividend

by Mary Swire, Tax-News.com, Hong Kong

30 June 2008


The Hong Kong Airport Authority has announced a HKD2.273bn (287mn) profit for the year ended 31st March - up 18% from a year earlier.

The final dividend declared to the Hong Kong Government rose 25%, to HKD2bn. Return on equity rose to 6.5%, from 5.6%.

Higher revenues, effective cost controls and productivity gains combined to produce the growth in net profit. The airport's operating margin improved slightly, from 60% to 62%, as revenues grew faster than operating expenses.

Revenue for the year rose 11%, to HKD8.577bn, mostly due to expanding air traffic and higher retail sales. Passenger throughput at Hong Kong International Airport increased 8%, to to 48.9 million, while cargo throughput rose 6%, to 3.8 million tonnes. Air traffic movements grew 6%, to 300,000.

Revenue from airport and security charges grew 8%, to HKD3.855bn, while earnings from support services franchises - primarily cargo handling, aircraft catering, aviation fuel and aircraft maintenance - rose 11%, to HKD1.404bn. Retail licences revenue increased 15%, to HKD2.389bn, mainly because of higher passenger spending and new sources of advertising income.

"Our short-term outlook is cautious, due to soaring oil prices and growing inflationary pressures," Airport Authority Chief Executive Officer Stanley Hui Hon-chung commented.

He added weekend direct charter flights across the Taiwan Strait, scheduled to begin in July, also present new challenges.

"However, our medium- to long-term prospects remain encouraging, especially given the continued expansion of global trade, sustained economic growth in Hong Kong and on the Mainland, and government efforts to increase aircraft movements at HKIA to 68 an hour by 2015," he observed.

To strengthen Hong Kong's position as a leading international and regional aviation hub, the Airport Authority will soon commission Master Plan 2030, a 20-year development blueprint.

It will examine whether and how the airport infrastructure should be developed to support the economic growth of Hong Kong and the region. Environmental impact and engineering feasibility studies for a third runway will start later this year, Mr Hui added.

The airport is now undergoing facility and system improvements to maintain operational efficiency, service standards and earnings growth in a rapidly changing and increasingly competitive environment.

Following the opening of Terminal 2 last year, a HKD4.5bn enhancement programme for Terminal 1 and the airfield is now underway. The new North Satellite Concourse, with 10 bridge-served parking bays, will begin receiving narrow-body aircraft by the end of 2009.

The airport's baggage-handling system and security and immigration facilities are being upgraded to boost passenger-handling capacity and efficiency. And in late 2009, the permanent SkyPier will enhance cross-boundary ferry service between the airport and the Pearl River Delta.

Growing traffic and new infrastructure have created additional demand for capital investment and higher depreciation charges. As a result of disciplined cost control, operating expenses before depreciation and amortisation increased just 7% in 2007/08, compared to a corresponding 14% rise in operating profit before depreciation and amortisation.

With annual passenger traffic approaching the 50-million mark, HKIA is at a critical point in its development, the airport's Executive Director of Finance & Investment Raymond Lai said.

"We remain committed to making the airport bigger and better in a cost-effective manner that will maximise the value for our shareholder. As our new facilities become fully operational and reach optimum usage levels, we are confident that HKIA will maintain sustainable growth in profitability," Mr Lai said.


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