Hong Kong Airport Authority on course for HK$57.6 billion passenger tax windfall, but won’t say what it plans to do with extra cash
Construction fee levied to help pay for expansion – including third runway – had
Danny Lee
A tax that Hong Kong airport passengers pay to help fund a third runway is on course to raise billions more than the HK$26 billion (US$3.3 billion) initially projected.
The Airport Authority, which manages Hong Kong International Airport (HKIA), said it would not change a timetable for charging travellers up to HK$180 a flight until 2031 – a fee that by conservative estimates could raise at least HK$57.6 billion.
Airport chiefs had repeatedly said only HK$26 billion would be raised from the airport construction fee (ACF). That is 18 per cent of the HK$141.5 billion needed for the expansion, which includes a new passenger concourse and reclaiming land from the sea.
The rest has been raised through HK$69 billion in loans, which make up 49 per cent of the amount, with another third funded by the HKIA’s profits.
That leaves a potential HK$31.6 billion excess should the tax remain in place. The authority has refused to clarify what it would do with the extra cash, but rules state the ACF could only be used for the runway project.
The Post asked the authority several questions on the subject, all of which it declined to answer, including: whether it was aware of the possible surplus from the fee; whether it had considered removing the charge earlier than planned; what airport bosses would do with a surplus; and whether it agreed its projections for the levy were inaccurate.
Hong Kong airport looking to speed up expansion work to cut impact on flight numbers
One option for the authority would be to remove the levy several years earlier, to boost Hong Kong’s competitive position as the airport becomes more expensive to fly in and out of.
The authority raised HK$3.9 billion in the first full year that the runway charge came into force, according to its 2017-18 annual report. To date, HK$5.9 billion has been raised since the charge was introduced in August 2016.
Based on the present rate the authority is on track to rake in more than HK$57.6 billion from passengers before the charge is slated to be removed in 2031. HKIA has not challenged the Post’s estimate.
Why Hong Kong airport must assure the public on green bona fides of third runway
A source familiar with the airport’s third runway funding said the money raised from the construction fee would be lower if debts were repaid sooner.
“If the ACF collection is higher than the amount originally expected to be collected, then, all things being equal, this would enable the debt borrowed to fund construction costs to be paid down earlier,” the source said.
However, in a presentation to lawmakers on February 2017, the airport authority said: “The ACF will remain in effect until all [third runway]-related borrowings have been fully repaid, which is expected to be in 2030-31.”
The authority added it “intends to maintain the charging levels of [the fee] throughout the collection period”.
The source said while the rules could mean HK$57.6 billion is ultimately collected, that was unlikely to happen as the other funding requirements change, allowing the authority to repay its debt quicker and end the fee collection sooner.
However, there is risk associated with any project and if the expansion were to go over budget, or the operational surplus is smaller than expected, the passenger tax would have to pick up the shortfall.
And the Post’s surplus estimate could still prove conservative, with passenger numbers expected to increase, and with airlines ordering bigger planes and cramming more seats into existing aircraft.
HKIA is already the world’s most profitable airport, and recently announced a record profit of HK$11.48 billion thanks to advertising and retail licences, and charging airlines higher fees.
Hong Kong International Airport to introduce charge for putting luggage onto carousel
Lawmaker and professional pilot Jeremy Tam Man-ho said he believed the airport may only need five more years to collect the fees to reach its target.
“There’s definitely room to review both the length of the airport construction fee and the amount,” he said.
“Once the Airport Authority reaches something like 20 per cent left of the required money, it would be a good time to make a decision to see if they are going to stop charging the ACF a bit earlier. To be fair to them, they probably will want to wait a few years to make changes.”
www.fotavgeia.blogspot.com
Construction fee levied to help pay for expansion – including third runway – had
Danny Lee
A tax that Hong Kong airport passengers pay to help fund a third runway is on course to raise billions more than the HK$26 billion (US$3.3 billion) initially projected.
The Airport Authority, which manages Hong Kong International Airport (HKIA), said it would not change a timetable for charging travellers up to HK$180 a flight until 2031 – a fee that by conservative estimates could raise at least HK$57.6 billion.
Airport chiefs had repeatedly said only HK$26 billion would be raised from the airport construction fee (ACF). That is 18 per cent of the HK$141.5 billion needed for the expansion, which includes a new passenger concourse and reclaiming land from the sea.
The rest has been raised through HK$69 billion in loans, which make up 49 per cent of the amount, with another third funded by the HKIA’s profits.
That leaves a potential HK$31.6 billion excess should the tax remain in place. The authority has refused to clarify what it would do with the extra cash, but rules state the ACF could only be used for the runway project.
The Post asked the authority several questions on the subject, all of which it declined to answer, including: whether it was aware of the possible surplus from the fee; whether it had considered removing the charge earlier than planned; what airport bosses would do with a surplus; and whether it agreed its projections for the levy were inaccurate.
Hong Kong airport looking to speed up expansion work to cut impact on flight numbers
One option for the authority would be to remove the levy several years earlier, to boost Hong Kong’s competitive position as the airport becomes more expensive to fly in and out of.
The authority raised HK$3.9 billion in the first full year that the runway charge came into force, according to its 2017-18 annual report. To date, HK$5.9 billion has been raised since the charge was introduced in August 2016.
Based on the present rate the authority is on track to rake in more than HK$57.6 billion from passengers before the charge is slated to be removed in 2031. HKIA has not challenged the Post’s estimate.
Why Hong Kong airport must assure the public on green bona fides of third runway
A source familiar with the airport’s third runway funding said the money raised from the construction fee would be lower if debts were repaid sooner.
“If the ACF collection is higher than the amount originally expected to be collected, then, all things being equal, this would enable the debt borrowed to fund construction costs to be paid down earlier,” the source said.
However, in a presentation to lawmakers on February 2017, the airport authority said: “The ACF will remain in effect until all [third runway]-related borrowings have been fully repaid, which is expected to be in 2030-31.”
The authority added it “intends to maintain the charging levels of [the fee] throughout the collection period”.
The source said while the rules could mean HK$57.6 billion is ultimately collected, that was unlikely to happen as the other funding requirements change, allowing the authority to repay its debt quicker and end the fee collection sooner.
However, there is risk associated with any project and if the expansion were to go over budget, or the operational surplus is smaller than expected, the passenger tax would have to pick up the shortfall.
And the Post’s surplus estimate could still prove conservative, with passenger numbers expected to increase, and with airlines ordering bigger planes and cramming more seats into existing aircraft.
HKIA is already the world’s most profitable airport, and recently announced a record profit of HK$11.48 billion thanks to advertising and retail licences, and charging airlines higher fees.
Hong Kong International Airport to introduce charge for putting luggage onto carousel
Lawmaker and professional pilot Jeremy Tam Man-ho said he believed the airport may only need five more years to collect the fees to reach its target.
“There’s definitely room to review both the length of the airport construction fee and the amount,” he said.
“Once the Airport Authority reaches something like 20 per cent left of the required money, it would be a good time to make a decision to see if they are going to stop charging the ACF a bit earlier. To be fair to them, they probably will want to wait a few years to make changes.”
www.fotavgeia.blogspot.com
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