Retail is key as Airport Authority Hong Kong delivers +13.9% surge in annual net profit

HONG KONG. Airport Authority Hong Kong (AAHK) has reported a +13.9% surge in net profit for the year ending 31 March 2009, with the figure hitting HK$2,588 million (US$334 million). Revenue increased +3.6% to HK$8,886 million (US$1.14 billion).

The company was buoyed by a strong retail performance, notably in the first half. Retail revenue in the year rose +8.3% to HK$2,587 million (US$333.8 million) thanks to higher spending per passenger and the availability of additional retail space in Terminal 1. Retail licences and advertising contributed 29% of total revenue in the year, with “sales of liquor & tobacco, perfumes & cosmetics, luxury branded items and commercial catering” supporting that growth, said AAHK.

For the 12 months ended 31 March 2009 Hong Kong International Airport (HKIA) handled 47.7 million passengers and 296,000 air traffic movements, showing mild falls of -2.5% and -1.1% respectively.

AAHK has been affected by the financial crisis as well as the launch of cross-strait direct flights (Mainland China-Taiwan).

CEO Stanley Hui Hon-chung said: “Although the financial tsunami dealt a heavy blow to the global economy and the aviation industry, AAHK managed to achieve a reasonably healthy financial performance for 2008/09 by implementing tight cost controls, enhancing productivity and revising the schedule of our short-term expansion plans. These measures, together with the relatively stronger traffic and earnings performance in the first half of the financial year, have helped to mitigate the negative impact of the economic downturn.”

As well as a strong H1 performance, the share of profit from the company’s Hangzhou Xiaoshan International Airport joint venture also contributed to growth. During the year, AAHK booked a profit of HK$193 million (US$25 million) from the joint venture, a +116.9% increase from the previous year.

Hui Hon-chung added: “Our near-term performance will depend on a number of factors. Clearly the aviation industry continues to suffer from the economic recession and traffic performance at HKIA will continue to reflect this.

“The spread of H1N1 around different parts of the world has also dampened travel desire, which has been reflected in passenger volume since May this year. The huge increase in cross-strait direct flights, operating on a scheduled basis with air cargo carried in the belly of the passenger flights, expected to be seen later this year will bring about further impact on passenger and cargo volumes at HKIA.

“Nevertheless, we remain confident in the longer term growth of HKIA because the economy of Mainland China remains robust, particularly in the Pearl River Delta (PRD) region. We will continue to control costs diligently while maintaining the highest standards of safety, reliability, security and service quality at HKIA. We will also continue to work with airlines, other business partners and the government to maintain and strengthen HKIA’s aviation centre status.”

AAHK Executive Director, Finance & Investment Raymond Lai Wing-chueng said: “During the year, the AA froze headcounts and ensured that all possible areas of cost-savings were identified, translating into a saving of 5.1% of the budgeted operating expenses. Earnings growth, however, was under pressure in light of the contraction in air traffic volumes. The HK$450 million relief package announced in April 2009 to help airlines and other businesses operating at HKIA will naturally affect revenue and profit next year.”

Planning ahead
To plan ahead for the next 20 years, the AA is working on the HKIA Master Plan 2030. The Master Plan will update air traffic forecasts, capacity requirements, development proposals and growth strategies, including the technical and environmental feasibility of a third runway.

In addition to long-term planning, several new facilities will begin services this year. These include the permanent SkyPier which replaces the current temporary SkyPier. The SkyPier connects HKIA with the PRD including Macau through high-speed ferry services linking six ports in the PRD region with HKIA.

The North Satellite Concourse will also start operating soon. When in operation, the concourse, part of the HK$4.5 billion capacity and facility enhancement programme that started in 2006, will provide 10 bridge-served stands for narrow-bodied aircraft.

HKIA’s two mainland joint ventures performed well last year, the company said. Passenger volumes at Hangzhou Xiaoshan International Airport reached 12.7 million in 2008, up +8.0% from a year earlier. Managed under AA’s joint venture with the Zhuhai Municipal Government, Zhuhai Airport achieved cash flow break-even for the first time in its 13-year operating history. Zhuhai Airport handled 1.1 million passengers, a year-on-year increase of +7.8%.

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