VZCZCXRO7822
RR RUEHCN RUEHGH RUEHVC
DE RUEHHK #1973/01 2960540
ZNR UUUUU ZZH
R 230540Z OCT 09
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 8804
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC

UNCLAS SECTION 01 OF 02 HONG KONG 001973 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE ALSO FOR EAP/EEB 
BEIJING FOR TSA EICKHOFF AND FAA POWER 
 
E.O. 12958: N/A 
TAGS: EAIR ECON ECIN HK
SUBJECT: HONG KONG'S AIRPORT AUTHORITY INVESTING IN CHINA'S 
AIRPORTS 
 
¶1. (SBU) SUMMARY: On October 12, the government-owned Airport 
Authority of Hong Kong (AAHK) entered into a twenty-year 
contract with the Shanghai Airport Authority (SAA) to 
co-manage Shanghai's Hongqiao Airport.  This USD 14.6 million 
joint venture deepens cooperation between the two aviation 
authorities and adds to AAHK's portfolio of Mainland airport 
investments that include the Zhuhai Airport, Hangzhou 
Xiaoshan International, ad-hoc projects with Beijing Capital 
International, cooperation with nearby Shenzhen 
International, and its training services to Mainland airports 
at the AAHK Airport Management Academy.  END SUMMARY 
 
¶2. (SBU) On October 12, the Airport Authority of Hong Kong 
(AAHK) announced the establishment of the Shanghai Hong Kong 
Airport Management Co., Ltd., a joint venture with the 
Shanghai Airport Authority (SAA) for the management of 
Shanghai's Hongqiao Airport.  AAHK will invest USD 7.2 
million for a 49% equity interest in this USD 14.6 million 
joint venture while SAA will acquire the remaining 51%. 
SAA's Executive Vice President Li Derun suggested to Shanghai 
press that SAA was considering the possibility of inviting 
AAHK to become a strategic investor in SAA, which also 
manages Shanghai's Pudong International Airport. 
 
--------------------------------------------- - 
Expansion Beyond Neighboring Pearl River Delta 
--------------------------------------------- - 
 
¶3. (SBU) AAHK's recent Shanghai investment adds to its 
growing Mainland portfolio.  AAHK has managed nearby Zhuhai 
Airport with the Zhuhai Municipal People's Government since 
¶2006.  It coordinated airport activities and upgrades for the 
Zhuhai-hosted 7th China International Aviation and Aerospace 
Exhibition in 2008.  AAHK also holds a 35% interest in 
Hangzhou Xiaoshan International Airport, the Mainland's 
fastest growing passenger airport, with 8% growth in 2008. 
In Beijing, AAHK shared expertise and conducted training for 
Beijing Capital International Airport's third terminal in 
2007, and provided on-site support during the terminal's 
opening in 2008 and throughout the Olympics and Paralympics. 
 
¶4. (SBU) AAHK's Airport Management Academy caters to Mainland 
airports and civil aviation bodies, providing training to 
over 3,600 participants since 2002.  AAHK is also 
collaborating closely with its sole shareholder, the Hong 
Kong Special Administrative Region Government (HKSARG), in 
the planning of major infrastructure projects linking Hong 
Kong to the Mainland, including the Hong Kong-Zhuhai-Macau 
Bridge and a high-speed rail link between Hong Kong and 
Shenzhen.  The HKSARG has decided to locate the Bridge's Hong 
Kong border crossing next to the Hong Kong International 
Airport (HKIA), while the rail link will connect HKIA with 
Shenzhen and its airport. 
 
------------------------------- 
Investments in China Paying Off 
------------------------------- 
 
¶5. (SBU) For its financial year ended March 31, AAHK declared 
a dividend of Hong Kong Dollar (HKD) 2.2 billion (USD 283 
million).  This is a 10% increase over 2008 and includes a 
profit of HKD 193 million (USD 24.8 million) from its 
Hangzhou Xiaoshan International venture.  Its Zhuhai Airport 
operation broke even for the first time in 13 years. 
 
--------------------------------------------- --- 
Economic Blow Softened but Throughput Still Down 
--------------------------------------------- --- 
 
¶6. (SBU) AAHK has offered incentives to airlines operating at 
HKIA to mitigate the effects of the global financial crisis. 
On October 16, the HKSARG announced that an existing 
incentive arrangement will be extended until December 2010 -- 
airlines flying between Hong Kong and a new destination will 
receive a 75% landing charge rebate between January to June 
and a 25% rebate from July to December. 
 
¶7. (U) Total air traffic movements at the AAHK-managed HKIA 
slowed by 8% in September to 22,570.  Passenger throughput 
for the month declined 3.5% compared to September 2008, to 
3.5 million, and remains down 6.6% for the year with a total 
of 34.2 million passengers from January to September 2009. 
On a 12-month basis, passenger throughput is down 6% 
year-on-year, to 46.2 million.  Air cargo throughput dropped 
4.3% in September, to 304,000 tons.  On a 12-month basis, 
 
HONG KONG 00001973  002 OF 002 
 
 
total air cargo volume is down by 16% to 3.2 million tons, 
with continued double digit declines primarily in exports and 
transshipments to Europe, North America, Taiwan and Japan. 
 
MARUT