The project to expand the Hong Kong International Airport into a three-runway system (2016/12/07)(Supplementary )

MR YIU SI-WING (in Cantonese): According to the Secretary, the 3RS projectwill be completed in 2024 and it is estimated that the airport's revenue willincrease subsequently. I would like to ask the Secretary whether there is anestimation of the growth in AA's revenue after 2024. The Secretary has alsosaid that dividend payments will resume upon the completion of the 3RS project. Is there an estimation of the growth in the surplus paid to the Government?

SECRETARY FOR TRANSPORT AND HOUSING (in Cantonese): President, Mr YIU has asked the question in great detail. I will ask AA for the relevant information after the meeting. In the entire planning process of 3RS, AA has also carried out some financial analysis. We estimate that after its completion, 3RS will fetch additional economic benefits worth $455 billion (2012dollars) over the 50-year period and additional employment opportunities of 80 000 direct and indirect/induced jobs, which will benefit the overall economyand various trades and industries. The latest stand alone assessment conducted by the financial advisor also confirms that the project will generate a financial internal rate of return of about 8%. Hence, from the perspective of financial viability, there is a solid base for the implementation of the project.

As regards the real benefits, one thing for sure, after the completion of the3RS project, the cargo throughput and passenger volume that the airport will becapable of handling will increase substantially. By that time, the number of passengers passing through the airport will increase to 100 million and cargo throughput will reach 9 million tonnes per annum. Hence, with the increase in passenger volume and cargo throughput as well as the earnings of the retail and commercial facilities in the airport, a steady growth in revenue should be forthcoming. I may provide Members with specific figures after the meeting.(Appendix II)

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(Appendix II)

WRITTEN ANSWER

Written answer by the Secretary for Transport and Housing to Mr YIUSi-wing's supplementary question to Question 2

As regards financial arrangement for the Hong Kong International Airport Three-Runway System ("3RS"), in formulating the financial arrangement for the 3RS project, the Airport Authority Hong Kong ("AA") has taken into account anumber of factors, including IATA Consulting's traffic forecast, AA's historical operational data, the overall economic forecast and AA's internal figures. The financial consultant for the 3RS project has confirmed that the assumptions andestimates adopted in the financial arrangement study were reasonable. The assumptions, among others, include the gradual increase of passenger traffic from69.7 million in FY2015-2016 to about 100 million in FY2030-2031; cargo throughput to increase gradually from 4.3 million tonnes to about 9.0 million tonnes; and air traffic movements ("ATMs") forecasted to increase from 410 000 ATMs to about 600 000 ATMs in the same period. In the past three financial years (i.e. from FY2013-2014 to FY2015-2016), AA recorded consolidated revenue of about HK$14.8 billion, HK$16.4 billion and HK$18.2 billion respectively. AA expects that its overall revenue after 2024 will roughly increase along the lines of actual traffic growth.

Section 26 of the Airport Authority Ordinance (Cap. 483) stipulates that AA may declare and pay dividends to the Government. It is for the AA Board to decide whether to declare dividends, and the amount of such dividends, if any. The proposal of not declaring dividends for the purpose of financing the 3RS projectwas approved by AA Board after due consideration.

In accordance with the 3RS financial arrangement proposal submitted by AA to the Government in 2015, AA would retain all operating surplus fromFY2014-2015 until the commissioning of 3RS (i.e. around 2024), which would amount to about $47 billion. For the preceding three financial years (i.e. fromFY2011-2012 to FY2013-2014), the amount of dividends declared by AA were HK$3.9 billion, HK$4.4 billion and HK$5.3 billion respectively. The dividend policy upon the completion of 3RS will be determined by AA Board on the basisof the financial position at that time. The AA Board determines the dividend payout ratio on an annual basis, as in the cases of most commercial entities, after considering a number of factors including, but not limited to AA's financial result,capital expenditure requirements, liquidity position, financing needs, future business growth and profitability, investment opportunities, optimal capitalstructure, etc.