Hong Kong International Airport has received a boost, with a share and bond sale raising some $1.3 billion to finance the construction. The runway project was viewed as crucial to Hong Kong’s development pre-COVID, and despite the pandemic, it seems investors still see it as a worthwhile cause. The runway is projected to open in 2024.
Hong Kong secures runway funding
The crisis of 2020 has seen air traffic at major hubs plummet. Key airports, usually buzzing with activity, have fallen quiet as traffic declined. Hong Kong International is no different. The last week that the airport operated semi-normal capacity was the week of January 22nd, 2020. Today, a full year since the start of the crisis, traffic remains depressed by more than 60% over 2019 levels.
Although Asia has gotten off lightly in some respects, with domestic traffic picking up pace, international remains largely nonexistent. From its lowest point in early April, when traffic was down 76%, HKG has recovered some of its capacity. Nevertheless, the airport remains a mere shadow of its former self and is likely to stay this way for some time yet.
Despite this, the airport’s owners are still looking ahead to the future. Resilient in their belief that air traffic will return to 2019 levels and will resume its growth beyond that, Airport Authority Hong Kong has successfully raised a sum of $1.3 billion to develop a third runway at the airport.
Reuters reports this week that the deal is the first time the authority has opened the investment to US-based financiers. The deal includes $900 million in 10-year notes and a further $600 million in 30-year bonds. These are the longest papers it has ever issued, and demand for the notes was oversubscribed by more than six times.
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Why does Hong Kong need a third runway?
The project to build a third runway at Hong Kong International has been on the table since 2011 when the Airport Authority developed the ‘Hong Kong International Airport Master Plan 2030’. The project has spent years going through the various stages of consultation and assessment and began being implemented in 2016.
As well as various expansions and improvements of the airport itself, the key element of the project is to add a third runway. The new runway will be 3,800 meters long and will run parallel to the north side of the existing two runways. It is set to be dedicated to arrivals only, and is projected to increase the capacity for air traffic movements by 33 per hour.
Despite widespread support from incumbent airlines and the government, the project has not been without its snags. Because of the location of the airport, around 650 hectares of land needed to be reclaimed for the construction, through a combination of placing dredged sand and deep cement to stabilize the muddy substrate. The sand, which has largely come from mainland China, has been in short (and expensive) supply, leading to delays and additional costs.
There have also been concerns raised regarding airspace congestion, a situation which has been exacerbated by Shenzhen Bao’an International Airport adding its own third runway. If takeoff to the south is used from Shenzen, it’s likely to compete for airspace with the new runway at Hong Kong.
Of course, COVID has thrown yet another spanner in the works, with some questioning whether the runway will be needed at all. However, with construction likely to run at least into 2024, and air traffic predicted to recover by then, hopes are high that the third runway will arrive just in time to facilitate Hong Kong’s aviation growth.
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