Airport Authority Hong Kong (AA), the operator of Hong Kong International Airport (HKG) generated retail licences and advertising revenue of HK$ 6,155m ($794m) in its fiscal year 2013/2014 (ending March) – a surge of +23.2%.

 

The strong performance from retail/advertising meant that the category accounted for more than half of the growth in AA’s turnover for the year. The category also has a bigger share of total revenue at 41.6%, dwarfing airport charges, the next biggest segment, with a 26% share (see chart below left).

 

Commenting on the result, AA says: “This increase was a result of the full-year effect of new anchor licences awarded in the last fiscal year; better sales performance in the luxury brands and speciality and commercial catering categories; the opening of a mega shop; higher advertising revenue from new clients and categories; and joint promotional initiatives with major brands and China UnionPay [the sole domestic bank card group in the People’s Republic of China-Ed].

 

The retail result at the third busiest international airport in the world was helped by a +6.1% rise in passengers traffic in the fiscal year to 60.7m. The traffic growth, together with the higher retail concessions revenue, plus cost controls, enabled AA to deliver total revenue growth of +12.8% to HK$ 14,810m and profit attributable to its equity shareholders of HK$ 6,454m a rise of +14.9% (see chart below right).

 

THIS YEAR WON’T BE AS GOOD

While the top- and bottom-line increases are extremely robust, William Lo Chi-chung, Executive Director, Finance, warns: “While we are very happy with our record-breaking performance for fiscal 2013/2014, this year we will face a number of challenges, like slower retail sales due to the high revenue base we set, the sluggish local retail market, increased operating expenses to maintain our service levels, and ongoing investments in much-needed capacity enhancements.”

 

On wider developments, Stanley Hui Hon-chung (below), CEO of the AA, says: “Air traffic at HKIA is growing much faster than the projections made in HKIA Master Plan 2030. We expect that the global economic recovery and robust regional growth will continue to drive traffic demand at a moderate rate. As a result, the two-runway system at HKIA will likely reach its capacity in a few years’ time.”

 

He adds: “To increase ground handling capacity for the immediate and medium terms, we have been pushing ahead with our Midfield development and west apron expansion projects. An investment of more than HK$12bn, these two projects will add a total of 48 parking stands and allow HKIA to serve an additional 10m passengers a year.”

 

NORTH COMMERCIAL DISTRICT

To capitalise on business opportunities arising from developments such as the Hong Kong-Zhuhai-Macao Bridge and the Tuen Mun-Chek Lap Kok Link – which will both commence operations in the next few years – the AA is also mapping out development plans for the North Commercial District (NCD).

 

The first phase of the NCD will be a hotel with more than 1,000 rooms, while a master plan for the entire district is expected to be completed this year.

 

Meanwhile, the AA is continuing its planning work to expand HKIA into a three-runway system (3RS), including the Environmental Impact Assessment (EIA), scheme design, cost updates and funding options as well as ongoing communications with the wider public. The EIA report for the 3RS project is available for public inspection until 19 July.