Airport Authority Hong Kong (AA) saw its retail licences and advertising revenue at Hong Kong International Airport (HKIA) surge by +10.3% in the 12 months ending March 2016, well ahead of traffic growth of +7.8% to 69.7m passengers. DFS is the key operator for the three core category concessions at the hub.

While retail licences and advertising revenue reached HK$7,523m/$970m, other terminal commercial revenue grew by +6.6% to HK$1,237m/$160m pushing up the total retail and commercial segment to HK$8,760m/$1,129m (see chart below).

HKIA’s strong results reflect the uplift in passengers, terminal developments such as the new Midfield Concourse as well as new retail programmes.

Fred Lam, Chief Executive Officer of the AA says:  “We have introduced various retail promotion campaigns throughout the year. This included the ‘I Love Hong Kong’ retail zone in the Departures East Hall, which comprises 14 well-known local brands offering a variety of Hong Kong products including food, fashion and traditional Chinese medicine.”

Retailers have been encouraged to offer limited-edition products, special gift packs and merchandise that is only available at HKIA. The zone also features pop-up stores from emerging Hong Kong designers and entrepreneurs.

During the year, the airport also extended its free delivery service from Hong Kong to mainland China, Taiwan and Macau. HKIA says the expansion has proved popular with passengers and retailers, and it has opened up new retail categories, such as footwear, luggage and prescription eye glasses.

WEST HALL REVAMP

Shoppers also benefited from a project to refresh the West Hall. Retail offerings will be enriched with 29 shops providing new products and services when the revamp is finished in 2016/17.

In addition, the West Hall food court has been rebranded as the ‘East to West Food Market’, with phase one launched in the third quarter of 2015/16. The food court will have a specially-selected range of local and international cuisine, including branches of Michelin-starred restaurants and it will double in size when it is fully completed in the second quarter of 2016/17.

MORE AIRLINES & DESTINATIONS

Airlines that began serving the airport for the first time included AirAsia Zest, Jetstar Pacific, Scandinavian Airlines, Malindo Air, Etihad Airways and Sky Lease Cargo.

Myanmar National Airlines resumed service to Hong Kong. Düsseldorf of Germany and the Gold Coast of Australia joined HKIA’s destination network, while direct service to Boston in the US resumed. At the end of March 2016, HKIA had over 100 airlines serving over 190 destinations.

The five-storey Midfield Concourse was completed on schedule and commenced operation during the financial year. It gives HKIA 20 additional parking positions that can handle approximately 20% of the airport’s daily flights, and raises capacity by at least 10m passengers a year.

A third runway also has the green light by Hong Kong’s Executive Council. “HKIA had a great year in terms of airport development. But in order to meet long-term air traffic demand, HKIA must expand into a three runway system. We are grateful for the Executive Council’s approval and will start construction as soon as possible, striving to make sure that the project is completed on time and within budget,” says Jack So Chak-kwong, Chairman of the AA.

During the year, revenue and profit attributable to the equity shareholder saw strong growth of +11.1% and +15.2% respectively, increasing to HK$18,184m and HK$8,359m for the 12 months ended 31 March 2016. Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased +9% year-on-year to HK$12,336m.

LOOKING AHEAD…

AA is predicting weaker pax growth this year and forecasts profits to grow at a slower pace due to capacity constraints from its two-runway system. But it plans to increase non-aeronautical revenues by enhancing the overall retail experience and introducing new marketing programmes.

“We are introducing proximity marketing to provide location-specific offers to travellers via iBeacon technology and we will continue to explore new business models,” AA says. To leverage the commercial opportunities brought by the opening of the Hong Kong−Zhuhai−Macao Bridge and the Tuen Mun–Chek Lap Kok Link around 2018, the airport is also proceeding with the development of the North Commercial District.