HONG KONG 2005

Hong Kong is a major international and regional aviation centre. The Hong Kong International Airport (HKIA) is one of the busiest airports in the world. At the end of 2005, there were 79 scheduled airlines serving Hong Kong. These airlines together operated about 5 200 weekly scheduled flights between Hong Kong and some 156 cities worldwide. In addition, an average of about 31 non-scheduled flights were operated to and from HKIA each week.

It was another record-breaking year for HKIA. A record high of 40.74 million passengers (including 930 000 in transit) passed through the airport during the year, representing an increase of 9.7 per cent over 2004. Aircraft movements increased by 11 per cent to a total of 263 352. Air cargo throughput also set new records: the airport handled 3.4 million tonnes of air cargo, representing an increase of 10 per cent over 2004. The corresponding value also increased by 17 per cent to $1,568 billion.

Air transport continues to play an important role in Hong Kong's external trade. Goods carried by air accounted for 37.7 per cent, 38 per cent and 30.2 per cent in value terms of Hong Kong's total imports, exports and re-exports respectively in 2005.

Improving connections with the PRD through the development of a range of transport links remains one of the major strategies of the Airport Authority which plans to extend the airport's catchment area to cover the entire PRD region with its population of over 40 million. During the year, about 1.34 million transit passengers used the authorities cross-boundary ferry service between the airport and five PRD ports. Passengers on these ferries do not have to go through customs and immigration procedures in Hong Kong before they board international flights, which results in significant savings in total travel time. The Airport Authority further enhanced the service in November when it launched an upstream check-in service at Shekou Port. Transit passengers can now check in their luggage at Shekou and travel baggage-free to the airport for their onward journey to overseas destinations.

The cross-boundary coach services are another major transport link between HKIA and 40 destinations in the PRD. In 2005, about 1.5 million passengers travelled between the airport and the PRD by the 200 daily coach services.

HKIA continued to work closely with airports on the Mainland to explore cooperation opportunities that would improve the integration of passenger and air cargo flows in the region. During the year, the Airport Authority acquired a 35 per cent interest in Hangzhou Xiaoshan International Airport at a cost of around $1.89 billion.

HKIA fulfils the ever-increasing expectations of customers by offering the highest standard of service. The airport's shopping mall, Hong Kong SkyMart, gives customers a shopping experience equal to any high-end downtown shopping mall. SkyMart is currently home to a wide array of over 200 shops and restaurants, including 25 top-line brand names.

Indeed, HKIA itself is one of the Hong Kong's most successful brand names thanks to the dedication and commitment of the whole airport community. For the fifth year in a row, it was voted Airport of the Year (2005) in a poll conducted by UK Skytrax Research.

The Mainland's fast-growing aviation market brings growth opportunities as well as new challenges to HKIA. In the face of intensifying competition from other airports in the region, HKIA has been taking proactive measures to maintain its competitive edge.

To cope with the robust growth in demand for air cargo services, Asia Airfreight Terminal has invested $1.75 billion to bring its annual handling capacity from 600 000 tonnes to 1.5 million tonnes by 2006. DHL has accelerated its expansion plan at the airport by investing $858 million in its phase two express cargo terminal facilities, which will enhance the parcel sorting capacity from 20 000 per hour to 35 000 per hour by 2007.

The AsiaWorld-Expo opened in December, providing more than 70 000 square metres of space at the airport for exhibition and other functions. Other value-added facilities are also in the pipeline to meet the diverse needs of HKIA's customers. SkyPlaza, a multi-purpose development comprising a new departure hall, airline check-in counters, ground transportation facilities and retail and office space, is under construction and will open in 2006. Hong Kong Aircraft Engineering Co Ltd has invested $320 million in a second hangar at HKIA. The 13 200 square metre facility will be capable of accommodating two wide-bodied and one smaller aircraft when it is completed in 2006.

In addition, the Airport Authority will spend $4.5 billion on improving passenger and airfield facilities. The Passenger Terminal Building will be reconfigured and the baggage handling system upgraded to cope with the passenger growth. A satellite concourse with 10 parking stands will be constructed to facilitate the increasing traffic demand for smaller passenger aircrafts, while improvements to taxiways will be made to cater for the giant A380 aircraft. Ten additional freighter parking stands will be constructed to capture the rapid growth in cargo traffic. These projects will be implemented in phases and are expected to be completed by 2010.

Public consultation on the proposed privatisation ended on May 31, 2005 with a total of 69 written submissions received. Public opinion was divided. The Government's main objective in the proposed privatisation is to help strengthen the Airport Authority's market discipline in running the airport to achieve greater efficiency and more commercial opportunities. The Government will continue discussions with stakeholders and, before it goes on to the next stage of the privatisation exercise, it will ensure that the concerns raised during the public consultation are addressed satisfactorily.

Under the specific authorisation of the Central People's Government, the Hong Kong Special Administrative Region (HKSAR) Government continues to negotiate and conclude bilateral air services agreements with aviation partners, providing the legal framework for scheduled air services between Hong Kong and other places. During the year, the Government concluded a new air services agreement with Saudi Arabia bringing the total to 55 agreements.

The Government also actively reviews the traffic rights arrangements with our bilateral partners to expand Hong Kong's aviation network and introduce more competition into the market. In 2005, the Government expanded traffic arrangements with 10 aviation partners, including fully liberalising bilateral air services between Hong Kong and Luxembourg, Bahrain, Mexico, and Ethiopia.

During the year, the Air Transport Licensing Authority granted 18 licences: four to Cathay Pacific Airways (CPA), two to Hong Kong Dragon Airlines (HDA), one to AHK Air Hong Kong (AHK), four to CR Airways (CRA), four to Hong Kong Express Airways (HKE) and three to Oasis Hong Kong Airlines (Oasis). To enhance transparency, the authority also made public its procedures for processing licence applications. The Procedural Guide is available on: www.edlb.gov.hk/edb/eng/related/Guide-eng-final.pdf.

CPA started passenger air services to Xiamen in February. During the year, the airline took delivery of a new B777-300 and three new A330-300 aircraft and increased the frequency of its scheduled passenger air services to Amsterdam, Bali, Beijing, Frankfurt, Ho Chi Minh City, Jakarta, Johannesburg, London, Nagoya, Perth, Rome and Seoul. As for freighter services, CPA launched new services to Shanghai in January and started services to Atlanta and Dallas in November. In December, the airline's first Boeing B747-400 special freighter converted from a passenger aircraft received its Certificate of Airworthiness. As the traffic soared at the airport, yearly record highs in passenger and air cargo shipment by CPA were recorded. By the end of the year, CPA was operating scheduled services to 53 destinations worldwide.

HDA launched scheduled passenger air services to Urumqi in July for the summer season. It also extended its codeshare services with Air China to cover Beijing, Hangzhou and Wuhan. During the year, one new A320-200 and three new A330-300 aircraft were delivered to the airline. In April, the airline started its trans-Pacific scheduled all-cargo air services to New York's John F. Kennedy Airport. By the end of the year, HDA had recorded a record number of passenger and air cargo shipments and was operating scheduled services to 33 destinations, including 19 cities in the Mainland.

CRA took delivery of a CRJ-700 aircraft during the year and launched scheduled passenger air services to Nanning, Jinan, Sanya/Haikou, Guilin and Kunming in January, April, July, August and October respectively. The charter services to Laoag were also converted to scheduled services in July.

HKE had its Air Operator's Certificate varied in July for the operation of Embraer ERJ-170 fixed-wing aircraft. Before the issue of the varied certificate, the company provided helicopters services only. The airline took delivery of three new Embraer 170 aircraft in 2005 and launched scheduled passenger air services to Guangzhou, Hangzhou and Ningbo in September, October and December respectively.

AHK received two new A300-600 Freighters during the year and expanded its scheduled all-cargo services to seven destinations in Asia.

More non-Hong Kong airlines introduced scheduled passenger services to Hong Kong. In March, Sky Airlines started new services between Bangkok and Hong Kong, and Xiamen Airlines between Fuzhou, Wuyishan and Hong Kong. In April, Bangkok Airways started services between Samui and Hong Kong. In May, Sichuan Airlines launched its services between Chongqing and Hong Kong. In September, Shenzhen Airlines and Shandong Airlines launched their services between Nanning and Hong Kong and Yantai and Hong Kong, respectively and, in October, Siem Reap Airways started operating services between Phnom Penh and Hong Kong. Shanghai Airlines opened its scheduled all-cargo services between Shanghai and Hong Kong in June.

Four airlines suspended their passenger services to Hong Kong during the year: Myanmar Airways between Yangon and Hong Kong and Japan Asia Airways between Taipei and Hong Kong in February. In October, Valuair suspended its Singapore/Hong Kong services and Transaero Airlines, its Moscow/Hong Kong services.

An environmental impact assessment was carried out to study the impact of the proposed expansion of the existing cross-boundary heliport at the Macao Ferry Terminal. The Government has decided to open the proposed government helipad planned for the Hong Kong Convention and Exhibition Centre to commercial operators to provide them with a permanent landing facility. A technical feasibility study is to be conducted to take the project forward.

The Government continued to align Hong Kong with the latest international standards. The Carriage by Air (Amendment) Bill 2005 was enacted to incorporate the provisions in the Convention for the Unification of Certain Rules for International Carriage by Air, signed at Montreal on May 28, 1999 into local law. The bill enhances legal protection for the travelling public and shipping community, provide a more clearly defined liability regime for airlines and help improve their operating efficiency.

The Civil Aviation (Amendment) Bill 2005 was also introduced into the Legislative Council to exempt aircraft owners who are not involved in the management of aircraft from the strict liability against claims made by third parties.

The air traffic control system continued to perform in a stable and reliable manner. It handled 263 461 aircraft movements at HKIA and 125 686 overflights (including aircraft operating to and from Macao Airport), representing a respective 11.1 per cent and 7.5 per cent increase over 2004.

On March 9, the Civil Aviation Department (CAD) signed a service agreement with the General Administration of Civil Aviation of China (CAAC) on the shared use of the Secondary Surveillance Radar (SSR) and Very High Frequency (VHF) communications facilities at Xisha. Signals from Xisha have been relayed to CAD since June 1 to enhance the efficiency of air traffic control services.

CAD continued its discussion with the civil aviation authorities of the Mainland and Macao on measures to improve the efficiency of air traffic operations in the Pearl River Delta area. The tri-partite working group met on five occasions in the year to identify long-term solutions and interim measures to rationalise air traffic management to support air traffic growth in the PRD region.

CAD joined forces with the People's Liberation Army Forces in the HKSAR and various government departments to conduct a local search and rescue exercise from August 17-22. The exercise served to enhance the preparedness and capability of all parties concerned in the event of emergency search and rescue exercises.

CAD signed a 'Technical Arrangement on Aviation Maintenance' in December with the Civil Aviation Directorate of Transport Canada for mutual recognition of approvals of maintenance organisations. CAD has entered into similar mutual recognition agreements with CAAC, the Civil Aviation Authority of Macao and the Civil Aviation Authority of Singapore.

In Hong Kong, the impact of aircraft noise is assessed on the basis of the internationally accepted Noise Exposure Forecast (NEF) Contour. The determination of the contour takes into account factors including the decibel levels of aircraft noise, its tonal characteristics and the duration and frequency of overflying flights at different times of the day. Currently, the aircraft noise standard adopted in Hong Kong is the NEF 25 contour.

CAD continued with its efforts to minimise the impact of aircraft noise on local communities by introducing noise abatement arrival and departure procedures and adopting flight paths which cover fewer residential areas whenever possible. The department also prohibited the operation of noisy aircraft which do not comply with the noise standard stipulated in the Convention on International Civil Aviation.

Amendments to the Aviation Security Ordinance came into effect on November 10, 2005. The amendments seek to impose criminal sanctions against unruly or disruptive behaviour committed on board civil aircraft and to extend Hong Kong's jurisdiction over certain offences committed outside Hong Kong on board non-Hong Kong-controlled aircraft, if its next place of landing is Hong Kong.

Three officers from the department continued to participate as auditors in the ICAO (International Civil Aviation Organisation) Universal Security Audit Programme and had completed aviation security audit missions for India, Palau, Japan and Australia.

A CAD officer was seconded to the Office of Representative of People's Republic of China on the Council of ICAO in February 2005. The secondment facilitates communication between the ICAO and CAD. It also provides a valuable opportunity for CAD staff to gain experience in international aviation matters.