Hong Kong International Airport's competition and regional integration strategy

¶ … airport management currently faced by Hong Kong International Airport (HKIA) and provide an analysis of the economic, social and environmental impacts of Hong Kong International Airport on the city of Hong Kong. In it, the author will provide an analysis of the main issues of airport management currently faced by HKIA as well as an analysis of the economic, social and environmental impacts of HKIA on the city of Hong Kong, its region and China as well.

In the report, a very important question is raised which must be answered which is where is the airport going in the next twenty years with regard to the type of traffic it carries. Increasingly, HKIA's future will rest in cooperation as much or more than competition with its neighbors. Due to the congestion in the regional airport market, HKIA will increasingly have to share sections of the "pie." In accordance with this, it will important to figure out which part of the "pie" it will "bite" and what it will share with others. The needs and traffic of other airports will increasingly define all aspects of HKIA, including capacity, economic impact and profits and to be in accordance with the "one China, two economies" agenda of the Beijing government.

Introduction

Despite severe problems at its original opening, HKIA has since then worked out these issues and is now performing very well, garnering an official Skytrax five star rating in the process (Skytrax 2010). HKIA has developed into a world-class airport and competes very well at present with its neighbors it its area. However, it is receiving stiff competition from its rivals. For it to succeed, it must integrate its efforts with the other regional airport and may have to specialize in one area such as passenger service at which it excels above all else. Further, for it to completely succeed in the future, it must embrace not the individualism of its past, but the integrated vision of itself in a united China with its diverse collection of former communism and former colonial past that is represented by Hong Kong and Macau. In this way, it will bridge its way from the colonial past into the united future.

Main Body

Section One

Major competition for HKIA includes Baiyun International Airport, Shaghai's Pudong Airport, Shenzen Airport and Macau as well (Bloomberg 2004). Due to the business of the air traffic in this area of China, there have been calls for the above airports to pool their resources. Specifically, Hong Kong would keep up with the international traffic and it will be beneficial to all if they pulled their resources together to compete as one. Hong Kong could specialize in international flights, leaving most domestic routes to Shenzhen, while Zhuhai would become a dedicated cargo hub. Macao, on the other hand, would close its airport altogether to conserve precious land resources and its passengers would be conveniently served by the Hong Kong International Airport and the Shenzhen Airport. Those two airports will be linked by the soon to be completed intercity bridge. These airports will be jointly owned by the four cities and managed by a unified authority. In this way, the strengths of the regional airports would be used and their negative attributes reduced, relatively speaking. Put differently, HKIA will have to find more airlines and freight operators and more passengers willing to use the Hong Kong International Airport as the gateway airport to and from China (Nai-Keung, L. (2010). This seems to concur with the findings of the Hong Kong Idea Centre that HKIA must start building the third runway for our airport as soon as possible to make it competitive with the other airports by increasing its capacity significantly to compete in its area and to serve its customers better. This will have a direct impact upon capacity and a big economic impact in the future (Hong Kong Ideas Centre 2010).

The hub nature of the market will have to be explored in full detail for HKIA. Increasingly in the future, it may be necessary (even mandatory) for the successful operation of the airport that it specialize into the traffic market that it excels in and is best for itself and the region as a whole. Whether HKIA will handle more freight or passengers will be an issue for the market to decide based upon past and present performance and future statistical projections.

The issue of revenue streams has and will continue to be one of major importance for HKIA. Some figures to illustrate the point are in order. The airport authority of Hong Kong reported a USD 168 million net profit in the last six months ending in September 2009 for its best net profit margin ever of 30.2%. However, total revenues slipped from profit projections by to USD 557 million. Overall air traffic was down in the same period. Total passenger traffic fell throughout the year by 6.4% to USD 23 million with cargo volume having dropped 11.5% to 1.68 tons in the same year. Air traffic movements dipped 8.5% to 138,000 in the six-month period. However, on the optimistic side, there were signs of stabilization in air cargo which is usually an indicator of future activity (Centre for Asia Pacific Aviation 2009). For this reason it might be prudent for the HKIA to investigate increasing its cargo component to take full advantage of China's economic rebound from the worldwide recession. However, this is very complex and will take a goodly amount of planning, which is what the 20-year plan is for that we will look at in another section.

However, it looks like airport traffic is picking up overall in the China market. Aircraft movements on domestic China air routes rose 4.5% while those on international routes such as, Hong Kong, Macau, and Taiwan air routes rose by 12%.Aircraft movements by foreign airlines increased by 11.8% year on year (China Hospitality News 2010). This augurs well for the future of HKIA.

The strength of HKIA is in its planning, as revealed in its plan through 2030. AECOM served as the lead consultant for HKIA - Airport Master Plan 2030. The study is a 20-year blueprint that will ensure HKIA meets growing demand for aviation services and also continues to serve the best interests of the community. This is to be done while retaining Hong Kong's famed long-term competitiveness and position as an international and regional aviation hub. The aim of this study is to conduct a comprehensive assessment of the airport's operational requirements and constraints up to 2030 and beyond based on adding a third parallel runway and the traffic that it will bring with it. In this way, HKIA can achieve the optimum balance between airport operations, aviation support and airport-related development that is necessary to make the airport grow successfully in the future (AECOM 2010). Only by detailed planning will it be possible to maximize profits and make correct decisions.

This overall vision will be necessary to guide HKIA into the future. In the opinion of this author it will be necessary to guide the decisions that will come up in the future as to what kinds of traffic will bring in the most profits for the airport. Otherwise, the HKIA planners will be firing in the dark. Only by planning in detail can they avoid the duplication in the future that has been such a part of the airport landscape in this part of the world, in particular Hong Kong before the British pullout. The reality of the Chinese takeover must be analyzed and dealt with in detail.

Summary and Conclusions

To summarize the author has reviewed the main points in the report and has offered their conclusions on how HKIA links with its host city and therefore with the rest of China and with the world. Despite severe problems at its original opening, HKIA has since then worked out these issues and is now performing very well with an official Skytrax five star rating in the process. HKIA has developed into a world-class airport and competes very well at present with its neighbors it its area. However, it is receiving stiff competition from its rivals. For it to succeed, it must integrate its efforts with the other regional airport and may have to specialize in one area such as passenger service at which it excels above all else. The author would tend to concur with the above findings. And would urge that HKIA does move to specialize in passenger service and scrap its other services such as cargo to better mesh with the other regional airports. As noted above, Given Hong Kong's traditional role as an economic powerhouse in China and with the official "one China, two economies" policy, and in this author's opinion will augur well with the Beijing government. It will go a long way to providing good public relations between HKIA, the Beijing government and the city of Hong Kong as well as its people. This good public will must also command a mastering of environmentalism and keeping up its status as a premier green airport, not just out of ecological need but out of public relations commonsense as well. In this way, the public will have a positive and true perception of the airport locally, nationally and globally. This public image is so necessary on all levels, if nothing more to protecting and promoting revenue for HKIA. The fact that the airport just recently had record numbers of passengers would indicate that this strategy is working and that the total actions of HKIA have well planned out and appear to be going in the same good direction in the future.