Hong Kong’s three-runway airport system to be completed by end of 2024 – 26 years after opening
Hong Kong's International Airport, commonly known as Chek Lap Kok, has been big, bold and brash since it opened in 1998, exactly 26 years ago.
Rushed to beat the deadline for the transfer of sovereignty from the UK to the Peoples Republic of China, the airport was constructed on an artificial island reclaimed from the sea. It became one of the world's top 10 airports for passengers and the leading one for cargo.
But within the last few years it has reached capacity and was in need of the shot in the arm that is the third runway, which opened in 2022 (while one of the original two closed for maintenance) and with associated terminal construction.
The entire shebang will be open, up, and running by the end of 2024, at which point the managing authority, Airport Authority Hong Kong (AAHK), can seriously start to think about it pushing further into the top 10 rankings, as an adjacent airport city serving a population close to 100 million comes increasingly on line.
But it won't be all plain sailing just yet, as the millions of passengers that were lost during the COVID-19 pandemic have yet fully to be recovered.
- Hong Kong airport’s three-runway system (3RS) including new terminal space should be co-ordinated and working by the end of 2024.
- It will be introduced in a phased manner, matched to pandemic recovery.
- After a severe pandemic downturn, passenger growth is back on track and runway/terminal capacity had been reached.
- Airline seat capacity still trails the 2019 levels, but cargo activities remained solid throughout the COVID-19 pandemic.
- Not yet evident how new infrastructure will be apportioned.
- 3RS should aid capacity utilisation – there are some pinch points during what can be busy days and nights.
- There are ambition plans for HKIA to become the world’s leading airport city, serving the Great Bay area.
Hong Kong's three-runway system, and associated terminal and other works, should all be completed by the end of 2024
Airport Authority Hong Kong (AAHK) has confirmed that Hong Kong International Airport's (HKIA) Three-runway System (3RS) will be completed and commissioned by the end of 2024, when all three-runways will then be operating.
The third runway was commissioned in Nov-2022, while the previous 'North Runway' was closed for modification works at the same time, leaving HKIA with two runways still.
Other 3RS related works - including reconfiguration of the centre runway, Terminal 2 expansion, the development of a T2 concourse (which is directly related to the third runway project) and associated infrastructure and systems - are targeted for completion also by the end of 2024.
Essential parts of the jigsaw
The third runway, built parallel to the current two runways on reclaimed land directly north of the existing airport island, is an essential piece of the jigsaw that will help increase HKIA's annual capacity to 120 million passengers and 10 million tonnes of cargo when 3RS completes. The terminal expansion also plays a major part in that.
That project required land reclamation, using deep cement mixing, of about 650 hectares (1,600 acres), and was controversial on several accounts - including the cost, environmental and specifically, local noise pollution concerns related to take off and landing routes, rather than the proximity of habitations close to the airport itself.
Outline plan of the third runway and other aspects of the 3RS system, Hong Kong
Maximum capacity has already been reached and additional infrastructure is essential, despite the pandemic's bearing
AAHK had estimated that the airport would reach its maximum runway capacity around 2020 if no extra runway was added.
According to recently updated CAPA - Centre for Aviation data, that capacity was 65mppa rising to 75mppa on the commissioning of the third runway, and nine million cargo tonnes throughput. (AAHK says the existing facilities of Terminal 1 are designed to handle up to 80 million passengers annually).
The end game of 3RS, now in sight, is what should raise both capacities to the levels mentioned earlier.
And they need to be raised. Before the COVID-19 pandemic passenger traffic had been rising inexorably from 2010 through to 2018 (in common with many other airports, there was a still not fully explained small reduction in 2019).
But HKIA took a battering from the pandemic, with traffic falling from 71.5 million in 2019 to a low of 1.3 million in 2021, as the impact of the malady was felt throughout China.
Hong Kong International Airport: annual traffic, passenger numbers/growth, 2010-2024
Cargo volume did grow during the pandemic, and HKIA is historically the world's leading airfreight centre
Cargo volume did grow again, however, as was the case at primary hub airports like HKIA around the world during the pandemic, with the rider that HKIA is historically the busiest cargo airport globally anyway. It was so in 2023, and stayed that way during the COVID-19 pandemic, with the single exception of 2020, when it was marginally overtaken by Memphis (which is mainly a parcels facility).
Hong Kong International Airport: annual traffic, cargo volume/growth, 2010-2024
Passenger traffic could reach 2018 levels again within a year, but the recovery rate is slowing
It wasn't until 2023 that there was a recovery of passenger traffic - almost 600% over 2022, and with +59% recorded in the first five months of 2024, which is more than twice the growth recorded at CAAC (Chinese Civil Aviation Authority) airports in mainland China.
If that rate of re-growth continued, it would mean HKIA would exceed its highest ever (2018) passenger total in 2025, and indeed go way beyond it.
That will not happen. The rate will settle down, probably to around 25% by the end of the 2024, and will be in single digits in 2025.
Even so, the prospect of HKIA regaining a top-10 slot in the list of the world's busiest airport is emerging. In the past decade, since 2015, it was the eighth busiest (2015-2018); and 13th in 2019. In 2023, despite the recovery, it didn't even feature in the top 50.
AAHK says that passenger traffic at HKIA has recovered to about 80% of the pre-pandemic level (measuring 2023 against 2019 it was 55%). It adds that it should reach the 70 million passenger mark by the end of 2024.
That is possible, but it would mean that not only would growth levels have to increase beyond the +59% in the first five months, they would also have to be sustained throughout the year. If 59% were to remain the figure throughout 2024, then HKIA could anticipate a total of 63 million passengers for the year.
It is the case in comparable scenarios that the rate of passenger growth is stalling and declining.
In Japan, for example, growth of +39% in 2023 has reduced to +7% in 1M-5M2024, and in South Korea the reduction is from +116% to +89% in the same period. Both countries were both seriously affected adversely by the COVID-19 pandemic.
The 2019 capacity level is yet to be restored
Nor has capacity been fully restored.
In the week commencing 08-Jul-2024 there are just over 1.3 million seats made available, compared to almost 1.8 million in the same week of 2019 - a shortfall of 26%.
Hong Kong International Airport: weekly total system seat capacity, 2019-2024*
There is currently no indication that that shortfall will be made up, but it can only be speculated on what will happen in the remainder of 2024, hence the dotted green line in the chart above.
In 2023 capacity rose by 358%. So far in 2024 the growth increase predicts a year-end one of +35.8%, which would take the number of seats to around 72% of the 2018 figure.
3RS will be introduced into active service via a flexible phasing strategy
Nevertheless, it is historical trends that dictate investment in airport infrastructure, rather than wildly varying statistics prompted by extraneous events, and on that basis the 3RS system is justified.
It needs also to be stressed that AAHK says it will deploy a flexible phasing strategy for the commissioning of the 3RS passenger facilities, in order to align with the progress of the post-pandemic air traffic recovery and the prevailing passenger demand.
Little indication yet how the 3RS facilities will be shared out
It is not yet evident how the completed 3RS facilities will be shared by airlines, and especially in Terminal 2.
Cathay Pacific is the largest airline by seat capacity (42%) and by movements (approximately 33% peak and off-peak).
Hong Kong International Airport: system seats, all airlines and business models, week commencing 08-Jul-2024
The oneworld alliance - including oneworld connect, of which Cathay Pacific is a member - has just under 45% of seat capacity in total, which makes it a reasonable candidate for T2 positioning, but at the same time there are no fewer than six alliances operating at HKIA, including subsidiaries, which together account for 69% of capacity.
Dividing up space and catering to all of them and their demands will not be an easy task.
HKIA is a global transfer hub and that has an impact on capacity utilisation
The additional runway and terminal space will be a boon for the way in which capacity is handled.
HKIA displays the characteristics of a global hub, as the route map below shows.
Hong Kong International Airport: network map for the week commencing 08-Jul-2024
At HKIA 56% of flights fall in the flight length category of 0 to 4 hours.
Hong Kong International Airport: system seats by length of flight, week commencing 08-Jul-2024
A 24/7 airport
Consequently, there are pinch points during the day, and particularly in the early evening, when activity is focused on short haul-to-short haul and short haul-to-long haul connections, and vice versa.
Moreover, the airport is active and busy 24/7. The chart below is for Saturday 06-Jul-2024, Saturday appearing to be the busiest day for movement activity, and it represents arriving and departing capacity per hour block.
Hong Kong International Airport: system seats per hour for Saturday 06-Jul-2024
State of the art security system alerts passengers to uncollected tray items
This variety of combined O&D and hub transfer activity necessitates the most stringent security applications. AAHK announced recently (end Jun-2014) that it would introduce a new state of the art passenger security screening system at HKIA - featuring 50 channels and 32 full body scanners, and equipped with 3D and 360-degree CT based X-ray scanning technology, auto tray recirculation, in-built tray sterilisation, and automatic alerts to passengers for uncollected items on the tray.
The system will be installed and put into operation initially in Terminal 1 by phases, with the first batch becoming operational at the South and North Departure Immigration Halls on 02-Jul-2024.
Ambitious intentions to be the world's leading airport city
With the added capacity provided by the 3RS, AAHK is "transforming HKIA from a city airport into an 'airport city'", to use its slogan, and with an ambition to be 'the world's leading airport city'.
Much of its airport city claim is based around the cargo business, and specifically around e-commerce.
A new 5.3 hectare 'premium logistics centre' is under construction, which will serve as Alibaba's 'smart hub' for Asia, and HKIA is additionally targeting high-value perishable products.
The catchment area is the Great Bay region of 90 million people
Developing cross-boundary trans-shipment will enable HKIA to tap into the economic development of the wider Guangdong-Hong Kong-Macao Great Bay - a megalopolis of nine cities and the two Special Administrative Regions of Hong Kong and Macau, which counts almost 90 million inhabitants.
AAHK is already a shareholder in Zhuhai Airport, which is part of the complex handling passenger and freight demands in this urban region, as noted in Hong Kong and Zhuhai authorities strengthen airport cooperation, a CAPA - Centre for Aviation report from Nov-2022.
AAHK has also launched a pilot scheme for sea-air intermodal trans-shipments between Dongguan and HKIA, followed by an agreement signed with Dongguan Port Group to establish a joint venture to develop HKIA Dongguan Logistics Park.
Finances have improved enormously since the lows of 2020/21
Irrespective of the pandemic, finances at HKIA are solid now.
The airport has just announced its financial results for the 12 months ended 31-Mar-2024:
- Revenue: HKD13,683 million (USD1.8 billion), +66.5% year-on-year;
- EBITDA (loss): HKD5404 million (USD690.6 million), compared to a profit of HKD813 million in previous comparable period;
- EBITDA Margin: 38.3%;
- Net profit (loss): HKD1613 million (USD206.2 million), compared to a loss of HKD2142 million in p-c-p;
- Total assets: HKD231.6 billion (USD29.6 billion);
- Total liabilities: HKD143.8 billion (USD18.4 billion);
- Current ratio: 1.6
- Cash and bank balances: HKD30.6 billion (USD3.9 billion).
That has not always been the case, and 2020/21 and 2021/22 were notably difficult years, as revealed by the table below.
Hong Kong International Airport: financials (in USD), 2019-2022
The result in 2020/21 was the worst year, with heavy losses, and the EBITDA and net levels, but capital expenditure remained constant throughout the three pandemic years and increased by a large margin in 2021/22 as work on the 3RS neared completion.
Lam steps up to Chairman of AAHK; search on for new CEO
Changes are afoot in AAHK's management.
Chairman Fred Lam commenced his three-year term in that capacity on 01-Jun-2024. Mr Lam served as AAHK's CEO from 01-Oct-2014 to 31-May-2024.
Chief operating officer Vivian Cheung is acting as CEO, and the AAHK board is conducting a global search for a new permanent CEO.