Pandemic cuts runway work some slack

Editorial | Mary Ma 23 Jun 2020

Someone from Financial Secretary Paul Chan Mo-po's office should have attended Legco's economic development panel meeting.

That's because the review of the airport's third runway project should have more to do with the city's economic forecast than the technical aspects of building and engineering works of the additional runway.

The Legco meeting should have shed some light on whether the SAR government is still committed to the mega-project after Covid-19 has shattered the entire global aviation scene.

Perhaps the absence of anyone from Chan's office was, in itself, an indication that the government was as confident as before.

Therefore, it did not think it necessary to give further assurances to lawmakers that the HK$141 billion investment remained good value for money - despite conflicting signals in aviation markets.

Still, an assurance supported by scientific data would have been preferable. When people are worried about a probable deep recession, good news of any kind offers some light at the end of the tunnel.

Markets are not short of critical opinions on how the coronavirus pandemic could permanently change the pattern of aviation.

When the United States was hit by major outbreaks of the virus, legendary investor Warren Buffett dumped his entire holdings in major US airlines, casting doubt on whether it would be wise to invest in the industry long term.

The airline stocks soared right after Buffett's sell-off, proving that even the investment guru could err in short-term trading.

In Hong Kong, Cathay Pacific Airways had to be saved with a multi-billion-dollar government bailout. Hong Kong Airlines, meanwhile, remains in trouble.

Hong Kong is not the only international airport under expansion - London's Heathrow Airport also has a plan for a third runway. Already compounded by legal issues, the pandemic has further complicated the Heathrow expansion, leaving it hanging in the balance.

The dilemma facing investors and policymakers brings to mind the question of whether a glass is half empty or half full. The SAR government's commitment to building the third runway at Chek Lap Kok and its rescue of Cathay Pacific suggest the glass is half full, with optimism potential for growth.

With intercontinental air traffic virtually grounded, competing airports will be reduced back to similar starting points. This could give the SAR a rare opportunity - the luxury of a break - to upgrade its airport facilities to be better positioned for future challenges from mainland competitors.

At the Legco panel meeting, Airport Authority treasurer David Woo revealed it was arranging for a five-year HK$20 billion loan with local and international banks to finance the runway project. This came as income from airport construction fees levied on passengers dwindled as passenger numbers dropped drastically.

It's worth noting that likely creditors were said to have responded positively to the credit facility which, if sealed, would be another shot in the arm for Hong Kong's future as an aviation hub.

It's interesting that markets are full of polar-opposite sentiments. Which side makes better sense? While everyone is free to make a judgment call, the SAR government has obviously called the shots.

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