On January 1, 2000 landing fees and parking charges will be reduced by 15 per cent. According to the Airport Authority the cost to an airline for landing an average 747-400 at CLK will drop from US$5,696 to US$5,052 - significant savings for an airline like Cathay Pacific that uses Hong Kong as home base.
However the landing fees and parking charges are only part of the fees charged to the airlines. Additional charges such as the terminal fee have not been discounted, making the actual fee cut for passenger flights only 12 per cent.
But is the reduction enough to stimulate business at Hong Kong's airport? Northwest Airlines' vice president Asia David Wookey says his company has already upgraded from a 747 Classic to a 747-400 with an extra 50 seats on four flights a week, and hopes to make it seven after January 1. "Obviously we'd like to see the lowest price possible, but we've seen a change in the right direction," he says. "The airport authority has made a significant gesture by reducing the fees."
CX General Manager for Hong Kong and China Alan Wong says the price cuts "are a very positive sign that shows the Airport Authority is taking the problem very seriously. But of course, any further reductions would allow the airlines to make moves to increase competitiveness."
Aviation analyst Jim Eckes of IndoSwiss Aviation would like to see twice the discount to encourage the growth of business at CLK. "CLK remains one of the world's most expensive airports after Narita and Kansai in Japan. There is no reason to emulate Japan," he says, "Hong Kong is a city-state fighting for its economic stability and growth, and the welcome mat to new business would look much more attractive with a 30 per cent reduction."
Esther Wong of Airport Authority media relations defends the size of the pricing change: "Of course the airlines would like to see more reduction in costs, but our first concern is the financial health of the airport."
CLK is losing only $60 million per year as a result of the cuts. The government has agreed to take back the cost of fire-fighting and aircraft rescue at the airport, offsetting $190 million of the $280 million in revenue lost through the price reductions. Another $30 million will be saved by the Civil Aviation Department and the Hong Kong Observatory.
The best way to offset fees reductions, says Eckes, would be for the government to renegotiate the pay-off period for the airport from the current eight years to 20. "If they were to make it 20 years, they could easily reduce the fees and make the airport more competitive. But no-one in this government has the inclination to go back to the Chinese and say 'we made a mistake'."
The airport authority will review the charges again next year. According to Esther Wong there could be further cuts if the market permits. The new north-west concourse in the passenger terminal - opening early in 2000 - will increase capacity by 10 million passengers a year. If this remains unused, the airlines may be able to pressure the AA to stimulate new business by introducing further price cuts.