HK Airport Authority to consider extending passenger levy

Customers stand in line at a check-in counter at Terminal 2 of the HK airport

The Airport Authority for Hong Kong has said that it will consider extending the period in which the increased passenger levy is applied if the third runway project for Hong Kong airport exceeds cost estimations.
A proposal released by the Airport Authority in September indicated that the passenger levy would be increased to HKD90 and HKD160 for economy short-haul and economy long-haul flights respectively, for the period spanning from 2016 to 2031, after a previous proposal was criticized for introducing too high a tax for ordinary passengers.
However the South China Morning Post reported last week that the Authority’s chief executive, Fred Lam, had suggested that the passenger levies could be extended past 2031 should the runway project encounter unforeseen difficulties or exceed budgetary expectations.
The revision, which is scheduled for implementation in the second quarter of next year, is designed to help finance the construction of the third runway at the international airport.
The Airport Authority said that the new passenger levy could cover around 8 percent of the cost of the project. This is a considerable decrease from a previous proposal that sought to cover as much as 29 percent of the cost through the charges, according to an article on EJ Insight.
As per the comments on the SCMP, Lam is said to have assured parties that the Airport Authority would closely monitor the project’s implementation to prevent costs from exceeding estimates.
According to a recent report compiled by HSBC which addressed the new runway’s anticipated finances,  an unexpected event such as a SARS outbreak could force the authority to seek additional funding elsewhere.
The HSBC report suggested that an adverse event could mean the authority would need to find a supplementary HKD 3 billion in addition to the planned HKD 69 billion already borrowed.
Lam told the SCMP that the current financial plan would be capable of funding the third runway, but in extreme circumstances, the authority would not rule out extending the raised passenger levy past 2031.
“Our preference is to go to the market to seek funding,” said the authority’s chief executive when asked about alternatives, should the cost exceed estimates.
Lam added that the authority’s strong financial position would enable it to secure a private loan on favorable terms.
“We have no plans to ask for government money to fund the third runway project,” the chief executive clarified. Staff reporter