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New HK terminal raises Asian stakes

FLIGHT DEMAND Hong Kong's second terminal is an impressive pitch for greater share of a growing market, but Singapore and China are catching up fast

AFP , HONG KONG

The new Terminal 2 is pictured before its official opening at Hong Kong International Airport on Friday.

PHOTO: AFP

Hong Kong airport's new terminal will help to strengthen the city's position as an Asian and global transportation hub, but competition from its rivals in the region is continuing to grow, analysts said.

Hong Kong International Airport's second terminal -- which has been built to meet increasing passenger demand -- formally opened on Friday.

In a region where passenger growth is faster than the global average, analysts said Hong Kong has to be well-prepared to fend off any threats to its position as an international air hub.

"All the airports are planning for the future, particularly in Asia and the Middle East, like Dubai," said Vincent Ng, a Singapore-based aviation analyst for Asian equity research at Standard and Poor's.

"You can see that Asia is going faster than the rest of the world. Airports are being built bigger and bigger. This gives them time to position themselves for the future," Ng said.

Jim Eckes, managing director of Hong Kong-based aviation consulting firm IndoSwiss Aviation, believes the opening of the 140,000m2 new terminal will pull in more customers.

"You have to be prepared for the future. Adding a second terminal gives you a lot of advantages and you can attract other airlines to come to Hong Kong," further strengthening its already extensive flight network, he said.

"If you are really going to be a landmark airport, you have to be ahead of the curve," he said.

AIR HUB

Hong Kong is seen as an important air hub in Asia and for China. Built on reclaimed land, the airport is among the world's largest and has seen rapid passenger growth since it was opened in 1998.

The number of air travelers has grown from 28.6 million in 1998 to last year's 44.4 million, with 80 million predicted by 2025. More than 85 airlines operate flights here to more than 150 destinations worldwide, including 40 Chinese cities.

But Hong Kong has its rivals.

The city's long-term arch rival, Singapore, whose airport handled 35 million passengers last year, already has two terminals, with a third one set to open this January.

The new 380,000m2 structure will bring the total annual passenger handling capacity to about 70 million at the airport, connected to more than 180 cities by more than 80 airlines.

"Singapore is always ahead of the pack in terms of having terminals before it was needed," Eckes said. "They are looking ahead. Hong Kong has to do that, too."

BIGGER THREATS

But Hong Kong is facing bigger threats closer to home. While it is considering building a third runway, the neighboring Baiyun airport in southern China already has plans to build a third, with completion scheduled for 2011.

Baiyun, China's third-largest airport, handled 26.2 million passengers last year and is gaining market share from its rival Shenzhen Airport, which borders Hong Kong, according to a research note issued by Morgan Stanley.

"When you look across China where the Baiyun airport was built, you've got competition in this business," Eckes said.

"You've got to have the facility not only to keep up with your neighbors but project an image that you can handle the growth rate, which right now is very astronomical," he said.

FAST GROWTH

China's aviation industry is one of the world's fastest growing, mirroring the broader economic growth in the nation of 1.3 billion people. Air passenger traffic in China grew 16.7 percent to 332 million trips last year.

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