hkia annual report 2009-10
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Contents
HKIA Environmental Performance 2Core Values 4HKIA Facts / Performance Highlights 5Chairman’s Statement 6Chief Executive Officer’s Statement 10The Board and Executive Directors 14Financial and Operational Highlights 17Corporate Governance 18Event Highlights 26Passenger Services 28Cargo and Aviation Services 34Airfield and Systems 38Mainland Projects 42Corporate Social Responsibility 46Looking Forward 50Financial Review 54Report of the Members of the Board 62Independent Auditor’s Report 65Financial Statements 66 Five-year Financial and Operational Summary 123Airlines and Destinations 124
Hong Kong International Airport (HKIA) aims to maintain
a leadership position in airport management and aviation-
related businesses to strengthen Hong Kong as a centre
of international and regional aviation by:
• upholding high standards of safety and security• operating effi ciently with care for the environment• applying prudent commercial principles• striving to exceed customer expectations• working in partnership with stakeholders• valuing human resources• fostering a culture of innovation
AIRPORT AUTHORITY HONG KONG (the Airport Authority) is a statutory corporation wholly owned by the Hong Kong SAR Government. The Airport Authority is responsible for the operation and development of HKIA.
Our Green Airport
The theme of this year’s annual report highlights the importance we place on
operating in an environmentally responsible manner. As you will see, a commitment
to green operations runs through everything we do. In addition to reducing, reusing
and recycling, the 1,100 people of Airport Authority Hong Kong are proud to share
their environmental knowledge with business partners, other airports and the
community at large.
Annual Report 2009/10 1
Hong Kong International Airport2
HKIA Environmental Performance
• We recycle a variety of materials, including cardboard, paper, plastics, scrap metals, glass, food waste, tyres, lubricating oil and fluorescent tubes.
• Over 60 recycling bins are available at the airport to collect recyclable waste.
• In the past five years, we recycled more than 4,600 tonnes of waste, including over 240 tonnes of food scraps, which were converted into soil conditioner for the airport’s landscaping. A new compost system, which can process 200 kilogrammes of food waste per day, started operation in April 2010.
• Asphalt waste from pavement refurbishment work is reused in road resurfacing and in the base and sub-base courses of the airfield pavement in the midfield.
• We work with the Environmental Protection Department and our business partners to step up recycling of waste wooden cargo pallets.
• In April 2010, we signed the Conscientious Recycling Charter initiated by Friends of the Earth (HK) to show our commitment to recycling all our used computers, electrical waste and electronic equipment through proper recycling channels verified by the Environmental Protection Department.
• In the past five years, HKIA’s wastewater treatment plant processed 6.4 million cubic metres of wastewater from aircraft catering facilities, aircraft washing bays, passenger terminal restaurants and rest room sinks. A portion of the treated water is used to irrigate the airport’s landscaping.
Recycling: More than 4,600 Tonnes of Waste
Recycled
Emissions Reduction: Over 320 Green Vehicles at HKIA
• To demonstrate our commitment to minimise air pollution, we signed the Hong Kong General Chamber of Commerce’s Clean Air Charter in 2007. In addition, we endorsed the Aviation Industry Commitment to Action on Climate Change in 2008, a global initiative to mitigate our industry’s impact on climate change.
• To reduce greenhouse gases, we promote the use of electric, hybrid and liquefied petroleum gas−powered vehicles at Hong Kong International Airport (HKIA). The airport has one of Hong Kong’s largest fleets of electric vehicles and ground service equipment, and all of the Airport Authority (AA)’s diesel vehicles now use B5 biodiesel, a mixture of 95% conventional diesel and 5% biodiesel made from used cooking oil. Since 2008, the AA has facilitated the collection of used cooking oil at HKIA, and more than 95,000 litres has been recycled as biodiesel.
• With an efficient public transportation system connecting HKIA and the city, 66% of passengers and 96% of airport staff take the Airport Express, buses or coaches to and from the airport.
• Fixed ground power (FGP) and pre-conditioned air (PCA) systems are provided for aircraft at parking stands, eliminating the need for aircraft to use their fuel-combustion auxiliary power generation units onboard. Powered by electricity instead of jet fuel, the FGP and PCA systems significantly reduce air pollutant and carbon emissions. About 70% of passenger flights use our FGP and PCA systems.
• The AA signed the Environmental Protection Department’s Carbon Reduction Charter in 2008. In April 2009, we conducted the first airport-wide carbon audit, and shared our carbon management experience with the airport community through nine workshops. More than 30 of our business partners have completed carbon audits that cover 90% of the buildings and vehicles at HKIA.
Annual Report 2009/10 3
• A wide range of measures have been introduced to improve the efficiency of the lighting, ventilation, air-conditioning and hydraulic systems, as well as escalators and travelators at HKIA.
• During the year, we replaced 4,200 lighting fixtures with light-emitting diode (LED) lights.
• All these measures contributed to an annual saving of about 10 million kilowatt hours (kWh) in 2009/10, which is an equivalent to 5,600 tonnes of carbon emissions.
• Great care has been taken in HKIA’s design, construction and operation to protect local wildlife and the natural habitat. To increase the diversity of inter-tidal flora and fauna, 90,000 mangrove seedlings were planted in Tai O in 2005 and 2006.
• We fund the management of the Sha Chau and Lung Kwu Chau Marine Park, and have supported research into Chinese white dolphins, the development of an artificial reef programme in North Lantau waters and a conservation plan for Romer’s tree frog, which is native to Hong Kong.
• To create a green environment for passengers and airport staff, we have grown 700,000 plants over an area of three million square metres on the airport island.
Energy: 10 Million kWh Saved
Local Ecology and Greening
Our Plans• An upgrade to the airport’s chiller systems will be completed in 2011, saving five million kWh and 2,800 tonnes of
carbon emissions per year.
• We plan to install an additional 81,000 LED lights in our passenger terminals by 2013 to save another 13 million kWh and 7,280 tonnes of carbon emissions per year.
• We have begun studying the feasibility of roof greening and the use of solar panels and wind turbines.
• Improvements will be made to the wastewater treatment plant by 2012 to enhance the quality of treated wastewater.
• The efficiency of the fixed ground power system will be improved by 2014, reducing local air pollutant emissions and saving over 1,000 tonnes of carbon emissions annually. A new, chlorine-free refrigerant will be used in the pre-conditioned air system, eliminating over 300 tonnes of carbon emissions a year.
• Before the airport opened, we established a comprehensive baseline for water quality and sediment levels in nearby waters to track HKIA’s impact on the marine environment. We are now conducting our fourth year-long monitoring programme as part of our commitment to minimising our impact on the local environment.
• We are studying the feasibility of expanding the airport’s green area by 130,000 square metres.
• We work with companies operating on the airport island to develop carbon-reduction programmes and set reduction targets for HKIA.
Annual Report 2009/10Hong Kong International Airport 54 Annual Report 2009/10Hong Kong International Airport 54
At Hong Kong International Airport (HKIA), six core values guide our staff and business partners in their day-to-day work and long-term plans. In a rapidly changing business environment, these principles are both constant and non-negotiable.
SafetyThe safety of our passengers, employees and business partners is paramount. Through training, accident reporting and analysis, communications and staff recognition programmes,our goal is to achieve a zero-injury rate at HKIA.
SecurityEffective security is an ongoing process that involves the entire airport community. We work closely with the police and other government departments to protect passengers, staff and business partners.
EnvironmentHKIA is committed to achieving high environmental standards.This includes minimising pollution, using energy and other resources efficiently, recycling and reusing wherever possible, and continually improving our environmental performance.
QualityAn airport-wide passion for customer service helps us maintain international standards of quality and customer satisfaction. As a result, HKIA has been named the world’s best airport about 30 times over the years.
EfficiencyBy efficiently serving our customers and business partners, we reinforce Hong Kong’s position as an aviation centre. That contributes to Hong Kong’s social and economic development and its competitiveness in financial services, trading and logistics, and tourism.
PeopleTop-quality people are the key to our high service standards. We use long-term training and development plans to ensure our staff are prepared to meet future challenges.
CoreValues
Annual Report 2009/10Hong Kong International Airport 54 Annual Report 2009/10Hong Kong International Airport 54
10
20
30
40
50
6,000
6,500
7,000
7,500
8,000
8,500
9,000
9,500
09/1008/0907/0806/0705/06
Passenger Trafficmillions of passengers
Turnoverin HK$ million
7,076
9,0158,8868,577
7,738
41.645.1
48.9 47.746.9
1
2
3
4
0
500
1,000
1,500
2,000
2,500
3,000
09/1008/0907/0806/0705/06
Cargo Throughputmillions of tonnes
Profit Attributable to Equity Shareholderin HK$ million
100
150
200
250
300
350
1
2
3
4
5
6
7
8
09/1008/0907/0806/0705/06
Air Traffic Movementsthousands
Return on Equityin percentage
270283 296 280
3.5 3.63.8
3.43.6
300
1,615
4.95.6
6.57.2
7.8
2,8442,588
2,273
1,920
09/1008/0907/0806/0705/06
09/1008/0907/0806/0705/06
09/1008/0907/0806/0705/06
Performance Highlights
HKIA Facts
Airport Site Area 1,255 hectares
Total Terminal Area 750,000 square metres
Airlines about 90
Destinations around 150
Runways 2
Annual Report 2009/10Hong Kong International Airport 76
Chairman’s Statement
Dear Stakeholders,
Fiscal 2009/10, ended 31 March 2010, was an unprecedented year for the global aviation industry and for Hong Kong
International Airport (HKIA).
As the year began, we were in the grip of a severe economic downturn. In April 2009, cargo throughput at HKIA was
down by nearly one-fifth from year-earlier figures. Gradually, the global economy began to rebound. In the first quarter
of 2010, cargo throughput was up 34.0% from the previous year. In this volatile operating environment, HKIA delivered
a satisfactory performance while maintaining our service standards, enhancing our facilities and laying the groundwork
for future growth.
When compared with 2008/09, air traffic movements fell 5.4%, passenger volume dropped 1.7%, while cargo
volume rose 4.4%. Thanks to strict cost controls, productivity gains, increased revenues from retail operations and an
improving economic climate, profit attributable to our equity shareholder rose 9.9%, to HK$2,844 million. Of that
amount, HK$2,300 million will be returned to our sole shareholder, the Hong Kong SAR Government, as an ordinary
dividend. In view of the Airport Authority (AA)’s strong financial position, the Board has also declared a special dividend
of HK$2,200 million out of previous accumulated retained profits. After making these payments, the AA will have paid its
shareholder a total of HK$18,980 million since 2003/04 in the form of dividends and repayment of capital.
Chairman’s Statement
Relief MeasuresThese results were particularly gratifying in light of
the relief package that we introduced for businesses
operating at HKIA in the wake of the financial crisis,
which had a dramatic impact on the aviation industry
worldwide. Effective from April to December 2009,
the package included a 10% reduction in landing and
parking fees for airlines. It also allowed companies renting
lounges, offices, counters and storage space to defer up
to 50% of their rent for one year and repay the deferred
charges in interest-free instalments. The reduction in
landing and parking fees was later extended until the end
of March 2010. In total, the relief measures reduced
HKIA’s revenues by HK$242 million.
Despite a challenging economic climate, there were
several highlights in 2009/10. For the seventh time since
2002, HKIA was named best airport in the TTG Travel
Awards. And for the fourth consecutive year, Airports
Council International recognised HKIA as the world’s best
airport among facilities serving over 40 million passengers
annually. Our 2008/09 annual report won seven prizes,
including the diamond award in the public sector/
not-for-profit category in the Hong Kong Institute of
Certified Public Accountants’ Best Corporate Governance
Disclosure Awards.
Staying CompetitiveDuring the year, we continued to refine development
plans that will ensure HKIA has the facilities and capacity
to meet future demand and retain its position as a leading
international and regional aviation centre. This year saw
the completion of two important facilities, SkyPier and the
North Satellite Concourse, that will help us meet this goal
and further enhance our service standards.
Our current five-year plan focuses on maximising the
performance and efficiency of existing facilities. We are
now studying the construction of a passenger concourse,
complete with aircraft stands and an automated people
mover link in the midfield, which is located between our
two runways. This project will support a gradual increase
in the runway capacity from the current 59 to 68 air
traffic movements per hour by 2015.
Work continued on HKIA Master Plan 2030, a 20-year
development blueprint that examines the airport’s
traffic forecasts, capacity constraints and ability to
meet long-term demand. This document will include
the outcome of preliminary feasibility studies on the
engineering, financial and environmental aspects of
building a third runway. When HKIA Master Plan 2030
is complete, we will consult the public and stakeholders
in a public engagement process.
In this volatile operating environment, HKIA delivered a satisfactory performance while maintaining our service standards, enhancing our facilities and laying the groundwork for future growth.
Annual Report 2009/10Hong Kong International Airport 98
Cooperation with the MainlandThrough our joint ventures at Zhuhai Airport and
Hangzhou Xiaoshan International Airport, our consulting
work at Beijing Capital International Airport and other
projects, we are developing local knowledge and
management expertise on the Mainland. In October 2009,
we capitalised on this expertise by forming a joint venture,
Shanghai Hong Kong Airport Management Co., Ltd,
that manages Shanghai Hongqiao International Airport’s
two terminals, east transportation centre and retail
operations. This is an exciting opportunity, one that
allows us to contribute to the growth and development
of one of the world’s most dynamic regions.
A Strong TeamThe AA has an experienced management team and a
motivated staff. The quality of our people was particularly
evident this year, as they maintained consistently high
levels of service, safety and efficiency in the face of rapidly
fluctuating demand. I am grateful for their hard work and
commitment.
The achievements of the past year would have been
impossible without the guidance and insight of our
Board. I would therefore like to thank outgoing member
Mr He Guangbei for his invaluable contributions. I would
also like to welcome the Hon Chan Kam-lam, the Hon
Albert Ho Chun-yan and Dr Allan Wong Chi-yun, who
joined the Board on 1 January 2010.
In addition, I would like to take this opportunity to
recognise retiring Executive Director, Finance &
Investment, Mr Raymond Lai Wing-chueng for his
14 years of loyal and dedicated service to the AA.
Mr Lai retired at the end of May 2010 and I wish
him a long and happy retirement.
Finally, I would like to extend my heartfelt appreciation
to our business partners and the Hong Kong SAR
Government for their continued support during an
extraordinary year.
Dr the Hon Marvin Cheung Kin-tung
Chairman
Hong Kong, 31 May 2010
Annual Report 2009/10Hong Kong International Airport 98
Annual Report 2009/10Hong Kong International Airport 1110 Annual Report 2009/10Hong Kong International Airport 1110
Chief Executive Officer’s Statement
Mr Stanley Hui Hon-chungChief Executive Officer
Annual Report 2009/10Hong Kong International Airport 1110
Annual Report 2009/10Hong Kong International Airport 1110 Annual Report 2009/10Hong Kong International Airport 1110 Annual Report 2009/10Hong Kong International Airport 1110
Dear Stakeholders,
Fiscal 2009/10, ended 31 March 2010, was a volatile year for Hong Kong International Airport (HKIA). The global
downturn slashed demand for business and leisure travel, as companies and holidaymakers waited for the economic
storm clouds to clear. Cautious shoppers and businesses depleting their inventories caused airfreight volume to fall.
By the final quarter of 2009, signs of a rebound were evident. Corporate and consumer confidence improved. Load
factors recovered on the back of stronger demand and reduced flight frequencies, resulting in better economics to the
airlines. Airlines began reinstating suspended services, albeit in a small and gradual way. Declines in passenger volume
began to moderate and demand for cargo services bounced back strongly.
For the year, passenger traffic at HKIA reached 46.9 million, a decrease of 1.7% from 2008/09. Cargo throughput
increased 4.4%, to 3.6 million tonnes, while air traffic movements declined 5.4%, to 280,000. Revenues were
HK$9,015 million, an increase of 1.5%. Profit attributable to equity shareholder increased 9.9%, to HK$2,844 million.
Return on equity rose to 7.8%.
Annual Report 2009/10Hong Kong International Airport 1312 Annual Report 2009/10Hong Kong International Airport 1312
Sustainability is at the core of both our day-to-day operations and our long-term development plans. We strive to save energy, reduce emissions and recycle and reuse waste throughout the airport.
Chief Executive Officer’s Statement
Annual Report 2009/10Hong Kong International Airport 1312
Service EnhancementsSeveral new facilities that will strengthen our reputation
for excellence entered service in 2009/10. SkyPier, a
permanent cross-boundary ferry terminal that is eight
times the size of the previous temporary facility, was
officially opened on 15 January 2010 by the Hon Donald
Tsang Yam-kuen, Chief Executive of the Hong Kong SAR.
The same day, we launched the North Satellite Concourse,
which offers 10 bridge-served parking stands for narrow-
bodied passenger aircraft. Together with the other air
bridges in Terminal 1, this facility allows 98% of our
passengers to enjoy the comfort and convenience of
embarking and disembarking aircraft through air bridges.
In June 2009, we completed the reconfiguration of the
North Departures Immigration Hall. This change, which
followed a similar upgrade to the South Departures
Immigration Hall in 2008, added new security channels
and increased passenger screening capacity by 50%. As a
result, this year 97.8% of passengers queued for no more
than 4.5 minutes for security check. The North Satellite
Concourse and the improvements to the Departures
Immigration halls were part of a HK$4.5 billion capacity
and service enhancement programme that began in 2006.
In September 2009, the HKIA Precious Metals Depository
—a secure storage and physical settlement facility for
banks, refiners and commodities exchanges—opened.
During the year, we also completed phase 1A of the
Permanent Aviation Fuel Facility, which includes four
tanks, twin submarine pipelines and a dual-berth jetty.
As business conditions improved, Cathay Pacific Services
resumed construction of its new cargo terminal. When
the terminal is completed in 2013, HKIA will have a total
general and express cargo handling capacity of 7.4 million
tonnes per annum.
A Multi-Modal HubHKIA is a multi-modal transport hub that enables the
smooth flow of people, goods, capital and information
between Hong Kong, the Pearl River Delta (PRD) and
the world. During the year, we took several steps to
strengthen our connectivity with the PRD.
SkyPier, our cross-boundary ferry terminal, now offers
seamless transfers for passengers arriving at HKIA by air
and continuing on to ports in the PRD and Macao, as well
as for sea–to–air passengers travelling in the opposite
direction. During the year, ferry services commenced to
Nansha in Guangdong and Taipa in Macao, bringing the
number of ports served from SkyPier to eight.
We also enhanced our road connectivity. Cross-boundary
coach services now link HKIA with 95 cities and towns in
the PRD, up from 90 destinations last year, and 160
limousines make 300 round trips to PRD cities each day.
In the next decade, HKIA’s importance as a multi-modal
hub will increase. We are working with the Hong Kong
SAR Government to ensure that the Tuen Mun – Chek
Lap Kok Link, Hong Kong – Zhuhai – Macao Bridge and
Hong Kong Boundary Crossing Facilities will be effectively
integrated with the airport’s existing and future
infrastructure. And we support ongoing studies on the
Annual Report 2009/10Hong Kong International Airport 1312 Annual Report 2009/10Hong Kong International Airport 1312 Annual Report 2009/10Hong Kong International Airport 1312
proposed Hong Kong – Shenzhen Western Express Line,
one function of which is to connect HKIA with
Shenzhen International Airport. These projects will bring
unprecedented levels of connectivity to HKIA and
residents of the PRD and contribute to the economic
growth and development not only of Hong Kong but of
the region as well.
Our Green AirportSustainability is at the core of both our day-to-day
operations and our long-term development plans. We
strive to save energy, reduce emissions and recycle and
reuse waste throughout the airport. For example, we
facilitate the collection of used cooking oil at HKIA, which
is converted to biodiesel that fuels all our diesel vehicles.
In October 2009, we welcomed the arrival of our first two
MyCars, which are zero-emission electric vehicles.
In addition, we work with our business partners to help
them minimise their environmental impact. In 2009/10,
we held nine carbon-reduction workshops that were open
to all companies operating at HKIA. Since July 2009, over
30 of our business partners have completed carbon audits
that cover 90% of the buildings and vehicles at the
airport. By establishing an emission baseline, these audits
are an essential first step in formulating an effective
carbon-reduction programme.
Through educational programmes for schoolchildren,
tree-planting events and global initiatives like the
International Coastal Cleanup, we share our knowledge
and passion for environmental protection with the
community at large.
AwardsDelivering a positive experience for passengers and other
airport users requires a coordinated effort by the Airport
Authority, airlines and other business partners. This
airport-wide commitment to service was recognised by
several organisations in 2009/10. We received our third
Asia-Pacific airport efficiency excellence award from the
Air Transport Research Society. Among other awards,
we also won the 2009 top service brand award from the
Hong Kong Brand Development Council and the Chinese
Manufacturers’ Association of Hong Kong.
Recognition of SupportI would like to thank the Airport Authority’s Board
and the Hong Kong SAR Government for their guidance
and support during a challenging year.
I would also like to express my gratitude to our 1,100
employees and the 60,000 members of the airport
community. HKIA’s reputation for service, safety, security
and efficiency is a direct result of your efforts.
Stanley Hui Hon-chung
Chief Executive Officer
Hong Kong, 31 May 2010
Hong Kong International Airport14
The Board and Executive Directors
The Board
Dr the Hon Marvin Cheung Kin-tung
Mr Stanley Hui Hon-chung
Professor the Hon K C Chan
The Hon Chan Kam-lam
Mr Benjamin Hung Pi-cheng
Ir Edmund Leung Kwong-ho
The Hon Eva Cheng The Hon Vincent Fang Kang
Mr He Guangbei The Hon Albert Ho Chun-yan
Ir Dr the Hon Raymond Ho Chung-tai
Mr Norman Lo Shung-man
Dr Allan Wong Chi-yun
Mr Wilfred Wong Ying-wai
Dr Lo Ka-shuiMr Andrew Liao Cheung-sing
Annual Report 2009/10 15
Dr the Hon Marvin Cheung Kin-tung DBA Hon. GBS OBE JP ChairmanAged 62. Appointed as Chairman of the Board in June 2008. First appointed as Member of the Board in June 2003 and was re-appointed in June 2005. Non-official Member of the Executive Council. Chairman of the Council of the Hong Kong University of Science and Technology. Independent Non-Executive Director of the Hong Kong Exchanges and Clearing Limited, Hang Seng Bank Ltd, HKR International Ltd and HSBC Holdings plc.
Mr Stanley Hui Hon-chung JP Chief Executive Officer*Aged 59. Appointed as Chief Executive Officer in February 2007. Former Chief Executive Officer of Dragonair and Chief Operating Officer of Air Hong Kong. First Vice Chairman of Hangzhou Xiaoshan International Airport Company Limited. Chairman of Hong Kong – Zhuhai Airport Management Company Limited. Member of the Hong Kong Government’s Aviation Development Advisory Committee. Member of the Fourth Shenzhen Committee of the People’s Political Consultative Conference of China. Member of the Greater Pearl River Delta Business Council. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Member of the Vocational Training Council. Chairman of the Chinese Cuisine Training Institute Training Board. Member of the Hong Kong Tourism Board. Member of the Construction Industry Council.
Professor the Hon K C Chan SBS JP Secretary for Financial Services and the Treasury*Aged 53. Became a Board Member in July 2007 upon his appointment as Secretary for Financial Services and the Treasury. Chairman of the Managing Board of Kowloon-Canton Railway Corporation. Member of the Board of Directors of MTR Corporation Limited.
The Hon Chan Kam-lam SBS JPAged 61. Appointed to the Board in January 2010. Member of the Legislative Council representing the constituency of Kowloon East. Chairman of the Panel on Financial Affairs and Member of the Panel on Housing of the Legislative Council. Member of the 11th National Committee of Chinese People’s Political Consultative Conference. Member of the ICAC Advisory Committee on Corruption. Non-Executive Director of Securities and Futures Commission.
The Hon Eva Cheng JP Secretary for Transport and Housing*Aged 50. Became a Board Member in July 2007 upon her appointment as Secretary for Transport and Housing. Member of the Managing Board of Kowloon-Canton Railway Corporation. Member of the Board of Directors of MTR Corporation Limited.
The Hon Vincent Fang Kang SBS JPAged 67. Appointed to the Board in June 2005 and was re-appointed in June 2008. Chief Executive Officer of Toppy International Ltd. Managing Director of Fantastic Garments Ltd. Chairman of Hospital Governing Committee, Princess Margaret Hospital. Chairman of Hospital Governing Committee, Kwai Chung Hospital. Honorary Advisor, Hong Kong Retail Management Association. Director of the Federation of Hong Kong Garment Manufacturers. Chairman of the Garment Advisory Committee of the Hong Kong Trade Development Council. Member of the ICAC Operations Review
Committee. Member of the Fight Crime Committee. Member of the Hong Kong Housing Authority and Member of the Greater Pearl River Delta Business Council.
Mr He Guangbei JPAged 55. Appointed to the Board in June 2003 and was re-appointed in June 2005 and June 2008. Vice Chairman and Chief Executive of BOC Hong Kong (Holdings) Limited. Vice Chairman and Chief Executive of Bank of China (Hong Kong) Limited. Chairman of Chiyu Banking Corporation Limited. Designated Representative of BOCHK to the Hong Kong Association of Banks and served as the Vice Chairman in 2009. Member of the Hong Kong Monetary Authority Exchange Fund Advisory Committee and Banking Advisory Committee. Director of Hong Kong Interbank Clearing Limited. Director of Hong Kong Note Printing Limited. Honorary President of the Hong Kong Chinese Enterprises Association. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Vice Chairman and General Committee Member of The Hong Kong General Chamber of Commerce.
The Hon Albert Ho Chun-yanAged 59. Appointed to the Board in January 2010. Practising Solicitor and Notary Public. Member of the Legislative Council representing the constituency of the New Territories West. Tuen Mun District Council Member. Member of the ICAC Complaints Committee and the Mandatory Provident Fund Schemes Advisory Committee. Board Member of the Society for Community Organization.
Ir Dr The Hon Raymond Ho Chung-tai SBS S.B.St.J. JPAged 71. Appointed to the Board in June 2008. Member of the Legislative Council (Engineering) and the former Provisional Legislative Council since 1996. Hong Kong Deputy to the 10th & 11th National People’s Congress of the People’s Republic of China. Chairman of Hong Kong Trade Development Council Infrastructure Development Advisory Committee. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Chairman of Guangdong Daya Bay Nuclear Plant and Lingao Nuclear Plant Safety Consultative Committee. Former President of the Hong Kong Institution of Engineers.
Mr Benjamin Hung Pi-chengAged 45. Appointed to the Board in June 2008. Executive Director and Chief Executive Officer of Standard Chartered Bank (Hong Kong) Limited. Vice Chairman of the Board of Directors of Bohai Bank. Chairman of the Hong Kong Association of Banks. Board Member of Hospital Authority. Member of the Insurance Advisory Committee, the Exchange Fund Advisory Committee and the Council for Sustainable Development. Council Member of the University of Hong Kong and the Hong Kong Trade Development Council. Chairman of Hong Kong Trade Development Council’s Financial Services Advisory Committee. Board Member of the Community Chest and the Community Business.
Ir Edmund Leung Kwong-ho SBS OBE JPAged 64. Appointed to the Board in June 2005 and was re-appointed in June 2008. A Professional Engineer. Managing Director of Hsin Chong Construction Group Ltd. Chairman of the Energy Advisory Committee. Chairman of the Process Review Panel of the Financial Reporting Council. Former President of the Hong Kong Institution of Engineers and former Chairman of the Hong Kong Branch of the Institution of Mechanical Engineers of the United Kingdom.
Mr Andrew Liao Cheung-sing GBS SC JPAged 60. Appointed to the Board in June 2005 and was re-appointed in June 2008. A Senior Counsel. Chairman of the Land and Development Advisory Committee. Chairman of the Air Transport Licensing Authority. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Member of the 11th National Committee of Chinese People’s Political Consultative Conference.
Dr Lo Ka-shui MD GBS JPAged 63. Appointed to the Board in June 2003 and was re-appointed in June 2005 and June 2008. Chairman and Managing Director of Great Eagle Holdings Limited. Non-executive Chairman of Eagle Asset Management (CP) Limited (Manager of the publicly listed Champion Real Estate Investment Trust). Vice President of the Real Estate Developers Association of Hong Kong. Trustee of the Hong Kong Centre for Economic Research. Chairman of the Chamber of Hong Kong Listed Companies. Non-executive Director of The Hongkong and Shanghai Banking Corporation Limited and Independent Non-executive Director of Shanghai Industrial Holdings Limited, Phoenix Satellite Television Holdings Limited and China Mobile Limited.
Mr Norman Lo Shung-man AE JPDirector-General of Civil Aviation*Aged 53. Became a Board Member in April 2004 upon his appointment as Director-General of Civil Aviation.
Dr Allan Wong Chi-yun GBS MBE JPAged 59. Appointed to the Board in January 2010. Chairman and Group Chief Executive Officer of VTech Holdings Limited. Member of the Commission on Strategic Development of the Hong Kong SAR Government and the Greater Pearl River Delta Business Council. Council Member of the University of Hong Kong. Independent Non-executive Director and Deputy Chairman of The Bank of East Asia, Limited. Independent non-executive Director of China-Hong Kong Photo Products Holdings Limited and Li & Fung Limited.
Mr Wilfred Wong Ying-wai SBS JPAged 57. Appointed to the Board in June 2005 and was re-appointed in June 2008. Executive Chairman, Greater China of Pacific Star Group. Executive Deputy Chairman of Hsin Chong Construction Group Limited and Synergis Holdings Limited. Deputy to The 11th National People’s Congress of the People’s Republic of China. Chairman of the Hong Kong International Film Festival Society Limited. Chairman of the Court and Council of the Hong Kong Baptist University. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Member of the Hong Kong Tourism Board, the Film Development Council and the Family Council. Chairman of the Business and Professionals Federation of Hong Kong.
Secretary to the BoardMr H Y Shu
AuditorsKPMG
* Member by virtue of being holder of the post
Hong Kong International Airport16
The Board and Executive Directors
Mr Howard Eng Kiu-chor Executive Director, Airport OperationsAged 57. Holds Bachelor’s Degrees in Science and in Commerce. Joined the Airport Authority in April 1995 and was appointed Director in December 2000. Before joining the Airport Authority, Mr Eng was Vice President of Operations, Edmonton International Airport, Canada, and has had more than 25 years of experience in the airport business involving project development, planning, retail and operation. He is a Director of Hong Kong – Zhuhai Airport Management Company Limited.
Executive Directors
Mr Raymond W C Lai Executive Director, Finance & Investment Aged 60. Holds a Bachelor’s Degree in Science, an MBA and an Honourary Doctor of Science Degree. Mr Lai was appointed in August 1996. Before joining the Airport Authority, Mr Lai was a veteran banker with over 20 years of experience in capital markets and corporate finance in Hong Kong, Europe and the USA. He is a Member of the Finance Committee of the Housing Authority and Board Vice Chairman of Shanghai Hong Kong Airport Management Co., Limited.
Financial and Operational Highlights
2009/10 2008/09 ±% 1
Financial Results
(in HK$ million)
Turnover 9,015 8,886 +1.5%
Operating profit before depreciation and amortisation 5,613 5,389 +4.2%
Depreciation and amortisation 2,191 2,234 -1.9%
Interest and finance costs 178 233 -23.6%
Profit attributable to equity shareholder 2,844 2,588 +9.9%
Dividend declared 2,300 2,200 +4.5%
Special dividend declared 2,200 -
Financial Position and Ratios
(in HK$ million)
Total assets 51,370 51,864 -1.0%
Total borrowings 8,193 9,377 -12.6%
Total equity 36,689 36,038 +1.8%
Return on equity 7.8% 7.2%
Total debt/capital ratio 18% 21%
Credit Ratings
Standard & Poor’s:
Long-term local currency AA+ AA+
Long-term foreign currency AA+ AA+
Operational Highlights2
Passenger traffic3 (millions of passengers) 46.9 47.7 -1.7%
Cargo throughput4 (millions of tonnes) 3.6 3.4 +4.4%
Air traffic movements (thousands) 280 296 -5.4%
1 Subject to rounding differences.2 “Operational Highlights” is based on the Airport Authority’s traffic data of Hong Kong International Airport only.3 “Passenger traffic” includes originating, terminating, transfer and transit passengers. Transfer and transit passengers are counted twice.4 “Cargo throughput” includes originating, terminating and transshipment cargo. Transshipment cargo is counted twice. Airmail is excluded.
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Appointment
Report Accountability
Annual Audit
Information
Approval ofResources &Audit Plan
Audit
AppointmentSupervisionGuidanceAppraisal
Report
Report Advice
Report Accountability
Appointment
SupervisionGuidance
AppointmentTerms of Reference Delegation
Board(Page 18)
Board Committees
Executive Management(Page 21)
Internal Audit(Pages 21-22)
External Auditor(Page 21) Report
Report
Shareholder(Hong Kong SAR Government)
Capital WorksCommittee
(Page 19)
Infrastructural Planning Committee
(Page 20)
Executive Committee
(Page 20)
Audit Committee& Finance Committee
(Page 19)
China Committee(Pages 19-20)
Remuneration Committee
(Page 20)
Report
We believe good corporate governance provides the foundation for good corporate performance and is essential to attaining long-term, sustainable growth. While recognising that corporate governance may hinge on a number of factors, we have adopted accountability, transparency, fairness and ethics as the cornerstones of our corporate governance framework.
Our Commitment We are committed to high standards of corporate governance and strive to achieve this commitment by institutionalising a clear and comprehensive governance framework and fostering an ethical and responsible culture at all levels of the organisation. Key features of our corporate governance framework are described below:
Corporate Governance Structure
The BoardThe Board has overall responsibility for the leadership, control and performance of the Airport Authority (AA). In line with the principles set out in the Non-statutory Guidelines on Directors’ Duties issued by the Companies Registry, each member of the Board has a duty to act in good faith and in the best interests of the AA.
Board CompositionThe Airport Authority Ordinance (Cap. 483) (the Ordinance) provides that the Board shall comprise a Chairman, a Chief Executive Officer (ex-officio) and between 8 and 15 other members, provided that the number of members who are public officers shall not exceed the number of members who are not public officers. This requirement effectively ensures that the Board will comprise of a majority of independent members, thereby promoting the fair and objective review of the performance of the executive management.
The Board currently has 16 members, whose details are set out on pages 14-16. With the exception of the Chief Executive Officer, all Board members are non-executives, the majority of whom are also considered independent1.
Appointment and RemunerationPursuant to the Ordinance, the appointment and remuneration of Board members, including the Chairman, are determined by the Chief Executive of the Hong Kong SAR. With the exception of Mr He Guangbei and Dr Lo Ka-shui whose current terms of appointment are for two years and the Chief Executive Officer who is an ex-officio member, the Chairman and all other members of the Board were appointed for a term of three years. The remuneration of Board members for the year under review is disclosed on page 88.
Board ProceedingsThe proceedings of the Board are designed to align to the extent applicable to the AA with the Code on Corporate Governance Practices issued by the Stock Exchange of Hong Kong Limited under Appendix 14 to the Main Board Listing Rules. A set of modus operandi of the Board was formalised in June 2008, the key elements of which include:
1 Any member who is not a public officer or an executive of the AA and is not related to any member of the Board or executive management is considered to be independent.
Corporate Governance
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• TheBoardshallmeetatleastfourtimesayear,
• TheannualscheduleforregularBoardmeetingsshallbemade available to members before the start of each year,
• TheagendasofBoardmeetingsshallbeapprovedby the Chairman. Members may propose matters to be included in the agendas,
• MeetingagendasandpapersshallbesenttoMembersat least three clear days (excluding the day on which they were despatched and the day of the meeting) before a meeting,
• TheBoardshallreceivereportsfromtheChairmenofthe Board committees at each meeting. Members of the Board shall also receive the minutes of all committee meetings,
• MeetingminutesshallbesenttoallMembersforcomment and record within a reasonable time after a meeting, and
• Membersshallsafeguardconfidentialinformationandobserve the procedures on declaration of interests.
Meetings In the year under review, the Board met four times, with an average attendance rate of 91%. Attendance records of individual members are on page 20.
Board CommitteesPursuant to the Ordinance, the AA may establish committees to consider matters relating to specialised areas upon which they advise the Board and/or, where appropriate, decide on matters within their ambits.
The structure and terms of reference of Board committees were approved by the Board and are reviewed from time to time in light of the AA’s evolving operational, business and development needs. The last review was conducted in June 2008. The current terms of reference of the Board committees are available on Hong Kong International Airport’s website, www.hongkongairport.com.
Under the current modus operandi of the Board committees, agendas of committee meetings are sent to all members of the Board who may choose to attend any meeting as observers, even if they are not a member of that committee. All members of the Board may obtain papers of any Board committee meetings from the Secretary to the Board.
Details of current Board committees and their principal duties are as follows:
Audit Committee and Finance Committee (ACFC) – Its principal duties include reviewing the AA’s financial statements; making recommendations on the appointment of external auditors and approving their remuneration and terms of engagement; reviewing the AA’s accounting policies, annual budget, 5-year financial plan and charging policies; and overseeing the AA’s internal
controls, financial controls, risk management system and internal audit function.
The ACFC is chaired by Mr He Guangbei. It currently has six members including its chairman, most of whom are independent non-executives. The ACFC met three times during the year, with an average attendance rate of 87%. Attendance records of individual members are set out on page 20.
In the year under review, the ACFC performed the following key functions:
• reviewedtheAA’sinterimfinancialreportsandauditedannual financial statements;
• reviewedtheAA’sannualbudget,financingplan,5-year financial plan and financial risk management policy;
• reviewedtheAA’sdividendpolicyanddividendpayment for the year;
• reviewedtheexternalauditor’sindependence;
• reviewedtheexternalauditor’sAuditReportandManagement Letter and management’s responses thereto, and met with the external auditors without the presence of executive management;
• reviewedtheobjectivityandeffectivenessofthe audit process and recommended to the Board the appointment of external auditors and approved their audit fee;
• reviewedtheannualCorporateGovernanceandInternal Control Review Reports and the adequacy of the resources, qualifications and experience of staff of the accounting and financial reporting function, and their training and budget; and
• approvedtheannualinternalauditprogrammeandreviewed the quarterly internal audit reports and the adequacy of the resources and the effectiveness of the internal audit function.
Capital Works Committee (CWC) – It is a specialist committee responsible for reviewing the AA’s policy and strategy on the procurement of capital works; making recommendations to the Board on annual capital works budget; and considering the award and monitoring the progress of major capital projects.
The CWC is chaired by Ir Edmund Leung Kwong-ho and currently has five members, including its chairman. The CWC met five times during the year under review, with an average attendance rate of 84%. Attendance records of individual members are set out on page 20.
China Committee (CC) – It is primarily responsible for advising the Board on the AA’s China development strategy; monitoring the AA’s investments in Mainland airports; and advising the executive management and the Board on business and co-operation opportunities on the Chinese Mainland.
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The CC is chaired by Mr Wilfred Wong Ying-wai and currently has 15 members, including its chairman. The CC met three times during the year under review, with an average attendance rate of 79%. Attendance records of individual members are set out below.
Executive Committee (EC) – It was established for the purpose of exercising the functions and responsibilities of the Board between regular Board meetings. It also serves as a sounding board for the Chairman of the Board in the leadership and oversight of the business and affairs of the AA and helps coordinate the activities of Board committees.
The EC is chaired by Dr the Hon Marvin Cheung Kin-tung and currently has four members, including its chairman. The EC met eight times during the year under review, with an average attendance rate of 97%. Attendance records of individual members are set out below.
Infrastructural Planning Committee (IPC) – It was established for the purposes of reviewing and advising the Board on major infrastructural developments at HKIA and its long-term master planning and associated issues. The IPC is chaired by Dr Lo Ka-shui and currently has 12 members, including its chairman. It met three times during the year under review, with an average attendance rate of 87%. Attendance records of individual members are set out below.
Remuneration Committee (RC) – It is responsible for reviewing the AA’s staffing, remuneration and
employment policies and strategies, and considering remuneration matters including salaries, compensation generally, and terms and conditions of service of employees. It also advises the Board on other staff-related issues including annual corporate goals and performance measures, variable compensation and retirement schemes.
The RC is chaired by the Hon Vincent Fang Kang and currently has nine members, including its chairman. With the exception of the Chief Executive Officer, all of its members are non-executives, most of whom are also considered to be independent. It met twice in 2009/10, with an average attendance rate of 83%. Attendance records of individual members are set out below.
In the year under review, the RC performed the following key functions:
• conductedanannualreviewofstaffremuneration;
• reviewedtheAA’stermsandconditionsofemployment;
• reviewedtheannualawardofvariablecompensationfor staff;
• reviewedtheperformanceoftheChiefExecutiveOfficer and executive directors and their variable compensation;
• maderecommendationstotheBoardontheappointment of senior management positions; and
• reviewedandrecommendedtotheBoardthecorporateperformance targets and measurements for the following year.
Meeting Attendance (1 April 2009 to 31 March 2010)
Members Board EC CWC CC IPC RC ACFC
Non-executiveSecretary for Transport and Housing 4/4 8/8 3/3 3/3 2/2Secretary for Financial Services and the Treasury 4/4 1/3 2/3 3/3Director-General of Civil Aviation 4/4 3/3 3/3 2/2
Independent non-executiveDr the Hon Marvin Cheung Kin-tung 4/4 8/8 * 3/5 1/3 3/3 (Chairman of the Board) The Hon Chan Kam-lam# 1/1 0/0 † 0/0 † 0/0 † The Hon Vincent Fang Kang 4/4 3/3 2/2 * 3/3Mr He Guangbei^ 2/4 1/3 3/3 *The Hon Albert Ho Chun-yan# 1/1 0/0 † 0/0 † 0/0 †
Ir Dr the Hon Raymond Ho Chung-tai 2/4 4/5 0/0 † 3/3 0/2 Mr Benjamin Hung Pi-cheng 4/4 2/2 3/3Ir Edmund Leung Kwong-ho 4/4 5/5 * 3/3 3/3 Mr Andrew Liao Cheung-sing 4/4 4/5 3/3 2/3 Dr Lo Ka-shui 3/4 7/8 2/3 3/3 * Dr Allan Wong Chi-yun# 1/1 0/0 † 0/0 † 0/0 † Mr Wilfred Wong Ying-wai 4/4 3/3 * 1/3 1/3
ExecutiveMr Stanley Hui Hon-chung (Chief Executive Officer) 4/4 8/8 5/5 3/3 3/3 2/2
*Chairman of the committee #Appointed to the Board of the AA on 1 January 2010 † Appointed to the committee on 22 February 2010 ^Retired on 31 May 2010
ACFC: Audit Committee and Finance Committee CWC: Capital Works Committee CC: China Committee EC: Executive Committee IPC: Infrastructural Planning Committee RC: Remuneration Committee
Corporate Governance
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Executive ManagementThe executive management team, led by the Chief Executive Officer, is responsible for managing the AA’s day-to-day operation and assisting the Board in formulating and implementing corporate strategies. Since June 2008, the AA has implemented a management structure under which the former business and service units were re-organised into functional departments, some of which were further grouped under divisions. This new structure facilitates a renewed focus on corporate performance, thereby fostering closer departmental cooperation without diminishing the accountability of individual departments.
The appointment and compensation of the Chief Executive Officer and the executive directors are reviewed and recommended by the Remuneration Committee and approved by the Board. The appointment of the Chief Executive Officer is also subject to the approval of the Chief Executive of the Hong Kong SAR. Details of the executive directors and their remuneration for the year under review are on page 16 and page 88 respectively.
Balance of ResponsibilityThe AA’s organisational structure is designed to maintain an appropriate balance of responsibility between the Board and the executive management. In essence, the Board is primarily responsible for overseeing the strategic direction and overall performance of the AA, while the executive management team is responsible for managing the AA’s day-to-day operations and implementing the strategies laid down by the Board.
To enable the Board to maintain effective oversight and control, clear guidelines have been established specifying issues that are reserved for Board decisions. These include decisions relating to major corporate strategies and policies, substantial investments and capital projects, material acquisitions and disposals of assets, corporate business and financial plans and budgets, senior executives’ appointment, compensation and succession planning, as well as the review of corporate and senior management performances.
At the AA, the posts of Chairman and Chief Executive Officer are separate. The Chairman is generally responsible for managing the Board, while the Chief Executive Officer is responsible for managing the business and operations of the AA.
Internal ControlsInternal controls form an integral part of the AA’s management system and are embodied in the operational procedures of functional departments. The AA’s internal controls are designed to give reasonable assurance that its operations are safe and secure and free from serious interruptions, that its assets have been prudently safeguarded, that maximum value for money is obtained from its expenditures, that its business activities are conducted in a fair and responsible manner, and that its
(in HK$ million) 2009/10 2008/09
Audit fee 4 4Fees for non-audit services 0 2
financial reporting is accurate, transparent, timely and complete. The underlying principle of the AA’s internal controls is to manage and mitigate, rather than to eliminate risks.
The Board is overall responsible for ensuring that the AA has effective internal controls and is assisted by the Audit Committee and Finance Committee in discharging this responsibility. Key components of the AA’s internal control framework include:
Audit Committee and Finance Committee Pursuant to its terms of reference, the Audit Committee and Finance Committee is responsible for reviewing the AA’s internal controls and risk management systems, and ensuring that management has discharged its duty to put in place an effective internal control system. It has full and independent access to the internal auditors as well as the senior management and, in the furtherance of its duty, may obtain external legal or other professional advice at the expense of the AA. It receives reports from both the external and internal auditors and considers any control issues arising from these reports. It reviews the AA’s internal control system and the adequacy of the AA’s accounting and financial reporting function, and meets at least once a year with the external auditors in the absence of executive management.
External AuditThe main purpose of the external audit is to provide independent assurance to the Board and shareholder that the annual financial statements of the AA are fairly stated. The appointment of the AA’s external auditor is subject to the approval of the Chief Executive of the Hong Kong SAR, on the recommendation of the Board and Audit Committee and Finance Committee. The external auditor for the year under review was KPMG.
To ensure the independence and objectivity of the external auditor, the AA has implemented policies which restrict the non-audit services to be provided by the external auditor and require its lead engagement partner responsible for the AA to be rotated every seven years (the last rotation took place in 2006). The following is a breakdown of the fees paid by the AA to the external auditor in the past two years for audit and non-audit services:
Internal AuditThe Internal Audit is primarily responsible for reviewing the adequacy and effectiveness of internal control procedures and monitoring compliance with them. The annual internal audit programme is drawn up using a risk-based approach and is approved by the Audit
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Committee and Finance Committee before implementation. According to the AA’s Internal Audit Charter, internal auditors have unrestricted access to information and complete freedom to draw independent conclusions in their audits. The Chief Internal Auditor reports to the Chief Executive Officer on an administrative basis but has direct access to the Audit Committee and Finance Committee and its Chairman, thereby ensuring that independence is maintained.
Annual Review of Internal Control SystemAssessing risks and reviewing the effectiveness of internal controls is a continuing process at the AA. In addition to the internal and external audits and other review and assurance processes, the executive management, assisted by a cross-departmental Internal Control Review Task Force, conducts annually a comprehensive review of the AA’s internal control system in accordance with the COSO (the Committee of Sponsoring Organisations of the Treadway Commission) framework recommended by the Hong Kong Institute of Certified Public Accountants.
The annual internal control review evaluates all major operations and processes of the AA based upon the five main components of the COSO framework, namely: control environment, risk assessment, control activities, information and communication, and monitoring. As part of the annual review, all AA departments and major subsidiaries are required to assess the risks associated with their key processes and the effectiveness of the controls in place to mitigate such risks. Independent verification of the effectiveness of controls for those high risk areas is also carried out.
During the year under review, the executive management has reviewed the AA’s internal control system and concluded that it is effective and adequate. A consolidated internal control review report was compiled and submitted to the Audit Committee and Finance Committee for review. The Board then reviewed the effectiveness of the AA’s system of internal control based on the consolidated report assessed by the Audit Committee and Finance Committee.
Operational Risk ManagementMaintaining Hong Kong as a centre of international and regional aviation is a statutory mandate of the AA. Given the myriad of potential risks that may affect the operations of the airport, the AA has recently introduced a new process for the Audit Committee and Finance Committee and the Board to review the risk and business continuity management processes pertaining to operational areas that are critical to sustaining the continuous operation of the airport.
The key elements of the AA’s integrated and multi-layered risk and business continuity management process include the establishment of an Operational Risks Register to track
and document identified risks, the development and continuous updating of preventive and responsive procedures, and the testing and drilling of action plans and procedures to ensure their effectiveness.
Delegation of AuthorityThe AA has a comprehensive system of delegation of authorities under which the authorities of the Board, Board committees and different levels of the executive management are clearly delineated. Such delegation of authority is reviewed from time to time to ensure it meets the AA’s evolving business and operational needs. The last review was conducted by the Board in June 2008.
Under current delegations, the Executive Committee has been given the power to exercise the functions of the Board between Board meetings, save for certain statutory restrictions. The Capital Works Committee is delegated the power to make financial commitments of up to HK$500 million. The Chief Executive Officer has been delegated the full power to make commitments of an operational nature and up to HK$50 million for capital expenditures. To complement these delegations, a reporting mechanism has been instituted to keep the Board informed when these powers have been exercised.
On the operational level, the Chief Executive Officer has established a Revenue and Expenditure Committee to assist him in exercising his delegated authority. The executive management has a structured system of sub-delegation under which staff members of different levels are given appropriate authority to enable them to effectively discharge their duties. The system of sub-delegation is subject to review and approval from time to time by the Chief Executive Officer.
Financial Planning, Control and ReportingThe AA has a three-tier corporate planning process under which a master plan with a long-term planning horizon of 20 years is compiled every five years. The preparation of HKIA Master Plan 2030 is currently underway. For medium-term planning, each year the AA prepares a rolling five-year business plan and financial plan. For short-term planning and control purposes, annual budgets are prepared and submitted to the Audit Committee and Finance Committee and the Board for approval.
Within the AA’s financial control system, there are defined procedures for the appraisal, review and approval of different levels of capital and operating expenditures. Stringent control and approval procedures are in place to govern expenditures beyond approved budgets. Results of operation against budget are reported to the Audit Committee and Finance Committee and to the Board at least on a quarterly basis. Financial control on major capital projects is reported to and monitored by the Capital Works Committee.
Corporate Governance
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The Board is overall responsible for the preparation of financial statements that give a true and fair view of the AA’s affairs and financial results. The Board is assisted by the Audit Committee and Finance Committee in discharging this responsibility. In preparing this year’s financial statements, the Board has adopted suitable accounting policies and applied them consistently; made judgements that are prudent and reasonable; and prepared the financial statements on a going concern basis. AccountabilityThe AA considers accountability one of the fundamental pillars of corporate governance and has built its corporate structure and management culture based on this notion. Under the current structure, the Board is overall accountable for the performance of the AA. The executive management is responsible for managing the AA’s day-to-day business and is accountable to the Board for its performance.
In order to strengthen the accountability mindset at all levels of the organisation, the AA has adopted a cost and contribution centres’ operating model. As relevant and appropriate, operating parameters are set for individual departments for which they are accountable. Disclosure of InterestThe AA has clear and comprehensive procedures for disclosure of interests which is considered an important safeguard against potential conflicts of interests. Under the current procedures, members of the Board and senior management are each required to make a general declaration upon their appointment and thereafter on an annual basis. They are also required to report any change to their declaration as and when it occurs or as soon as they become aware that conflicting interests may arise. In addition, written procedures are in place requiring staff to disclose their interests under specific circumstances, for instance, acting as a member of a tender assessment panel. Board or staff members with potential conflicts of interests will normally be excluded from the relevant deliberation and decision-making process. A register of declarations made by members of the Board is maintained by the Corporate Secretariat and is available for public inspection.
Ethical CultureEthics is a core value of the AA. To foster an ethical culture, the AA uses both the ”structural” and ”people” approaches.
The structural approach aims to attain ethical behaviour by institutionalising policies and procedures with which staff members are required to comply. Such policies and procedures also serve as constant reminders to staff of the minimum ethical standards the AA expected of them.
LegalCompliance
Policies & Procedureseg. Code of Conduct
General Conduct & Behaviour “Mindset“
The Code of Conduct is a key component of that structure. This Code provides specific guidelines to help staff make ethical decisions in the course of discharging their duties. Compliance with this Code is part of the terms of employment of all staff, who are reminded at least once a year of their responsibilities under the Code. The Code of Conduct is reviewed and updated regularly to ensure that it is consistent with current best practices (The last update was done in September 2008). As part of the ethics structure, a high-level Ethics Panel will be convened as needed to review serious ethical issues. The Ethics Panel may take independent advice and reports to the Chief Executive Officer and/or the Audit Committee and Finance Committee, as appropriate. The AA also has a formal Whistle Blowing Policy to encourage and guide its staff to raise serious concerns internally in a responsible manner, without fear of retribution.
The people approach aims to inculcate an ethical mindset among all staff and enhance their awareness of good ethics through continuing education. In this regard, workshops and sharing sessions conducted by internal and external parties are held from time to time. At these sessions, information on desirable ethical behaviours are promulgated and often supplemented by case studies to help staff gain a better understanding of the underlying principles and how they can be applied in different situations.
Recognising that ethics management is a complex subject which goes beyond simply complying with laws and regulations, to promote a better understanding of different levels of ethical responsibility, the AA has defined various ethics-related issues and presented them in an ethics pyramid. Staff members are regularly reminded of their obligations under each level of the pyramid.
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Financial ReportingThe AA fully complies with the financial reporting requirements set out in Section 32 of the Ordinance. Although not required under the Ordinance, the AA voluntarily complies with the disclosure provisions of the Hong Kong Companies Ordinance (Cap. 32). Starting in 2005/06, the AA’s financial statements are prepared in compliance to the extent applicable with the relevant disclosure provisions in the Listing Rules issued by the Stock Exchange of Hong Kong Limited. Since 2006/07, the AA began voluntarily announcing its interim financial results.
Corporate Governance PracticesAlthough the AA is not required to comply with the Code on Corporate Governance Practices (the Code) issued by the Stock Exchange of Hong Kong Limited under Appendix 14 to the Main Board Listing Rules, the AA has applied its principles and voluntarily complied with the code provisions therein except for those as set out below, most of which are not applicable to the AA.
Code Provision Reason for Deviation
A.1.8 This provision is not applicable to the AA which has only one shareholder - the Hong Kong SAR Government. The procedure for dealing with any conflict of interest affecting a Board member is governed by Section 13 of the AA Ordinance.
A.4.1 This provision is not applicable to the AA because the terms of office of Board Members are governed by Section 11 of the AA Ordinance.
A.4.2 This provision is not applicable to the AA. Pursuant to Section 3 of the AA Ordinance, Board members are appointed by the Chief Executive of the Hong Kong SAR. Terms of office of members are governed by Section 11 of the AA Ordinance.
A.5.4 This provision is not applicable because all of the AA’s shares are held by the Hong Kong SAR Government and are not publicly traded.
A.6.1 The AA has self-imposed a guideline to issue papers to members at least three ”clear” days (excluding the day the papers were despatched and the day of the meeting) before a meeting. But due to occasional urgent business or last minute developments, this guideline is not always met. For the year under review, about 56% of a total of 96 papers met this guideline. The AA will continue to strive to comply with this guideline to the extent practicable.
If a substantial shareholder or a director has a conflict of interest, the matter should be dealt with through a formal board meeting and not by way of circulation or by a committee.
Non-executive directors should be appointed for a specific term, subject to re-election.
Directors appointed to fill a casual vacancy should be elected by shareholders at the next annual general meeting. Directors should be subject to retirement by rotation at least once every three years.
Directors must comply with obligations under the Model Code for Securities Transactions and the Board should establish guidelines for employees dealing in the securities of the company.
An agenda and Board papers should be sent to all directors at least three days before a meeting.
Quality of StaffThe effectiveness of internal controls relies to a large extent on the integrity and performance of staff. The AA believes that a fair and competitive reward system is a key driver of staff performance and behaviour. In 2002, we implemented a variable compensation scheme under which a part of staff remuneration is directly linked to corporate and individual performance, and payable only when agreed corporate goals and targets are met. This scheme was reviewed and finetuned in 2008.
ComplianceSection 6(1) of the Ordinance provides, inter alia, that the AA shall conduct its business according to prudent commercial principles. Having regard to this statutory mandate, the AA endeavours to follow, to the extent applicable to the AA, the compliance standards of major commercial organisations in Hong Kong.
Corporate Governance
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Code Provision Reason for Deviation
B.1.3 The provision on the power to determine Board members’ remuneration is not applicable because Section 11(4) of the AA Ordinance provides that the remuneration of Board members shall be determined by the Chief Executive of the Hong Kong SAR.
C.3.3 To make the terms of reference of the Audit Committee and Finance Committee (ACFC) more concise and tailored to the AA’s needs, some of the requirements in Code Provision C.3.3 have been condensed before being incorporated into the terms of reference of the ACFC. Regarding the requirement to ensure the adequacy of resources, qualifications and experience of staff of the accounting and financial reporting function,and their training programmes and budget, which came into effect on 1 January 2009, the ACFC has in fact performed such function, which will be incorporated into its terms of reference in the next round of revision.
E.1.1, E.1.2, These provisions are not applicable because the AA has E.1.3, E.2.1 only one shareholder and is not required to hold annual general meetings.
Terms of reference of the Remuneration Committee
Terms of reference of the Audit Committee
These code provisions deal with the proceedings for annual general meetings
TransparencyThe AA considers transparency an important attribute of good corporate governance and has taken an open approach of disclosing information relating to its performance and operations, save for certain information relating to aviation security and matters of commercial sensitivity. To promote transparency and openness, the AA has voluntarily undertaken to disclose the individual attendance records of Board and committee meetings and the full details of the remuneration of its Board members and executive directors. This year’s remuneration details are set out in note 6 to the financial statements.
CommunicationThe AA adopts an open and proactive communication policy. To promote effective communication with the public at large, the AA maintains a website where comprehensive information about the AA, HKIA and its services is provided. In addition, the AA keeps the public abreast of HKIA’s new service offerings, growth and development through the mass media by organising press conferences and briefings, giving interviews and issuing press releases and statements. Meetings, sharing sessions and forums are held to foster two-way communication with business partners, the aviation industry and other stakeholders. A newsletter, hkia News, is published to share news with AA staff, the airport community at large and other pertinent stakeholders. The Legislative Council and neighbouring District Councils are also kept updated on major developments at HKIA. Moreover, the AA values customer feedback. A wide array of channels such as the website, quantitative and qualitative opinion surveys,
emails, feedback forms, hotlines and more are used to solicit views of passengers, customers and other stakeholders. The AA’s annual reports and interim financial reports are published on its website.
Corporate CitizenshipThe AA is committed to being a caring and responsible corporate citizen. Throughout the year under review, the AA participated in and provided support for a number of initiatives that promoted environmentally friendly practices, people development and community well-being. Major programmes and events undertaken during the year are set out on pages 2, 3, 46 to 49 of the annual report in the ”HKIA Environmental Performance” and ”Corporate Social Responsibility” sections. The AA has established a Corporate Environmental Policy that focuses on adopting and encouraging practices at the airport that prevent or minimise pollution and maximise energy and natural resource use efficiency. Apart from following such policy as far as practicable in our own activities and operations, we encourage our business partners to adopt the same responsible approach in conducting their business at HKIA.
RecognitionThe AA’s 2008/09 annual report won seven local and international prizes, including a Diamond Award in the public sector/not-for-profit category of the 2009 Best Corporate Governance Disclosure Awards organised by the Hong Kong Institute of Certified Public Accountants, and a Bronze Award in the General Category of the Hong Kong Management Association’s Best Annual Reports Awards 2009.
Hong Kong International Airport26
The AA declares a HK$2,200 million final dividend to its shareholder, the Hong Kong SAR Government. The dividend is 10% higher than that in 2007/08.
A HK$90 million reconfiguration of the Departures Immigration halls is completed, increasing security screening capacity by 50%.
On World Environment Day, 100 volunteers from the AA and other organisations clean the Tung Chung mangrove swamp near HKIA.
June
Reacting quickly to an emerging threat, the AA introduces a series of precautionary measures to counter H1N1 influenza.
China Aircraft Services Limited (CASL) opens its first aircraft maintenance hangar at Hong Kong International Airport (HKIA).
Upstream check-in service is extended to Shenzhen Kingkey Banner Centre.
May
The Airport Authority (AA) offers a HK$450 million relief package to airlines and other companies operating at HKIA that are affected by the economic downturn.
April
Event Highlights
2
4
6
1
3
5
The 340-square-metre HKIA Precious Metals Depository opens. The new facility provides secure storage and physical settlement services for banks, commodity exchanges and refiners.
Hong Kong Aircraft Engineering Co. Ltd. (HAECO) opens its third hangar at HKIA.
The Asian Aerospace International Expo and Congress 2009 attracts more than 350 businesses and 12,000 delegates to Hong Kong.
September
The AA hosts the Airport Community Environmental Forum to share its experience with the airport community in conducting carbon audits. The AA is committed to carbon emissions reduction to create an environmentally friendly airport.
August
HKIA welcomes its first regularly scheduled Airbus A380 flight.
HKIA adds eight automated people mover cars to its fleet, bringing the total to 28.
A new ferry service between SkyPier and Nansha in Guangzhou begins, increasing the number of ports served to seven.
HKIA wins its third consecutive Asia-Pacific airport efficiency excellence award from the Air Transport Research Society.
In an event organised by the Islands District Office to celebrate the 12th anniversary of the establishment of the Hong Kong Special Administrative Region, AA volunteers plant trees on the waterfront promenade in Tung Chung.
July
1
3
4
5
6
7
2
Annual Report 2009/10 27
Phase 1A of the Permanent Aviation Fuel Facility opens, enhancing the reliability of HKIA’s fuel supply.
The AA entertains over 2,100 elderly residents at spring dinners in Tung Chung and Tuen Mun.
March
SkyPier and the North Satellite Concourse officially open.
HKIA wins the 2009 top service brand award from the Hong Kong Brand Development Council and the Chinese Manufacturers’ Association of Hong Kong.
January
HKIA is awarded a “Class of Excellence” Energywi$e Label by the Environmental Campaign Committee for the second year. HKIA also wins a bronze award in the public sector category.
For the fourth consecutive year, Airports Council International recognises HKIA as the world’s best airport among facilities serving over 40 million passengers annually.
February
The AA signs a cooperation agreement with Shanghai Airport (Group) Co., Ltd. to manage Shanghai Hongqiao International Airport’s two terminals, east transportation centre and retail operations.
For the seventh time since 2002, HKIA is named best airport in the TTG Travel Awards.
October
The AA announces that the Hon Chan Kam-lam, the Hon Albert Ho Chun-yan and Dr Allan Wong Chi-yun will join the Board on 1 January 2010.
The foundation stone is laid for the new Civil Aviation Department headquarters, which is scheduled for completion by the end of 2012.
The first self check-in kiosk outside HKIA is installed at the Grand Hyatt Hotel in Wan Chai.
November
The AA extends the 10% reduction in aircraft landing and parking fees until 31 March 2010.
A roving exhibition showcasing the airport’s environmental initiatives and programmes takes place at six locations across Hong Kong, including HKIA.
For the eighth time, the AA’s annual report wins a diamond award in the public sector/not-for-profit category of the Hong Kong Institute of Certified Public Accountants’ Best Corporate Governance Disclosure Awards.
Ferry services commence between SkyPier and Taipa in Macao, raising the number of ports served to eight.
December
7
9
8
11
12
10
8
9
10
12
11
Annual Report 2009/10Hong Kong International Airport 2928 Annual Report 2009/10Hong Kong International Airport 2928
Passenger Services
In 2009/10, Hong Kong International Airport (HKIA)
continued to enhance and refine its award-winning
passenger services. We also completed several facility
upgrades and made improvements to some behind-
the-scenes systems that are essential to the airport’s
efficient operation.
SecurityDuring the year, the North Departures Immigration Hall
was reconfigured, so passengers pass through security
screening before completing immigration formalities.
Together with a similar realignment to the South
Departures Immigration Hall in 2008 and the installation
of additional X-ray machines, this change streamlined
passenger flow and increased screening capacity by 50%.
Transfer passengers also benefited from an increase in
screening capabilities. The six transfer points in Terminal 1
(T1) now have a total of 22 screening channels, increasing
capacity by more than 45%.
SafetyWe strive to be the world’s safest airport and to
continually improve our safety performance. In 2009/10,
the Airport Composite Safety Index, which measures the
injury rate among passengers and staff, dropped from
7.98 to 7.55 injuries per million passengers. This is a
record low for HKIA.
The passenger injury rate dropped 54% during the year,
from 0.50 to 0.23 per million passengers. This improvement
was due in part to the launch of the Airport Safety
Ambassador Programme, which we organised with Hong
Kong Sheng Kung Hui Tung Chung Integrated Services,
a local social welfare group. Safety Ambassadors are
strategically deployed near automated people movers,
escalators and travelators during peak holiday seasons to
enhance passenger safety.
Enhancing Our Passenger Services
Annual Report 2009/10Hong Kong International Airport 2928
Annual Report 2009/10 29
New Fixtures Get a Green LightLighting represents one of the key portions of HKIA’s electricity bill. It is also an
area where energy savings must be carefully balanced with operational, safety
and security considerations and with the need to maintain airport operation and
a pleasant ambience for passengers.
After extensive testing and evaluation, in 2009/10 we replaced approximately
4,200 lighting fixtures with light-emitting diode (LED) lights. Fixtures in exit
signs, spotlights and other applications were changed, resulting in an annual
electricity saving of 580,000 kilowatt hours (kWh), which is equivalent to about
325 tonnes of greenhouse gas emissions. We plan to replace another 81,000
fixtures in Terminal 1 with LED lights, saving an additional 13 million kWh and
7,280 tonnes of greenhouse gas emissions each year.
t
Annual Report 2009/10 29
Annual Report 2009/10Hong Kong International Airport 3130 Annual Report 2009/10Hong Kong International Airport 3130
Joining hands with airlines, we introduced safety
inspections of aircraft cabin and cargo hold operations.
Baggage hall and ramp safety was strengthened with an
awareness campaign that focused on stretching and
lifting techniques as well as safe driving practices.
Our efforts were recognised with an award from Hong
Kong’s Occupational Safety and Health Council for
maintaining a low staff injury rate for three consecutive
years. We also won a silver prize in the council’s new
Work Safe Behaviour Promotion Awards.
Bird strikes are a safety concern for all airports. In addition
to devising and implementing habitat management and
environmental hygiene policies, our Bird Hazard Reduction
Committee and Bird Control Unit obtain expert advice
from ornithologists, and use special tools to repel birds
from the airport. Through sighting reports, records of
flock activities and careful analysis of bird strikes, we
formulate effective bird control measures.
EfficiencyHKIA maintains operational resilience through more than
90 seminars and drills each year, including an annual
crash and rescue exercise. More than 1,200 participants
from the Airport Authority (AA), airlines, government
departments and other organisations took part in the
2009 exercise, which simulated an accident during a
landing on the North Runway. Air, land and sea rescue
operations were included in this year’s exercise.
In April 2009, we staged our largest-ever typhoon
preparedness drill. Involving more than 600 participants
from 20 organisations, the exercise tested our ability to
manage service disruptions, including flight rescheduling,
caring for and communicating with stranded passengers,
and managing the resulting baggage backlog.
As fiscal 2009/10 began, it appeared that our business
continuity plans would be tested by an outbreak of
H1N1 influenza. Working with the Department of
Health, the World Health Organization, airlines and
the airport community, we created an integrated,
comprehensive action plan. The programme included
regular communications with travellers and staff, inflight
announcements, health declarations and enhanced
medical assistance for arriving passengers, and extra
cleaning and disinfection of public facilities.
Japan
Others
USA & Canada
Australasia
South East Asia
Chinese Mainland
Europe
Taiwan
10%
21%
6%
9%
7%
7%
24%
16%
Total46.9 million
Passenger by Marketyear ended 31 March 2010
The new SkyPier lets passengers make fast, convenient connections to the Pearl River Delta and Macao.
Passenger Traffic and Injury Rate millions of passengers injuries per million passengers
0
20
40
60
05/06 06/07 07/08 08/09 09/10
Injury Rate
Number of Passengers
0
1
2
3
Passenger Services
Annual Report 2009/10Hong Kong International Airport 3130 Annual Report 2009/10Hong Kong International Airport 3130
Facility UpgradesOn 15 January 2010, we officially opened the 20,000-
square-metre North Satellite Concourse. The HK$1 billion
facility, which has an initial annual capacity of five million
passengers, was built to accommodate the growing
number of narrow-bodied aircraft serving HKIA. The new
concourse’s 10 bridge-served stands minimise the need
for aircraft to park at remote stands, enabling more
passengers to embark and disembark using air bridges.
Built as part of a HK$4.5 billion enhancement programme
that was announced in 2006, the new concourse includes
shops and other amenities.
As part of the same enhancement programme, in
2009/10 the transfer areas were expanded and the
number of airline transfer counters was increased from
38 to 55. We added four ferry transfer counters, bringing
the total to 12. In 2011, our two Arrivals Immigration
halls will be combined into a single space to facilitate
passenger flow, and 12 additional immigration counters
will be added to provide passengers with greater
convenience. T1 has been reconfigured to accommodate
more airline lounges. In 2009, we added 1,600 square
metres of lounge space in the East Hall and North
Concourse. Work has also begun in the West Hall and
Northwest Concourse to create an additional 3,600
square metres of lounge space, which will be completed
in 2012.
During the year, all of the airport’s plasma flight
information display systems were replaced with liquid
crystal display (LCD) monitors. Over 450 LCD monitors,
Service Performance in 2009/10percent
50 60 70 80 90 100
Baggage Delivery (First Bag) first bag delivered to baggage reclaim within 20 minutes
Baggage Delivery (Last Bag)last bag delivered to baggage reclaim within 40 minutes
Passenger Embarkation and Disembarkation passengers embarking and disembarking by air bridge
Departures Security Screening Under Normal Circumstancespassengers whose queuing time at the screening channels is 4.5 minutes or less
Transfer Security Screening Under Normal Circumstancespassengers whose queuing time at the screening channels is 4.5 minutes or less
97.0
95.8
95.3
97.8
94.7
ranging in size from 107 centimetres to 165 centimetres,
were installed. The new monitors are easier to read and
display more data than their predecessors.
Service EnhancementsBy the end of March 2010, more than 83,100 people had
joined the HKIA Frequent Visitor Channel Programme,
which enables self-service immigration clearance through
10 e-channels at HKIA. During the year, the Immigration
Department expanded eligibility for this programme to
include frequent travellers on 30 airlines.
Since 2007, 65 self check-in kiosks have been installed
at HKIA. Passengers can now use the kiosks to check in
and obtain a boarding pass for flights on Air Canada,
Air France, Cathay Pacific Airways, China Airlines,
Delta Airlines, Dragonair, Finnair, KLM Royal Dutch
Airport Ambassadors create a positive impression of Hong Kong and HKIA.
Annual Report 2009/10Hong Kong International Airport 3332 Annual Report 2009/10Hong Kong International Airport 3332
Airlines and United Airlines. In November 2009, the first
self check-in kiosk outside the airport was installed at the
Grand Hyatt Hotel, and two more hotels will soon provide
the same service. Preparations are now under way to
install four kiosks at Hong Kong Station on the Airport
Express Line.
Our free public WiFi service, which covers all of T1
and Terminal 2 (T2), is also available in the departures
areas of SkyPier and the North Satellite Concourse.
Business travellers also appreciate the more than 210
complimentary charging stations that are now available
in over 40 locations in T1. The stations are perfect for
recharging mobile phones, laptops and other personal
electronics.
Enhancing Connectivity with the PRDOne of the highlights of 2009/10 was the opening of a
permanent SkyPier for ferries sailing to and from eight
ports in the Pearl River Delta (PRD) and Macao. SkyPier is
an innovative complex that facilitates sea-to-air and
air-to-sea traffic, strengthening HKIA’s position as a
multi-modal transportation hub. During the year, Nansha
in Guangzhou and Taipa in Macao were added to the list
of destinations served from SkyPier. Other ports include
Zhongshan, Zhuhai Jiuzhou, Dongguan Humen, Shenzhen
Shekou, Shenzhen Fuyong and the Macao Maritime Ferry
Terminal. Since its launch in 2003, SkyPier has served over
10 million passengers. Currently, its high-speed ferries
shuttle around 6,000 passengers daily between HKIA
and the PRD.
People using SkyPier do not have to complete
customs and immigration at HKIA, making it a fast,
convenient way for PRD residents to travel abroad
and for international passengers to reach the PRD.
It takes only a few minutes to travel from SkyPier to T1
on HKIA’s automated people mover (APM). To support
SkyPier’s launch, eight new APM cars were added to the
airport’s fleet, bringing the total to 28.
With a maximum annual capacity of eight million
passengers, SkyPier has four ferry berths, five security
screening channels and 20 airline check-in desks. The
16,500-square-metre facility, which replaced a temporary
pier, has been designed to accommodate future growth,
including the addition of four more ferry berths.
SkyPier’s convenience is enhanced by HKIA’s upstream
check-in service, which began in 2005. Today, people
travelling on 10 airlines can obtain a boarding pass
and check their bags at Dongguan Humen, Shenzhen
Shekou, Shenzhen Fuyong and the Macao Maritime
Ferry Terminal.
Upstream check-in is also available to passengers
travelling to HKIA by limousine or coach from Shenzhen
International Airport and Shenzhen Kingkey Banner
Centre, which joined this programme in May 2009.Free WiFi service is available at HKIA.
Passengers Using HKIA’s Cross-boundary Land and Sea Transportmillions of passengers
05/06 06/07 07/08 08/09 09/10
2.7
3.1
3.4 3.3
0
1
2
3
4
3.2
Passenger Services
Annual Report 2009/10Hong Kong International Airport 3332 Annual Report 2009/10Hong Kong International Airport 3332
Airport Service Quality (ASQ) SurveyOverall Satisfaction Scorepercent
2008 67.6 30.8
2009 77.3 21.3
0.12007 60.3 37.6
2.0
0.1
1.3
1.6
0 10050
FairExcellent GoodVery Good
Source: Airports Council International - Airport Service Quality Survey -
Airport Customer Satisfaction Programme 2007-2009
Opened in 2007, T2 includes a cross-boundary
transportation centre where travellers can make enquiries,
buy tickets and board Mainland-bound coaches and
limousines. Every day, 360 round-trip coach services link
HKIA with 95 cities and towns in the PRD, up from 90
destinations last year. Some 160 limousines make 300
round trips to and from the PRD each day.
Customer ServiceWe continue to raise service quality with our Customer
Service Excellence Programme. During the year, we
launched a series of airport-wide campaigns to boost
staff’s awareness of service excellence, and organised
different festive events, magic shows and handicraft
workshops for passengers. A popular customer service
initiative at HKIA is the Airport Ambassador Programme,
which recruits young people, students and retirees to
welcome and provide assistance to travellers. Organised
with the Hong Kong Federation of Youth Groups, the
Hong Kong Young Women’s Christian Association
and the Labour Department, the programme provides
valuable work experience for youths and gives retirees an
opportunity to act as mentors and meet passengers from
different cultures.
During the year, 60 young people became Airport
Ambassadors. More than 750 ambassadors have
participated in this programme since it was launched
in 2002.
To enrich travellers’ time at HKIA, in January 2010 the
AA teamed up with the Leisure and Cultural Services
Department to launch ”Discovering Hong Kong’s Cultural
Traditions”. Comprising a series of colourful displays that
explain our city’s history and heritage, the year-long
exhibition showcases Cantonese opera, as well as the Tin
Hau, Mid-Autumn and Dragon Boat festivals.
In December 2009, over 3,000 athletes converged on
Hong Kong for the East Asian Games. Reprising our
role during the equestrian events in the 2008 Olympic
Games, we welcomed athletes, delegates and spectators
with an accreditation centre as well as hospitality and
transportation desks.
As a platinum sponsor for Hong Kong’s participation in
Expo 2010 Shanghai China, we showed our support by
decorating T1 and T2 with Expo-related messages and
images. In addition, a miniature Hong Kong Pavilion was
on display in the atrium of T2 from 1 May to 30 June
2010. The AA also hosted an exhibition highlighting
HKIA’s global connectivity and world-class services in the
Hong Kong Pavilion in Shanghai.
AwardsWe received several honours in 2009/10. For the seventh
time, HKIA was named best airport in the TTG Travel
Awards and for the fourth consecutive year, we were
recognised by Airports Council International as the
world’s best airport serving more than 40 million
passengers annually. We also received the 2009 top
service brand award from the Hong Kong Brand
Development Council and the Chinese Manufacturers’
Association of Hong Kong.
A miniature Hong Kong Pavilion at Expo 2010 Shanghai China was displayed in Terminal 2 in May and June 2010.
Annual Report 2009/10Hong Kong International Airport 3534 Annual Report 2009/10Hong Kong International Airport 3534
Cargo and Aviation Services
The World’s Busiest International Cargo Airport
Annual Report 2009/10Hong Kong International Airport 3534
Annual Report 2009/10 35
The global economic downturn caused a sharp drop
in demand for airfreight in the early part of 2009/10.
However, the economy began to recover in the final
quarter of the year, and annual throughput at Hong
Kong International Airport (HKIA) reached 3.6 million
tonnes, an increase of 4.4% from 2008/09. Despite
volatile market conditions, HKIA retained its position as
the world’s busiest international cargo airport in 2009
and has held this title since 1996.
During the year, we continued to develop our cargo
and aviation services infrastructure, while several of
our business partners expanded their operations at
the airport.
In September 2009, Hong Kong hosted the Asian
Aerospace International Expo and Congress, which
attracted more than 12,000 delegates from all over the
world. In cooperation with government departments,
industry associations and our business partners, we used
this event to showcase Hong Kong’s advantages as an
international and regional aviation centre and air cargo
and logistics hub.
Greener Airport VehiclesThe Airport Authority (AA) and its partners use a growing number of
environmentally friendly vehicles. For example, HKIA has one of Hong Kong’s
largest fleets of electric vehicles and ground service equipment. Over 200
electric vehicles and pieces of ground service equipment, including baggage
tractors, conveyor-belt loaders and marshalling vehicles, are now in operation
at the airport.
To power these vehicles, the AA set up charging stations on the apron
and Hong Kong Aircraft Engineering Co. Ltd. (HAECO) installed more than 20
quick-charging terminals in its aircraft maintenance area.
In addition, the Hong Kong Police use hybrid patrol cars at the airport.
The AA operates hybrid passenger cars and all of its diesel vehicles run on B5
biodiesel, a mixture of 95% conventional diesel and 5% diesel made from
used cooking oil.
Annual Report 2009/10 35
Annual Report 2009/10Hong Kong International Airport 3736 Annual Report 2009/10Hong Kong International Airport 3736 Annual Report 2009/10Hong Kong International Airport 3736
Cargo ServicesDuring the year, Cathay Pacific Services resumed work on
a new HK$5.5 billion cargo terminal, which is scheduled
to enter service in 2013. When the terminal opens, it will
add an annual cargo handling capacity of 2.6 million
tonnes, bringing the total design handling capacity of
HKIA to 7.4 million tonnes a year.
In September 2009, the HKIA Precious Metals Depository
opened for business. A secure storage and physical
settlement facility, the 340-square-metre depository
enhances Hong Kong’s position as a trading and logistics
hub for gold and other precious metals.
For the fourth consecutive year, our cargo service was
recognised with an air cargo excellence award from
Air Cargo World. In the publication’s annual survey, HKIA
achieved a superior overall score among airports in Asia
HKIA has been the world’s busiest international cargo airport since 1996.
Cargo Throughput by Marketyear ended 31 March 2010
Japan
Others
USA & Canada
Australasia
South East Asia
Chinese Mainland
Europe
Taiwan
16%
11%
3%
9%
15%
12%
16%
18%
Total 3.6 million
tonnes
Cargo and Aviation Services
Annual Report 2009/10Hong Kong International Airport 3736 Annual Report 2009/10Hong Kong International Airport 3736 Annual Report 2009/10Hong Kong International Airport 3736
and the Middle East with an annual capacity of over one
million tonnes of cargo.
Aviation ServicesIn May 2009, China Aircraft Services Ltd. opened a
10,000-square-metre hangar at HKIA, adding base
maintenance to its existing line maintenance service.
In September 2009, Hong Kong Aircraft Engineering
Co. Ltd. opened a third hangar at HKIA. The new
16,460-square-metre building was built at a
cost of HK$850 million and can simultaneously
accommodate two fully docked wide-bodied aircraft
and one nose-in aircraft.
A dependable fuel supply underpins HKIA’s reputation
for efficiency and reliability. In March 2010, we opened
phase 1A of the Permanent Aviation Fuel Facility (PAFF),
which includes four tanks with a total storage capacity of
140,000 cubic metres, a jetty and twin submarine
pipelines. Phase 1B will be commissioned by the end of
2010, adding four tanks and 124,000 cubic metres of
storage capacity. When the facility is complete, it will
have 12 tanks with a total capacity of 388,000 cubic
metres. PAFF is operated by ECO Aviation Fuel Services
Limited, a subsidiary of The Hong Kong and China Gas
Company Limited.
In May 2009, China Aircraft Services Limited opened its first maintenance hangar at HKIA.
Ten Busiest Airports in 2009 – International Freight Throughput*millions of tonnes
0
4
3
2
1
Hong Kong(HKG)
Incheon(ICN)
Dubai(DXB)
Narita(NRT)
Pudong(PVG)
Rhein/Main(FRA)
Changi(SIN)
Taoyuan(TPE)
Miami(MIA)
Anchorage(ANC)
* International freight throughput includes imports, exports and transshipment (counted twice) freight carried between the designated airport and an airport in another country. Airmail is not included.Source: Preliminary figures from Airports Council International in March 2010
Annual Report 2009/10Hong Kong International Airport 3938 Annual Report 2009/10Hong Kong International Airport 3938
Airfield and Systems
Hong Kong International Airport (HKIA) has one of the world’s most efficient airfields. By maintaining and upgrading
our facilities, we ensure our ability to operate safely, securely and reliably.
Baggage HandlingDuring the year, we continued to optimise our baggage handling and sorting systems. When a HK$750 million upgrade
is completed in 2010/11, total system capacity will grow from 8,000 bags to 16,000 bags per hour and eight kilometres
of new conveyor belts will be installed.
Operating Safely, Securely and Reliably
Annual Report 2009/10Hong Kong International Airport 3938
Annual Report 2009/10 39
Cleaner Power on the GroundWhen an aircraft is waiting at the gate, its auxiliary power unit (APU) generates
electricity to run the on-board air-conditioning, lights and other essential
systems. APUs use jet fuel to produce electricity, and emit more air pollutants
and greenhouse gases per unit of electricity than land-based generating
systems.
At HKIA, we encourage airlines to turn off their APUs and use our fixed ground
power and pre-conditioned air systems, which are powered by Hong Kong’s
electrical grid.
About 70% of passenger flights now use our fixed ground power and pre-
conditioned air systems. In mid-2010, we will start a renewal and upgrade
programme to improve system efficiency and reduce carbon emissions, which
will be completed by 2013/14.
r on
ss aauxuxilliaiaryry p powowerer u uninit t (A(A(APUPU) ) gegeneneeraratetet s s
ooninin ngngng, , lilighghtsts a andndn o oththherer e essssenentitialal
ccctrtrtricicicitity,y,y a andnd e emimit t momom rere a aairir p polollulutatantnts ss
Annual Report 2009/10 39
Annual Report 2009/10Hong Kong International Airport 4140 Annual Report 2009/10Hong Kong International Airport 4140 Annual Report 2009/10Hong Kong International Airport 4140
Airfield EnhancementsAn Airbus A380 touched down for the first time at HKIA in November 2006, and the first scheduled A380 passenger
flight operated by Singapore Airlines to and from Hong Kong began service in July 2009. HKIA has a total of two parking
stands and four air bridges that can accommodate the A380 and offer direct access to the superjumbo’s upper deck.
During the year, we started upgrading a third stand. When work is completed in mid-2010, this stand will have three air
bridges.
In March 2010, we finished relocating a taxilane on the cargo apron to accommodate the extended wingspan of the new
Boeing 747-8. As part of our regular maintenance programme, in October 2009 we began resurfacing four taxiways.
The resurfacing work was completed in April 2010.
By 2015, the capacity of HKIA’s two runways is expected to reach 68 aircraft movements per hour. To accommodate this
increase, we have started preparing the design of a midfield concourse, which will include 20 aircraft stands, apron
facilities and an automated people mover link to Terminal 1.
The North Satellite Concourse was officially opened in January 2010.
Airfield and Systems
Annual Report 2009/10Hong Kong International Airport 4140 Annual Report 2009/10Hong Kong International Airport 4140 Annual Report 2009/10Hong Kong International Airport 4140
System UpgradesWorking with Cathay Pacific Airways, we began in March 2010 a three-month trial of a system that transmits data from
an onboard computer of a specially modified aircraft to Cathay Pacific’s ground computer system through our wireless
network. By providing airlines and ground handling staff with more rapid access to data, this technology could facilitate
faster aircraft turnarounds. HKIA is the first airport in Asia to conduct a trial of this system and the results will help drive
the development of related industry standards.
During the year, HKIA’s access control system was enhanced with the addition of new contactless smart card and
biometric technologies. Security was also strengthened with the adoption of a new ”smart” closed-circuit television
system that automatically alerts security personnel to unusual activities.
Ten Busiest Airports in 2009 - International Passenger Throughput* millions of passengers
Heathrow(LHR)
Charles deGaulle(CDG)
Hong Kong(HKG)
Schiphol(AMS)
Rhein/Main(FRA)
Changi(SIN)
Narita(NRT)
Dubai(DXB)
Bangkok(BKK)
Madrid(MAD)
0
25
50
75
* International passenger throughput includes originating, terminating and transfer (counted twice) passengers travelling between the designated airport and an airport in another country. Transit passengers are not included. Source: Preliminary figures from Airports Council International in March 2010
Upgraded parking stands provide direct access to the upper deck of the Airbus A380. Improvements to HKIA’s baggage handling system will double its capacity from 8,000 bags to 16,000 bags per hour.
Annual Report 2009/10Hong Kong International Airport 4342 Annual Report 2009/10Hong Kong International Airport 4342
Mainland Projects
The Mainland is an important source of passenger and cargo growth for Hong Kong International Airport (HKIA),
and presents enormous market potential to drive HKIA’s future development. By capitalising on these opportunities,
we will continue to contribute to Hong Kong’s long-term competitiveness and its role as an international and regional
aviation centre.
Connecting with the Chinese Mainland
Annual Report 2009/10Hong Kong International Airport 4342
Annual Report 2009/10 43 Annual Report 2009/10 43
Saving Energy at Zhuhai AirportWe work closely with our joint venture partner to improve Zhuhai Airport’s
environmental performance. In addition to instituting energy-saving measures
that have proven effective at HKIA, we modified the layout of Zhuhai Airport’s
lighting fixtures. This maintained illumination standards and achieved an annual
electricity saving of 182,000 kilowatt hours (kWh), the equivalent of 127 tonnes
of greenhouse gas emission.
We installed 17 split-type air conditioners that allow us to maintain a
comfortable environment for passengers during off-peak hours without using
the terminal’s main chiller plant. The operating cost for the air conditioners is
about 10% of that of the chiller, saving some 205,000 kWh, or about 144
tonnes of greenhouse gas emission, annually. And we are installing film on the
terminal’s glass curtain wall to screen out ultraviolet light and reduce the need
for air-conditioning.
Annual Report 2009/10Hong Kong International Airport 4544 Annual Report 2009/10Hong Kong International Airport 4544 Annual Report 2009/10Hong Kong International Airport 4544
During the year, work continued on the expansion of the domestic terminal at Hangzhou Xiaoshan International Airport, shown here in an artist’s rendering.
Zhuhai AirportSince October 2006, Zhuhai Airport has been managed
by a joint venture between the Zhuhai Municipal People’s
Government and the Airport Authority (AA).
Calendar 2009 saw further improvement at Zhuhai
Airport. Passenger volume grew 24% from 2008, to 1.4
million. Cargo throughput increased 24%, to 13,800
tonnes, while air traffic movements fell 23%, to 23,347.
The decline in air traffic movements was largely due to
cutbacks in training flights caused by the economic
downturn.
With the recent economic recovery, we expect that the
number of training flights at Zhuhai Airport will increase.
The Zhuhai Aviation Industry Park, a new industrial park
focusing on general aviation-related manufacturing,
maintenance, repairs and logistics, will also have a
positive impact on Zhuhai Airport’s operations when
manufacturing commences by the end of 2010.
Hangzhou Xiaoshan International AirportThe AA acquired a 35% interest in Hangzhou Xiaoshan
International Airport (HXIA) in December 2006. In
calendar 2009, passenger volume at HXIA grew 18%, to
14.9 million, while cargo throughput increased 7.4%, to
226,307 tonnes. Air traffic movements rose 13% from
2008, to 134,058.
In 2009, work continued on the second phase of a
RMB 7 billion expansion project at HXIA. A new
96,000-square-metre international passenger terminal is
scheduled to open in mid-2010. Expansion of the
Mainland Projects
Annual Report 2009/10Hong Kong International Airport 4544 Annual Report 2009/10Hong Kong International Airport 4544 Annual Report 2009/10Hong Kong International Airport 4544
The Airport Authority’s new joint venture with Shanghai Airport (Group) Co., Ltd, operates several facilities at Shanghai Hongqiao International Airport.
Throughput at Hangzhou Xiaoshan International Airportpassengers in millions cargo in thousands of tonnes
0
5
10
15
2006 2007 2008 20090
100
200
300
186211
226
Source: Civil Aviation Administration of China (CAAC)
Passenger Cargo
11.712.7
14.9
9.9
196
domestic terminal and construction of a second runway
and related airfield facilities are now under way and
expected to be completed by early 2012. Feasibility
studies on new supporting infrastructure, including a
multi-storey car park, cargo terminal and transportation
centre, are in progress.
Shanghai Hongqiao International AirportIn October 2009, the AA signed an agreement with
Shanghai Airport (Group) Co., Ltd. to establish a joint
venture, the Shanghai Hong Kong Airport Management
Co., Ltd. The new company manages Shanghai Hongqiao
International Airport’s two terminals, east transportation
centre and retail operations.
Since October 2009, AA staff have assisted in the
commissioning of Hongqiao airport’s new facilities,
including the new Terminal 2 and the east transportation
centre. We have also shared with Hongqiao airport’s
staff our experience in terminal operations, retail and
commercial management, and ambience enhancement.
Throughput at Zhuhai Airportpassengers in millions cargo in thousands of tonnes
0
0.5
1.0
1.5
2006 2007 2008 20090
10
20
30
Source: Civil Aviation Administration of China (CAAC)
Passenger Cargo
1.0
10.78.9
13.811.1
0.8
1.4
1.1
Annual Report 2009/10Hong Kong International Airport 4746 Annual Report 2009/10Hong Kong International Airport 4746
Corporate Social Responsibility
At Hong Kong International Airport (HKIA), corporate
social responsibility is a core value that is incorporated
into everything from day-to-day operations to long-term
planning.
EmissionsWe share the community’s concerns about air quality
and are committed to monitoring and minimising the
environmental impact of our business.
The Airport Authority (AA) operates three air-quality
monitoring stations: on the north and south sides of the
airport and on Lung Kwu Chau, an island north of HKIA.
Data from the stations provides useful insights into
regional air quality and is analysed by scientists at the
Hong Kong University of Science and Technology.
Reducing emissions at the source is usually the best
way to improve air quality. In keeping with this belief,
the AA licenses new airside vehicles only if they meet
strict environmental standards. Since June 2008,
we have banned idling engines on the airside, except
for some vehicles and equipment due to safety and
operational considerations.
Caring for the Community
Annual Report 2009/10Hong Kong International Airport 4746
We are also minimising our environmental impact by
increasing the number of electric, liquefied petroleum gas
(LPG) and hybrid vehicles in our fleet. To facilitate the use
of environmentally friendly vehicles, we have installed an
LPG filling station and electric-vehicle charging stations on
the apron.
Today, over 200 electric vehicles and pieces of ground
service equipment are in operation at HKIA. We are now
investigating the feasibility of using electric vehicles for
the bulk of the airside fleet.
Since October 2009, all the AA’s diesel vehicles have run
on B5 biodiesel – a mixture of 95% conventional diesel
and 5% biodiesel made from used cooking oil. B5 biodiesel
reduces exhaust smoke by up to 50% in trials. About
4,000 litres of used cooking oil is collected at the airport
each month and recycled into biodiesel to power our fleet.
Energy SavingsOur energy conservation programme is built around a
system that continuously monitors the airport’s electricity
consumption. This data allows us to fine-tune our
operations for maximum efficiency.
Annual Report 2009/10 47
Recycling More WasteRecovering more recyclables at the source is a key environmental goal at HKIA.
In the airport’s public areas, we provide more than 60 highly visible bins that
make it easy for passengers to sort their trash. We encourage our tenants and
business partners to sort their waste and provide coloured bags for sorting
recyclable from non-recyclable waste. We also introduced incentives for our
waste collection contractor to increase the proportion of recyclables that are
diverted from landfills.
Annual Report 2009/10 47
During the year, the lighting schedule and photocell
settings in the Terminal 1 (T1) Departures Concourse were
adjusted to reduce the use of gantry lighting, while
maintaining a suitable illumination level. The set-point for
the air-conditioning system in the passenger terminals
was increased to 25.5 degrees Celsius and the system’s
operating schedule was adjusted. About 10% of HKIA’s
escalators and travelators were shut down during the day
and nearly all were turned off from midnight to 5:00 AM.
These changes resulted in an estimated annual saving
of 4.6 million kilowatt hours (kWh) of electricity, which
is equivalent to about 2,576 tonnes of greenhouse
gas emissions.
Our energy saving efforts were recognised at the
Hong Kong Awards for Environmental Excellence,
where we received a ”Class of Excellence” Energywi$e
Label for the second consecutive year and a bronze
award in the public sector category. In addition, we were
the second runner-up in the biggest unit saver (company)
category in a competition organised by Friends of the
Earth, a local environmental group.
Annual Report 2009/10Hong Kong International Airport 4948 Annual Report 2009/10Hong Kong International Airport 4948 Annual Report 2009/10Hong Kong International Airport 4948
Amount of Waste Recycled by the Airport Authority in 2009/10in tonnes
Cardboard
Metals
Glass Bottles
Plastics
Vehicle Tyres, Lubricating Oil, Aluminium, Fluorescent TubesFood Waste
Paper
36.5
456.4
535.6
98.9
13.7
2.8
10.3
Total 1154.2 tonnes
Water and Solid WasteWe recycle a great variety of materials such as cardboard,
paper, plastics, scrap metals, glass bottles, food waste,
vehicle tyres, lubricating oil, and fluorescent tubes. During
the year, the volume of solid waste recycled by the AA
exceeded 1,100 tonnes. We also encourage waste
separation and recycling among business partners. At
HKIA, construction contractors are required to sort and
reuse waste materials wherever possible. Compliance is
monitored through compulsory waste disposal logs.
HKIA recovers and treats wastewater from restaurants,
aircraft catering and cleaning, as well as toilet sinks. In
2009/10, our wastewater treatment plant processed 1.1
million cubic metres of greywater, a portion of which was
used for landscape irrigation at HKIA.
We buy environmentally friendly products wherever
possible. The AA was a founding member of the Hong
Kong Green Purchasing Charter in 2007. The following
year, we established a green purchasing policy for items
ranging from printing paper, LED lights, hybrid and
electric vehicles to detergents used to clean the airport
apron. This year, we conducted a survey to review the
applicability of the Hong Kong Green Label Scheme, a
local product-certification programme, to our operations.
We also plan to organise a green purchasing training
programme for our staff.
Carbon ReductionRunning a green airport requires teamwork, and the
AA proactively encourages and facilitates a low-carbon
operation among its business partners. Our programmes
to minimise emissions, recycle and reuse waste, and use
energy efficiently work in concert with an airport-wide
carbon-reduction initiative.
In 2008, we signed the Aviation Industry Commitment to
Action on Climate Change. Since then, we have actively
pursued its goal of reducing our industry’s environmental
impact. In April 2009, the AA completed the first
airport-wide carbon audit, and during the year held nine
carbon reduction workshops for its business partners.
Since July 2009, carbon audits have been conducted on
90% of the buildings and vehicles at HKIA. More than 30
of our partners have participated in carbon-management
workshops, and we continue to use our expertise to help
airport businesses create effective carbon-reduction plans.
During the year, we joined the Climate Change Business
Forum to facilitate collaboration and experience sharing
with other Hong Kong business leaders to reduce carbon
emissions.
Community OutreachWe are proud to share our commitment to the
environment with the community at large. During the
year, the AA partnered with the Green Council, WWF-
Hong Kong, Green Power, Friends of the Earth (HK),
The Conservancy Association and other environmental
organisations to support a host of green activities
including the International Coastal Cleanup, Walk for
Nature @ Mai Po, Green Power Hike, Earth Partner
Programme and Walk for the Environment, etc.
We believe environmental awareness should start at
an early age, and support several green educational
initiatives. We promote environmental awareness
All of the Airport Authority’s diesel vehicles now run on B5 biodiesel.
Corporate Social Responsibility
Annual Report 2009/10Hong Kong International Airport 4948 Annual Report 2009/10Hong Kong International Airport 4948
Carbon Reduction Achieved by the Airport Authority in 2009/10
36.2%
57.2%
4.1%1.9% 0.3%
0.3%
Optimisation of Lighting System
Temperature Adjustmentin Terminals
Lift and Escalator Usage Optimisation
Others
Waste Recycling and Reduction
Use of Clean Fuel
Total 5,875 tonnes of
CO2 equivalent
Annual Report 2009/10Hong Kong International Airport 4948
through the Business Environment Council’s Corporate
Sustainability For Schools (CS4Schools) programme,
and the annual roof-greening and organic farming
competition that is organised by the Hong Chi Association
to teach children about climate change and the importance
of nature conservation. During the year, we also staged
environmental exhibitions at HKIA and other high-traffic
locations in Hong Kong. These initiatives encourage
young people to love the earth and understand the need
for environmental protection.
In addition to environmental programmes, the AA and
its employees contribute to Hong Kong in many other
ways. In April 2009, along with a team from the Airport
Police, AA staff climbed more than 900 stairs at Jardine
House in Central and raised HK$60,000 for youth mental
health promotion programmes. In early 2010, the AA
entertained more than 2,100 elderly guests at spring
Low-emission Vehicles at HKIAas at March 2010
Hybrid BiodieselElectric LPG
233 11 10
Total 325 vehicles
71
A visit to the wastewater treatment plant helps students understand the many environmental protection measures in place at HKIA.
dinners in Tung Chung and Tuen Mun. In August 2009,
Typhoon Morakot, a massive and deadly storm, lashed
Taiwan. To assist with the rebuilding efforts, AA staff held
a fund-raising event that generated HK$100,000. In
May 2010, about HK$350,000 was raised to help the
earthquake victims in Yushu county, Qinghai.
These efforts were recognised with a Caring Organization
award from the Hong Kong Council of Social Service. This
was the fifth consecutive year that we have received this
award.
Annual Report 2009/10Hong Kong International Airport 5150 Annual Report 2009/10Hong Kong International Airport 5150
Looking Forward
Hong Kong International Airport (HKIA) plays a central role in supporting major pillars of Hong Kong’s economy:
financial services, trading and logistics, and tourism. As a multi-modal transportation hub, HKIA supports the economic
growth and prosperity of the Pearl River Delta (PRD) region.
If HKIA is to continue making these contributions and retain its position as a leading international and regional aviation
centre, it must have the right mix of facilities, resources and people. That means creating and refining long-term plans that
look beyond temporary market fluctuations and anticipate the region’s future needs.
Planning for Tomorrow’s Needs
Annual Report 2009/10Hong Kong International Airport 5150
Annual Report 2009/10 51 Annual Report 2009/10 51
An Airport OasisPlants play an important role in absorbing carbon dioxide. A single tree is capable of
absorbing 23 kilogrammes of carbon dioxide* each year.
To help offset our environmental impact, we have grown 700,000 plants,
including 88,000 trees, over three million square metres at the airport. We planted
350,000 seedlings in nearby Tung Chung, and more than 10,000 trees from
20 species now grace the Airport Trail.
Our planting activities have the added benefit of reducing soil erosion and
maintaining an attractive environment for our passengers, staff and business
partners.
*Source: Environmental Protection Department and Electrical and Mechanical Services Department
Annual Report 2009/10Hong Kong International Airport 5352 Annual Report 2009/10Hong Kong International Airport 5352 Annual Report 2009/10Hong Kong International Airport 5352
Top 20 Airports in the Chinese Mainland in 2009 - Passenger Throughput millions of passengers
Source: Civil Aviation Administration of China (CAAC)
Beijing,Capital
Guangzhou Shanghai,Pudong
Shanghai,Hongqiao
Shenzhen Chengdu Kunming Xian Hangzhou Chongqing Xiamen Wuhan Changsha Nanjing Qingdao Dalian,Zhoushuizi
Haikou Sanya Shenyang Zhengzhou0
40
60
80
20
Midfield DevelopmentIn 2010, the Airport Authority (AA) will complete a
detailed plan for the midfield, which is the only large-scale
undeveloped area on the airport island. The first phase of
the midfield plan includes a new passenger concourse, 20
aircraft stands with associated apron facilities and an
automated people mover link.
Building new facilities in the midfield, which is adjacent
to our two runways, will help us take advantage of a
capacity increase that will see the number of air traffic
movements grow from 59 to 68 per hour by 2015.
HKIA Master Plan 2030We are now finalising HKIA Master Plan 2030, a strategic
plan for the airport’s long-term development. HKIA
Master Plan 2030 examines all aspects of the airport and
its operations, from demand forecasts and facility
requirements to mid- and long-term expansion
programmes. When HKIA Master Plan 2030 is complete,
we will consult the public and stakeholders through a
public engagement process.
New InfrastructureAir, road, rail and sea transportation meet seamlessly at
HKIA. In the years ahead, our multi-modal connectivity
will increase as the Tuen Mun – Chek Lap Kok Link, Hong
Kong – Zhuhai – Macao Bridge and Hong Kong Boundary
Crossing Facilities enter service. We are working closely
with the Hong Kong SAR Government to ensure that
these new facilities integrate smoothly with the existing
infrastructure on the airport island.
We also support ongoing studies on the proposed
Hong Kong – Shenzhen Western Express Line, one
function of which is to connect HKIA with Shenzhen
International Airport. Taken together, these projects will
make the airport island a crossroads for people and goods
travelling between Hong Kong, the PRD and Macao.
Airlines and DestinationsAs of 31 March 2010, around 90 airlines operated from
HKIA. These carriers serve nearly 150 destinations,
including around 40 cities on the Mainland.
Fourteen carriers began service to HKIA in 2009/10. Seven
new destinations were added to the network.
Looking Forward
Annual Report 2009/10Hong Kong International Airport 5352 Annual Report 2009/10Hong Kong International Airport 5352 Annual Report 2009/10Hong Kong International Airport 5352
Developing Our PeopleThe AA implements a range of initiatives to enhance employees’ professional standard and the organisation’s overall
talent pool.
For example, personalised development and assessment programmes support employees’ career progression. Job rotation
plans broaden individuals’ experience and ensure that the organisation has people ready to fill critical positions when the
need arises.
The AA also operates a management trainee programme that cultivates home-grown talent. Through this scheme, new
recruits are guided through a systematic learning and development regime that familiarises them with HKIA’s operations
and businesses.
In addition to classroom and on-the-job training, employees use e-learning to master new skills, whenever and wherever
they are needed. Today, over 60 e-learning courses are available, covering a wide spectrum of technical skills and airport
management competencies.
The Airport Authority encourages staff to participate in a range of charitable and environmental events.
Annual Report 2009/10Hong Kong International Airport 5554 Annual Report 2009/10Hong Kong International Airport 5554
Financial Summaryfor the year ended 31 March
(in HK$ million) 2009/10 2008/09 ±%1
Turnover 9,015 8,886 +1.5%Operating expenses before depreciation and amortisation 3,402 3,497 -2.7%Operating profit before depreciation and amortisation 5,613 5,389 +4.2%Depreciation and amortisation 2,191 2,234 -1.9%Interest and finance costs 178 233 -23.6% Share of profits less losses of jointly controlled entities 177 193 -8.3%Profit before taxation 3,421 3,115 +9.8%Income tax 580 532 +9.0% Profit for the year 2,841 2,583 +10.0%Profit attributable to equity shareholder 2,844 2,588 +9.9%Dividend declared 2,300 2,200 +4.5% Special dividend declared 2,200 -
Key Financial Ratios Return on equity 7.8% 7.2% Total debt/capital ratio 18% 21%
Key Traffic Summary2 Passenger traffic3 (millions of passengers) 46.9 47.7 -1.7%Cargo throughput4 (millions of tonnes) 3.6 3.4 +4.4%Air traffic movements (thousands) 280 296 -5.4%
1 Subject to rounding differences.
2 “Key Traffic Summary” is based on the Airport Authority’s traffic data of Hong Kong International Airport only.
3 “Passenger traffic” includes originating, terminating, transfer and transit passengers. Transfer and transit passengers are counted twice.
4 “Cargo throughput” includes originating, terminating and transshipment cargo. Transshipment cargo is counted twice. Airmail is excluded.
Net ProfitFiscal 2009/10 was a volatile year. While the Airport
Authority experienced some difficult moments in the first
half, the global economy showed signs of improvement in
the second half with a rebound in international trade and
renewed consumer and business confidence. As a result,
declines in passenger volumes and air traffic movements
began to moderate and demand for cargo services
bounced back strongly. Passenger traffic at Hong Kong
International Airport (HKIA) reached 46.9 million, a 1.7%
decline from 2008/09, while air traffic movements slid
5.4%, to 280,000. Cargo throughput rose 4.4%, to 3.6
million tonnes.
In this challenging environment, the Airport Authority and
its subsidiaries (the group) delivered a solid financial
performance. Turnover increased slightly. As a result of
stronger non-aeronautical revenues and strict cost
management, the group’s operating profit before
depreciation and amortisation rose 4.2%, to HK$5,613
million (2008/09: HK$5,389 million). With lower
depreciation, interest and finance costs, the group’s profit
attributable to equity shareholder reached HK$2,844
million, an increase of 9.9% from last year (2008/09:
HK$2,588 million).
Financial Review
Annual Report 2009/10Hong Kong International Airport 5554
Annual Report 2009/10Hong Kong International Airport 5554 Annual Report 2009/10Hong Kong International Airport 5554
Return on equity (ROE) improved from 7.2% to 7.8% in
2009/10, underpinned by the increase in net profit.
Financial Resultsin HK$ million
Turnover Operating Profit before Depreciation and Amortisation
Profit Attributable to Equity Shareholder
0
2,000
4,000
6,000
8,000
10,000
09/1008/0907/0806/0705/06
7,0767,738
8,577 8,886 9,015
4,2564,653
5,285 5,389 5,613
1,615 1,9202,273 2,588 2,844
1
2
3
4
5
6
7
8
09/1008/0907/0806/0705/06
Return on Equityin percentage
4.95.6
6.57.2
7.8
Turnover by Sourcefor the year ended 31 March 2010
Retail Licences and Advertising Revenue
Other Income
Other Terminal Commercial Revenue
Real Estate Revenue
Airport Charges
Security Charges
Airside Support Services Franchises
Aviation Security Services
2%1%
30%
8%
16%
9%
32%
2%
Total turnover
HK$9,015million
Annual Report 2009/10Hong Kong International Airport 5554
TurnoverTurnover increased 1.5%, to HK$9,015 million (2008/09:
HK$8,886 million), largely as a result of higher retail
licenses and advertising revenue in Terminal 1 (T1), both
of which benefited from a rebound in consumer
confidence. A relief package granted to our airlines and
business partners from April 2009 to March 2010 caused
a HK$242 million reduction in revenue.
Lower passenger volumes and fewer air traffic movements
— coupled with a 10% reduction in aircraft landing and
parking charges offered to airlines as part of the relief
package — resulted in a 10.1% drop in airport and
security charges revenue, to HK$3,429 million (2008/09:
HK$3,813 million).
Revenue from airside support services franchises increased
4.2%, to HK$1,432 million (2008/09: HK$1,374 million).
This growth was mainly attributable to higher air cargo
throughput and the increase in facility payments of our
aviation fuel supply system.
The decrease in passenger volume did not hurt retail
licenses and advertising revenue, which jumped 12.8%
from last year, to HK$2,918 million (2008/09: HK$2,587
million), and represented 32.4% of total turnover. With
the stronger economy, higher spending was recorded in
key retail categories including liquor and tobacco and
perfumes and cosmetics. Additional revenue was
generated from new retail space in the North Satellite
Concourse, the T1 Arrivals Immigration Hall and SkyPier.
Annual Report 2009/10Hong Kong International Airport 5756 Annual Report 2009/10Hong Kong International Airport 5756
Financial Review
Operating ExpensesThe Airport Authority continues to exercise stringent
financial discipline to control its operating expenses, while
maintaining the highest standards of safety, security and
service. Total operating expenses before depreciation and
amortisation fell 2.7%, to HK$3,402 million (2008/09:
HK$3,497 million), and were 4.5% lower than budget.
A significant portion of our operating expenses is related
to depreciation, government rent and rates, and
government services over which the group has limited
control. Nevertheless, through cost control measures
and productivity gains, the Airport Authority reduced
its operating expenses in 2009/10. This reduction is
particularly noteworthy given the increase in costs
associated with the opening of the North Satellite
Concourse and SkyPier.
Turnover/Operating Expenses per Employeein HK$ million
Turnover per Employee
Operating Expenses per Employee
Notes:1. Excludes employees of subsidiaries.2. Operating expenses includes depreciation and amortisation, but excludes interest and finance costs.
05/06 06/07 07/08 08/09 09/104.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
6.9
4.6
6.7
7.68.0
8.3
4.4
5.0 5.1 5.1
Annual Report 2009/10Hong Kong International Airport 5756
Group staff costs and related expenses increased
marginally by 0.8%, to HK$1,158 million (2008/09:
HK$1,149 million), notwithstanding additional resources
required to enforce health check during the outbreak of
H1N1 influenza and to cope with additional activities with
the opening of new facilities.
Repairs and maintenance expenses increased 6.8%, to
HK$442 million (2008/09: HK$414 million). This resulted
primarily from a refurbishment and overhaul programme
for T1 and the airfield, which have now been in service for
more than a decade. The inclusion of maintenance costs
for the North Satellite Concourse and SkyPier also
contributed to the increase.
Operational contracted services expenses grew 2.4%, to
HK$340 million (2008/09: HK$332 million), largely due to
the opening of the North Satellite Concourse and SkyPier.
Government rent and rates increased 20.3%, to HK$154
million (2008/09: HK$128 million), because the 2008/09
figure included a one-time rent refund resulting from an
appeal to the Rating and Valuation Department.
Other operating expenses decreased 32.5%, to HK$378
million (2008/09: HK$560 million). The reduction was
mainly attributable to the tightening of controllable costs
and lower provisions for doubtful debts in the improving
economy. Included in other operating expenses was an
impairment charge against the Airport Authority’s
investment in IEC Holdings Limited, which was triggered
by a gloomy outlook at AsiaWorld-Expo.
Depreciation and amortisation decreased 1.9%, to
HK$2,191 million (2008/09: HK$2,234 million), as
certain assets were fully depreciated during the previous
financial year.
Annual Report 2009/10Hong Kong International Airport 5756 Annual Report 2009/10Hong Kong International Airport 5756
Operating Expenses by Categoryfor the year ended 31 March 2010
Other Operating Expenses
Occupancy Expenses
Depreciation and Amortisation
Staff Costs and Related Expenses
Repairs and Maintenance
Operational Contracted Services
Government Services
Government Rent and Rates
21%
8%
6%
13%
3%3%
39%
7%
Total operating expenses
HK$5,593million
Annual Report 2009/10Hong Kong International Airport 5756
Mainland Airports A robust local economy helped our joint venture
Hangzhou Xiaoshan International Airport Co. Ltd. (HXIA)
achieve double-digit growth in passenger throughput
and air traffic movements. Our 35% share of HXIA’s
profits was HK$177 million (2008/09: HK$193 million).
The decrease was largely due to the lower airport
construction subsidies that HXIA received from the
Mainland government during the year and higher
operating costs in an inflationary environment.
Our joint venture with the Zhuhai Municipal People’s
Government that manages Zhuhai Airport reduced its net
loss significantly in 2009/10. The Airport Authority’s share
of the loss was HK$6 million (2008/09: HK$11 million).
In October 2009, the Airport Authority formed a joint
venture with Shanghai Airport (Group) Company Limited
to manage Shanghai Hongqiao International Airport’s
two terminals, east transportation centre and retail
operations.
Balance Sheet and Capital ExpenditureThe group’s balance sheet is strong and well capitalised.
Total assets were HK$51,370 million (2008/09:
HK$51,864 million), a decrease of 1.0% from last year.
Fixed assets represent a large part of our assets, at
HK$46,079 million (2008/09: HK$47,128 million). Capital
expenditure fell 39.1%, to HK$1,300 million (2008/09:
HK$2,136 million), as the Airport Authority continues to
exercise restraint and reschedule works programmes.
Intangible asset was HK$259 million (2008/09: HK$273
million), representing the amortised cost of the
management rights to Zhuhai Airport and its operating
assets for a period of 20 years, starting in 2006.
Interests in jointly controlled entities of HK$2,808 million
(2008/09: HK$2,606 million) represented the group’s
effective interest in the net assets of HXIA and the joint
venture with Shanghai Airport (Group) Company Limited,
plus associated goodwill.
05/06 06/07 07/08 08/09 09/10
2,136
2,526
2,2022,319
1,300
0
1,000
2,000
3,000
Capital Expenditurein HK$ million
Annual Report 2009/10Hong Kong International Airport 5958 Annual Report 2009/10Hong Kong International Airport 5958
Trade and other receivables were HK$1,180 million
(2008/09: HK$1,010 million), an increase of 16.8%. This
is mainly related to delayed payments arranged under the
relief package, which allowed companies renting lounges,
offices, counters and storage space to defer up to 50% of
their rent for one year and repay the deferred charges in
interest-free instalments. Full recovery of the deferrals in
the amount of HK$259 million (2008/09: HK$ nil) is
expected in 2010/11.
Total trade and other payables fell 18.8%, to HK$1,791
million (2008/09: HK$2,207 million), reflecting a decrease
in contract costs payable following the completion of the
North Satellite Concourse and SkyPier during the year.
DividendA dividend of HK$2,300 million (2008/09: HK$2,200
million), payable to the Hong Kong SAR Government, was
declared by the Board subsequent to the financial
year-end. Our seventh such payment, the dividend
represents 85.9% of the Airport Authority’s distributable
profit for the year. In addition, a special dividend of
HK$2,200 million was declared out of the Airport
Authority’s retained profits.
Cash FlowNet cash generated from operating activities decreased
from HK$5,711 million in 2008/09 to HK$5,477 million
this year, due primarily to higher receivables associated
with the payment deferrals extended to our business
partners in the relief package.
FinancingThe Airport Authority’s total borrowings amounted
to HK$8,193 million (2008/09: HK$9,377 million) at
31 March 2010. Our borrowings comprised unsecured
bank loans, medium to long-term fixed-rate notes and
bonds, and money market lines.
During the year, the Airport Authority issued a total
of HK$900 million in debt through private placements
of Hong Kong dollar fixed-rate notes with maturities
of 3 to 10 years. Proceeds from these issues were
used to refinance maturing debt and meet working
capital requirements.
Financial Review
Annual Report 2009/10Hong Kong International Airport 5958
Loan Facilities and Programmesas at 31 March 2010
Eurobond Fixed Rate Notes Bank Loans
* After unamortised finance costs of HK$16 million.
34%
38%
28%
Total borrowings
HK$8,193million*
Annual Report 2009/10Hong Kong International Airport 5958 Annual Report 2009/10Hong Kong International Airport 5958 Annual Report 2009/10Hong Kong International Airport 5958
Following the 2003 acquisition of the aviation fuel supply
system, which generates revenue in United States dollars,
the Airport Authority hedged its currency exposure with
the appropriate amount of US dollar borrowings, thereby
neutralising the risk of exchange rate fluctuations on the
revenue stream. In addition, we have executed forward
contracts to fix the exchange rate for the conversion of
Hong Kong dollars into US dollars to control the risk of
exchange rate fluctuations on a portion of the US dollar
borrowings. Since the latter part of 2006, the Airport
Authority has also been exposed to Chinese renminbi
movements as a result of its investment in Mainland
airports. This exposure has resulted in significant
exchange gains on the balance sheet owing to the
strengthening renminbi. Apart from the above, the
Airport Authority has minimal currency exposure because
revenue and costs at HKIA are largely denominated in
Hong Kong dollars.
The Airport Authority continues to be one of the highest-
rated corporations in Hong Kong. Its AA+ ratings for
long-term local and foreign currency debt are identical to
those of the Hong Kong SAR Government.
Financial Risk ManagementThe Airport Authority manages its financial risks with a
variety of instruments and techniques, including natural
hedges achieved by spreading its loan portfolio over
different roll-over and maturity dates. Financial
instruments such as interest rate swaps and forward
contracts are also used to hedge the Airport Authority’s
financial risks. In accordance with approved policy, we
have adopted measures to fix the interest rate of a
portion of total borrowings in order to minimise the
impact of interest rate fluctuations on earnings.
Loan Maturity Profileas at 31 March 2010
Within One Year or on Demand
After One Year but Within Two Years
After Two Years but Within Five Years
After Five Years
14%
30%
6%
50%
Total borrowings
HK$8,193million*
* After unamortised finance costs of HK$16 million.
Capital Structurein HK$ million
0 10,000 20,000 30,000 40,000 50,000
Total Debt Total Equity
06/07
07/08
08/09
9,954
11,058
10,325
9,377
09/10 8,193
33,687
34,500
35,393
36,038
36,689
05/06
Annual Report 2009/10Hong Kong International Airport 6160 Annual Report 2009/10Hong Kong International Airport 6160 Annual Report 2009/10Hong Kong International Airport 6160
OutlookThe new year started well for HKIA. Passenger traffic,
cargo throughput and air traffic movements all recorded
positive growth in the first quarter. This encouraging
performance was driven by a steady recovery of the global
economy and strong growth in China. In this improved
business environment, the Airport Authority will capture
new opportunities, maximise revenues and continue to
diligently control costs, while maintaining the highest
standards of safety, security, reliability and service.
The completion of the North Satellite Concourse, SkyPier
and the Permanent Aviation Fuel Facility late in the fiscal
year will bring in additional revenue. With the end of the
financial relief programme in March 2010, a further
improvement in our financial performance is expected in
2010/11, despite higher operating costs arising from the
recently opened facilities.
In the medium term, we will continue to increase our
commercial revenue by enlarging the airport’s retail space,
building new facilities and supporting our business
partners as they expand and add new services.
To enhance the airport’s competitiveness and support
long-term growth, we will start developing a concourse,
20 aircraft stands and an automated people mover link in
the midfield. We will continue work on HKIA Master Plan
2030, which assesses the airport’s infrastructure
requirements, including the engineering, environmental
and financial feasibility of building a third runway.
Through continuous cooperation with the Hong Kong
SAR Government on key infrastructure projects, including
the Hong Kong–Zhuhai–Macao Bridge, Tuen Mun–Chep
Lap Kok Link, Hong Kong Boundary Crossing Facilities
and the study of a high-speed rail link connecting HKIA,
Shenzhen municipality and Shenzhen International
Airport, we believe the accessibility of HKIA will be
greatly improved and its role as a premier international
and regional aviation centre will be enhanced.
With financial discipline, innovation and timely
development, HKIA will continue to bring value to its
stakeholders and generate economic benefits for Hong
Kong and the entire Pearl River Delta region.
Financial Review
Table of Contents
Report of the Members of the Board 62
Independent Auditor’s Report 65
Financial Statements
Income Statement 66
Statement of Comprehensive Income 67
Balance Sheet 68
Consolidated Statement of Changes in Equity 69
Statement of Changes in Equity 70
Consolidated Cash Flow Statement 71
Notes to the Financial Statements1. Establishment of the Authority 73
2. Principal Activities of the Authority 73
3. Summary of Significant Accounting Policies 73
4. Segmental Information 86
5. Operating Profit before Interest and Finance Costs 87
6. Remuneration of the Members of the Board and Executive Directors and Individuals
with the Highest Emoluments 88
7. Staff Costs and Related Expenses 90
8. Finance Costs 91
9. Taxation 92
10. Fixed Assets 94
11. Intangible Asset 97
12. Investments in Subsidiaries 98
13. Interests in Jointly Controlled Entities 99
14. Other Investments 101
15. Employee Retirement Benefits 102
16. Financial Risk Management and Fair Values 104
17. Trade and Other Receivables 111
18. Cash and Bank Balances 113
19. Interest-bearing Borrowings 113
20. Trade and Other Payables 115
21. Deferred Income 115
22. Capital, Reserves and Dividends 116
23. Outstanding Commitments 118
24. Contingent Liabilities 118
25. Material Related Party Transactions 119
26. Immediate and Ultimate Controlling Party 120
27. Accounting Judgements and Estimates 120
28. Non-Adjusting Post Balance Sheet Events 122
29. Comparative figures 122
30. Possible Impact of Amendments, New Standards and Interpretations Issued but Not Yet Effective
for the Year Ended 31 March 2010 122
Five-year Financial and Operational Summary 123
Report of the Members of the BoardFinancial year ended 31 March 2010
Hong Kong International Airport62
The Members of the Board have pleasure in submitting the annual report of the Airport Authority (“AA”) together with the
audited financial statements for the year ended 31 March 2010.
Principal ActivitiesPursuant to the Airport Authority Ordinance (Cap. 483) (“the Ordinance”) and the objective of maintaining Hong Kong’s status as
a centre of international and regional aviation, the AA is responsible for the provision, operation, development and maintenance
of the Hong Kong International Airport (“HKIA”) situated at Chek Lap Kok, Lantau, Hong Kong and the provision of facilities,
amenities and services at, as regards or in relation to the HKIA. The AA may also engage in airport-related activities in trade,
commerce and industry at or from any places in the airport island, and the airport-related activities as permitted by the Airport
Authority (Permitted Airport-related Activities) Order (Cap. 483E). The AA is required under the Ordinance to conduct its business
according to prudent commercial principles.
The principal activities and other particulars of the AA’s subsidiaries are set out in note 12 to the financial statements.
Financial StatementsThe profit of the group and the AA for the year ended 31 March 2010 and the state of the group’s and the AA’s affairs as at that
date are set out in the financial statements on pages 66 to 122.
DividendThe Ordinance provides that the AA may pay dividends on its shares and that the Financial Secretary may, after taking into
account the financial position of the AA and its subsidiaries, direct the AA to pay dividends out of the distributable profits of the
AA. A dividend of HK$2,200 million or HK$7,178.28 per share was declared and paid for the year 2008/09. The Board now
recommends the payment of a final dividend of HK$2,300 million or HK$7,504.57 per share and a special dividend of HK$2,200
million or HK$7,178.28 per share for the year ended 31 March 2010.
Transfer to ReservesThe group’s profit attributable to equity shareholder of HK$2,844 million (2008/09: HK$2,588 million) has been transferred to
reserves. Other movements in reserves are set out in the Consolidated Statement of Changes in Equity.
Fixed AssetsMovements in fixed assets during the year are set out in note 10 to the financial statements.
Capitalised InterestInterest amounting to HK$59 million (2008/09: HK$59 million) was capitalised by the group during the year as set out in note 8
to the financial statements.
Bank Loans and Other BorrowingsParticulars of bank loans and other borrowings of the group and the AA as at 31 March 2010 are set out in note 19 to the
financial statements.
Financial SummaryA summary of the financial results and the assets and liabilities of the group for the last five financial years is set out on page 123
of the annual report.
Annual Report 2009/10 63
Share CapitalUnder the terms of the Ordinance, the AA may only issue shares to the Government of the Hong Kong Special Administrative
Region of the People’s Republic of China (“the Hong Kong SAR Government”) on behalf of which all shares are held by the
Financial Secretary Incorporated. No shares were issued or cancelled during the year ended 31 March 2010.
DonationsDonations made during the year amounted to HK$820,000 (2008/09: HK$1,288,000) which were funded partly from the sales
of “lost & found” items at the airport.
Major Customers and SuppliersThe information in respect of the group’s sales and purchases attributable to the major customers and suppliers respectively
during the financial year is as follows:
Percentage of the group’s total
Sales Purchases
The largest customer 25%Top five customers 48%The largest supplier 45%Top five suppliers 54%
The largest supplier is the Hong Kong SAR Government which is the sole shareholder of the AA.
Purchases are exclusive of supplies of capital nature.
Going ConcernThe financial statements on pages 66 to 122 have been prepared on a going concern basis. The Board has approved the AA’s
budget for 2010/11 and the business plan and financial plan for 2010/11 to 2014/15 and is satisfied that the AA has sufficient
resources to continue as a going concern for the foreseeable future.
Retirement SchemesDetails with regard to the AA’s retirement schemes are set out in note 15 to the financial statements. The administration of the
retirement schemes and the AA’s contributions thereto are reviewed periodically with reference to reports of the investment
manager of the schemes and independent actuaries.
Corporate GovernancePrincipal corporate governance practices adopted by the AA are set out in the Corporate Governance section on pages 18 to 25
of the annual report.
EmployeesAs of 31 March 2010, the AA, excluding its subsidiaries, had a staff force of 1,088 (31 March 2009: 1,116). The AA has
developed human resources policies to ensure that the pay level of its employees are competitive and that employees are
rewarded according to their performance within the framework of the AA’s salary and performance awards system. To further
strengthen the underlying principle of pay-for-performance, a Variable Compensation Scheme was introduced in April 2002. The
Scheme was finetuned in 2008.
Hong Kong International Airport64
Report of the Members of the Board
Members of the Board and Executive DirectorsMembers of the Board and Executive Directors at the date of this report are set out on pages 14 to 16 of the annual report.
The Hon Chan Kam-lam, the Hon Albert Ho Chun-yan, Dr Allan Wong Chi-yun were appointed to the Board on 1 January 2010
for a term of three years. Dr Lo Ka-shui was re-appointed to the Board for a term of one year from 1 June 2010 to 31 May 2011.
Ms Anita Fung will join the Board on 1 June 2010. Her term of appointment is three years. Mr He Guangbei, who has been a
member of the Board since 27 June 2003, retired on 31 May 2010.
Mr Raymond W C Lai, Executive Director, Finance and Investment, retired on 31 May 2010. Mr William Lo has been appointed as
Executive Director, Finance with effect from 9 July 2010. Mr Wilson Fung has been appointed as Executive Director, Corporate
Development. Mr Fung will join the AA in the third quarter of 2010.
Interest of Members of the Board and Executive Directors in ContractsNo contracts of significance to which the AA or any of its subsidiaries was a party and in which a Member of the Board or an
Executive Director had a material interest subsisted at the end of the year or at any time during the year. At no time during the
year was the AA or any of its subsidiaries a party to any arrangements to enable any Member of the Board or Executive Director
to acquire benefits by means of acquisition of shares of the AA or of any body corporate.
Related Party TransactionsDetails of material related party transactions entered into or were ongoing during the year are set out in note 25 to the financial
statements.
Members’ Responsibilities for the Financial StatementsThe Members of the Board are responsible for the preparation of financial statements for each financial year which give a true
and fair view of the state of affairs of the group and of the results and cash flows for the period. In preparing the financial
statements for the year ended 31 March 2010, the Members of the Board have selected suitable accounting policies and applied
them consistently; made judgements and estimates that are prudent and reasonable; and have prepared the financial statements
on a going-concern basis. The Members of the Board are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the group.
AuditorsIn accordance with Section 32 of the Ordinance, the Chief Executive of the HKSAR approved the appointment of KPMG as
auditors and they remain in office.
By order of the Board
H Y Shu
Secretary to the Board
Hong Kong, 31 May 2010
Independent Auditor’s Report
65Annual Report 2009/10
To The Airport Authority(Incorporated in Hong Kong under the Airport Authority Ordinance)We have audited the financial statements of the Airport Authority (“the Authority”) set out on pages 66 to 122 which comprise
the consolidated and Authority balance sheets as at 31 March 2010, the consolidated and Authority income statements, the
consolidated and Authority statements of comprehensive income, the consolidated and Authority statements of changes in
equity and the consolidated cash flow statement for the year then ended and a summary of significant accounting policies and
other explanatory notes.
Board members’ responsibility for the financial statementsThe Board members of the Authority are responsible for the preparation and the true and fair presentation of these financial
statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public
Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing,
implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you,
as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the
contents of this report.
We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified
Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and true and fair presentation of the financial statements in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the Board members, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements give a true and fair view of the state of affairs of the Authority and of the group as at
31 March 2010 and of the Authority’s and the group’s profit and the group’s cash flows for the year then ended in accordance
with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the applicable disclosure
requirements of the Hong Kong Companies Ordinance.
KPMG
Certified Public Accountants
8th Floor, Prince’s Building
10 Chater Road
Central, Hong Kong
31 May 2010
Income StatementFor the year ended 31 March 2010 (Expressed in Hong Kong dollars)
66 Hong Kong International Airport
The group The Authority
$ million Note 2010 2009 2010 2009
Airport charges 2,671 3,048 2,652 3,026Security charges 758 765 758 765Aviation security services 149 135 – –Airside support services franchises 1,432 1,374 1,383 1,334Retail licences and advertising revenue 2,918 2,587 2,912 2,582Other terminal commercial revenue 830 738 839 744Real estate revenue 182 170 190 179Other income 75 69 59 98
Turnover 9,015 8,886 8,793 8,728
Staff costs and related expenses 7 (1,158) (1,149) (629) (643)Repairs and maintenance 25(b) (442) (414) (435) (408)Operational contracted services (340) (332) (737) (715)Government services 25(a) (735) (722) (734) (722)Government rent and rates (154) (128) (151) (128)Occupancy expenses (195) (192) (184) (181)Other operating expenses (378) (560) (332) (514)
Operating Expenses before Depreciation and Amortisation (3,402) (3,497) (3,202) (3,311)
Operating Profit before Depreciation and Amortisation 5,613 5,389 5,591 5,417
Depreciation and amortisation (2,191) (2,234) (2,157) (2,201)
Operating Profit before Interest and Finance Costs 5 3,422 3,155 3,434 3,216
Interest and finance costs:Finance costs 8 (196) (252) (193) (249)Interest income 18 19 16 15
(178) (233) (177) (234)Share of profits less losses of
jointly controlled entities 13 177 193 – –
Profit before Taxation 3,421 3,115 3,257 2,982Income tax 9(a) (580) (532) (578) (530)
Profit for the Year 2,841 2,583 2,679 2,452
Attributable to:Equity shareholder of the Authority 2,844 2,588 2,679 2,452Minority interests (3) (5) – –
Profit for the Year 2,841 2,583 2,679 2,452
The notes on pages 73 to 122 form part of these financial statements. Details of dividend payable to equity shareholder of the
Authority attributable to the profit for the year are set out in note 22(b).
Statement of Comprehensive IncomeFor the year ended 31 March 2010 (Expressed in Hong Kong dollars)
67Annual Report 2009/10
The group The Authority
$ million 2010 2009 2010 2009
Profit for the Year 2,841 2,583 2,679 2,452
Other Comprehensive Income for the YearExchange difference on translation
of financial statements of:– a subsidiary in the People’s Republic of China (“PRC”) 1 10 – –– jointly controlled entities in the PRC 8 51 – –
9 61 – –
Cash flow hedge: effective portion of changes in fair value 11 32 11 32Less: Deferred tax 2 2 2 2
13 34 13 34
Cash flow hedge: transfer from equity to profit or loss (10) (31) (10) (31)Less: Deferred tax (2) (2) (2) (2)
(12) (33) (12) (33)
10 62 1 1
Total Comprehensive Income for the Year 2,851 2,645 2,680 2,453
Attributable to:Equity shareholder of the Authority 2,854 2,646 2,680 2,453Minority interests (3) (1) – –
Total Comprehensive Income for the Year 2,851 2,645 2,680 2,453
The notes on pages 73 to 122 form part of these financial statements.
Balance SheetAt 31 March 2010 (Expressed in Hong Kong dollars)
68 Hong Kong International Airport
The group The Authority
$ million Note 2010 2009 2010 2009
Non-current AssetsFixed assets
– Investment properties 10 268 279 349 364– Interest in leasehold land 10 8,638 9,032 8,638 9,032– Other property, plant and equipment 10 37,173 37,817 37,020 37,652
46,079 47,128 46,007 47,048Intangible asset 11 259 273 – –Investments in subsidiaries 12 – – 5 5Interests in jointly controlled entities 13 2,808 2,606 1,994 1,977Other investments 14 136 191 136 191Net defined benefit retirement plan asset 15 73 63 73 63Derivative financial assets 16(e) 76 95 76 95
49,431 50,356 48,291 49,379
Current AssetsStores and spares 48 51 46 50Trade and other receivables 17 1,180 1,010 1,339 1,170Derivative financial assets 16(e) 53 37 53 37Cash and bank balances 18 658 410 470 230
1,939 1,508 1,908 1,487
Current LiabilitiesInterest-bearing borrowings 19 (2,480) (1,453) (2,480) (1,453)Trade and other payables 20 (1,534) (1,970) (1,438) (1,876)Deferred income 21 (121) (113) (121) (113)Derivative financial liabilities 16(e) (3) (5) (3) (5)
(4,138) (3,541) (4,042) (3,447)
Net Current Liabilities (2,199) (2,033) (2,134) (1,960)
Total Assets Less Current Liabilities 47,232 48,323 46,157 47,419
Non-current LiabilitiesInterest-bearing borrowings 19 (5,713) (7,924) (5,713) (7,924)Trade and other payables 20 (257) (237) (228) (208)Deferred income 21 (1,422) (1,544) (1,422) (1,544)Derivative financial liabilities 16(e) (5) (12) (5) (12)Deferred tax liabilities 9(d) (3,146) (2,568) (3,146) (2,568)
(10,543) (12,285) (10,514) (12,256)
Net Assets 36,689 36,038 35,643 35,163
Capital and Reserves 22Share capital 30,648 30,648 30,648 30,648Reserves 5,839 5,185 4,995 4,515
Total equity attributable to equity shareholder of the Authority 36,487 35,833 35,643 35,163
Minority interests 202 205 – –
Total Equity 36,689 36,038 35,643 35,163
Approved and authorised for issue on behalf of the Members of the Board on 31 May 2010.
Dr the Hon Marvin Cheung Kin-tung Mr Stanley Hui Hon-chung Mr Raymond W C LaiChairman Chief Executive Officer Executive Director, Finance and Investment
The notes on pages 73 to 122 form part of these financial statements.
Consolidated Statement of Changes in EquityFor the year ended 31 March 2010 (Expressed in Hong Kong dollars)
69Annual Report 2009/10
The notes on pages 73 to 122 form part of these financial statements.
Attributable to Equity Shareholder of the Authority
$ million NoteShare
capitalExchange
reserveCapital reserve
Hedging reserve
Retained profits Total
Minority interests
Total equity
At 1 April 2008 30,648 274 41 (5) 4,229 35,187 206 35,393Changes in equity for the year:Dividend approved in respect of
the previous year 22(b) – – – – (2,000) (2,000) – (2,000)Transfer from retained profits
to capital reserve 22(d)(ii) – – 109 – (109) – – –Total comprehensive income
for the year – 57 – 1 2,588 2,646 (1) 2,645
At 31 March 2009 and 1 April 2009 30,648 331 150 (4) 4,708 35,833 205 36,038
Changes in equity for the year:Dividend approved in respect of
the previous year 22(b) – – – – (2,200) (2,200) – (2,200)Transfer from retained profits
to capital reserve 22(d)(ii) – – 83 – (83) – – –Total comprehensive income
for the year – 9 – 1 2,844 2,854 (3) 2,851
At 31 March 2010 30,648 340 233 (3) 5,269 36,487 202 36,689
Statement of Changes in EquityFor the year ended 31 March 2010 (Expressed in Hong Kong dollars)
70 Hong Kong International Airport
The notes on pages 73 to 122 form part of these financial statements.
$ million NoteShare
capitalHedging
reserveRetained
profits Total
At 1 April 2008 30,648 (5) 4,067 34,710Changes in equity for the year:Dividend approved in respect of the previous year 22(b) – – (2,000) (2,000)Total comprehensive income for the year – 1 2,452 2,453
At 31 March 2009 and 1 April 2009 30,648 (4) 4,519 35,163Changes in equity for the year:Dividend approved in respect of the previous year 22(b) – – (2,200) (2,200)Total comprehensive income for the year – 1 2,679 2,680
At 31 March 2010 30,648 (3) 4,998 35,643
Consolidated Cash Flow StatementFor the year ended 31 March 2010 (Expressed in Hong Kong dollars)
71Annual Report 2009/10
$ million Note 2010 2009
Operating ActivitiesProfit before taxation 3,421 3,115Adjustments for:Depreciation 1,943 1,986Amortisation of interest in leasehold land 232 232Amortisation of intangible asset 16 16Interest on notes and bank loans 243 300Other borrowing costs and interest expense 19 17Interest income (18) (19)Cash flow hedges:
– net gain on forward foreign exchange contracts, reclassified from equity (23) (36)– net loss on interest rate swaps, reclassified from equity 13 5
Fair value hedges:– net gain on fair value hedging instruments (interest rate swaps) (42) (99)– net (gain)/loss on underlying hedged interest-bearing borrowings (19) 76
Share of profits less losses of jointly controlled entities (177) (193)Impairment loss on trade and other receivables 4 38Impairment loss on other investments 55 70Net loss on disposal of other property, plant and equipment 9 19Loss in respect of the early termination of a lease arrangement – 5Net foreign exchange loss/(gain) 5 (11)Amortisation of deferred income (114) (109)Expenses recognised in respect of defined benefit retirement plan 37 36
Operating Profit before Changes in Working Capital 5,604 5,448Decrease in stores and spares 3 10(Increase)/decrease in trade and other receivables (168) 115Increase in trade and other payables 41 138
Cash Generated from Operations 5,480 5,711Hong Kong Profits tax paid (3) –
Net Cash Generated from Operating Activities 5,477 5,711
Investing ActivitiesReceipts on maturity/(placement) of term deposits 40 (67)Interest received 18 19Payment for the purchase of other property, plant and equipment (1,572) (2,050)Payment for the purchase of interest in leasehold land – (162)Receipts from disposal of other property, plant and equipment 3 2Payment of annual franchise fee for a PRC subsidiary (3) (3)Payment to acquire interest in a jointly controlled entity (17) –
Net Cash Used in Investing Activities (1,531) (2,261)
72 Hong Kong International Airport
For the year ended 31 March 2010 (Expressed in Hong Kong dollars)
Consolidated Cash Flow Statement (continued)
$ million Note 2010 2009
Financing ActivitiesInterest paid on notes and bank loans (314) (358)Other borrowing costs and interest expenses paid (25) (19)Receipts from new bank loans 80 200Repayment of bank loans (1,500) (2,020)Receipts from issue of notes 900 800Repayment of notes (653) –Net interest income received on interest rate swaps 54 19Net payment in respect of the early termination of a lease arrangement – (64)Dividend paid (2,200) (2,000)
Net Cash Used in Financing Activities (3,658) (3,442)
Net Increase in Cash and Cash Equivalents 288 8Cash and Cash Equivalents at Beginning of Year 343 331Effect of foreign exchange rate changes – 4
Cash and Cash Equivalents at End of Year 18 631 343
The notes on pages 73 to 122 form part of these financial statements.
Notes to the Financial Statements(Expressed in Hong Kong dollars)
73Annual Report 2009/10
1. Establishment of the AuthorityThe Airport Authority (“the Authority”) is a statutory corporation wholly owned by the Hong Kong SAR Government (“the
Government”). It was formally established on 1 December 1995 when the Airport Authority Ordinance (“the Ordinance”)
was brought into effect as a continuation of the Provisional Airport Authority which had been set up in 1990.
The Authority’s statutory purpose is to provide, operate, develop and maintain Hong Kong’s airport at Chek Lap Kok, in
order to maintain Hong Kong’s status as a centre of international and regional aviation. Pursuant to these purposes, the
Authority may also engage in airport-related activities in trade, commerce or industry at Chek Lap Kok and is permitted to
engage in or carry out airport-related activities at any place in or outside Hong Kong. The Authority is required under the
Ordinance to conduct its business according to prudent commercial principles.
2. Principal Activities of the AuthorityThe Authority’s principal activities are the management, operation, planning and development of the Hong Kong
International Airport (“HKIA”) at Chek Lap Kok. It also engages in airport-related commercial and industrial activities at the
above airport.
The Authority’s principal subsidiaries and their principal activities are set out in note 12.
3. Summary of Significant Accounting Policies(a) Statement of compliance
These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting
Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting
Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of
Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure
requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable
disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
with the exception of disclosure on Earnings Per Share which is not relevant to the Authority as the Authority’s shares
are not publicly traded. A summary of the significant accounting policies adopted by the Authority and its subsidiaries
(together referred to as the “group”) is set out below.
The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for
the current accounting period of the group and the Authority. Note 3(c) provides information on any changes in
accounting policies and note 3(d) to (y) summarises the accounting policies of the group after the adoption of these
developments to the extent that they are relevant to the group for the current and prior accounting periods reflected
in these financial statements. The adoption of these amendments does not have a significant impact on the group’s
results of operations and financial position for the financial years 2009 and 2010.
The group has not applied any new standard or interpretation that is not yet effective for the current accounting
period (note 30).
(b) Basis of preparation of the financial statements
The group’s financial statements include the financial statements of the group as well as the group’s interests in
jointly controlled entities.
The measurement basis used in the preparation of the financial statements is the historical cost basis except for
certain derivative financial instruments which are stated at their fair values as explained in the accounting policies set
out below (notes 3(h) and (p) respectively).
The preparation of financial statements in conformity with HKFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income
and expenses. The estimates and associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
74 Hong Kong International Airport
Notes to the Financial Statements
3. Summary of Significant Accounting Policies (continued)
(b) Basis of preparation of the financial statements (continued)
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
Judgements made by management in the application of HKFRSs that have significant effect on the financial
statements and major sources of estimation uncertainty are discussed in note 27.
(c) Changes in accounting policies
The HKICPA has issued one new HKFRS, a number of amendments to HKFRSs and new Interpretations that are first
effective for the current accounting period of the group and the Authority. Of these, the following developments are
relevant to the group’s financial statements:
• HKFRS 8, “Operating segments”
• HKAS 23 (revised 2007), “Borrowing costs”
• HKAS 1 (revised 2007), “Presentation of financial statements”
• Amendments to HKAS 27, “Consolidated and separate financial statements – cost of an investment in a
subsidiary, jointly controlled entity or associate”
• Amendments to HKFRS 7, “Financial instruments: Disclosures – improving disclosures about financial instruments”
• Improvements to HKFRSs (2008)
The group early adopted the provisions of HKFRS 8 which is effective for annual periods beginning on or after
1 April 2009 in the 2008/09 annual financial statements of the group. Management considers there to be only one
operating segment under the requirements of HKFRS 8. The amendment to HKAS 23 has no material impact on the
group’s financial statements as the amendment is consistent with policy already adopted by the group. The impact of
the remainder of these developments on the group’s financial statements is as follows:
• As a result of the adoption of HKAS 1 (revised 2007), details of changes in equity during the period arising from
transactions with the equity shareholder in its capacity as such have been presented separately from all other
income and expenses in a revised consolidated statement of changes in equity. All other items of income and
expense are presented in the consolidated income statement, if they are recognised as part of profit or loss for
the period, or otherwise in a new primary statement, the consolidated statement of comprehensive income.
The new format for the consolidated statement of comprehensive income and the consolidated statement of
changes in equity has been adopted in these financial statements and corresponding amounts have been restated
to conform to the new presentation. This change in presentation has no effect on reported profit or loss, total
income and expense or net assets for any period presented.
• The amendments to HKAS 27 have removed the requirement that dividends out of pre-acquisition profits should
be recognised as a reduction in the carrying amount of the investment in the investee, rather than as income. As
a result, as from 1 April 2009, all dividends receivable from subsidiaries and jointly controlled entities, whether
out of pre- or post-acquisition profits, will be recognised in the Authority’s profit or loss and the carrying amount
of the investment in the investee will not be reduced unless that carrying amount is assessed to be impaired as a
result of the investee declaring the dividend. In such cases, in addition to recognising dividend income in profit
or loss, the Authority would recognise an impairment loss. In accordance with the transitional provisions in the
amendment, this new policy will be applied prospectively to any dividends receivable in the current or future
periods and previous periods have not been restated. This change in requirement has no impact on reported
profit or loss, total income and expense or net assets for the current year.
75Annual Report 2009/10
3. Summary of Significant Accounting Policies (continued)
(c) Changes in accounting policies (continued)
• As a result of the adoption of the amendments to HKFRS 7, the financial statements include expanded disclosures
in note 16(e) about the fair value measurement of the group’s financial instruments, categorising these fair
value measurements into a three-level fair value hierarchy according to the extent to which they are based on
observable market data. The group has taken advantage of the transitional provisions set out in the amendments
to HKFRS 7, under which comparative information for the newly required disclosures about the fair value
measurements of financial instruments has not been provided.
• The “Improvements to HKFRSs (2008)” comprise a number of minor and non-urgent amendments to a range of
HKFRSs which the HKICPA has issued as an omnibus batch of amendments. Of these, the following amendment
has resulted in changes to the group’s accounting policies:
As a result of amendments to HKAS 28, “Investments in associates”, impairment losses recognised in respect
of the associates and jointly controlled entities carried under the equity method are no longer allocated to the
goodwill inherent in that carrying value. As a result, when there has been a favourable change in the estimates
used to determine the recoverable amount, the impairment loss will be reversed. Previously, the group allocated
impairment losses to goodwill and, in accordance with the accounting policy for goodwill, did not consider such
losses to be reversible. In accordance with the transitional provisions in the amendment, this new policy will be
applied prospectively to any impairment losses that arise in the current or future periods and previous periods
have not been restated.
(d) Subsidiaries and minority interests
Subsidiaries are entities controlled by the group. Control exists when the group has the power to govern the financial
and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting
rights that presently are exercisable are taken into account.
An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control
commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits
arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements.
Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Authority, whether directly or indirectly through subsidiaries, and in respect of which the group has not agreed any additional terms with the holders of those interests which would result in the group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. Minority interests are presented in the consolidated balance sheet within equity, separately from equity attributable to the equity shareholder of the Authority. Minority interests in the results of the group are presented on the face of the consolidated income statement and the consolidated statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between minority interests and the equity shareholder of the Authority.
Where losses applicable to the minority exceed the minority’s interest in the equity of a subsidiary, the excess, and any further losses attributable to the minority, are charged against the group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. All subsequent profits of the subsidiary are allocated to the group until the minority’s share of losses previously absorbed by the group has been recovered.
Loans from holders of minority interests and other contractual obligations towards these holders are presented as financial liabilities in the consolidated balance sheet in accordance with note 3(p) or (q) depending on the nature of the liability.
In the Authority’s balance sheet, an investment in a subsidiary is stated at cost less impairment losses (note 3(m)), unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale).
76 Hong Kong International Airport
Notes to the Financial Statements
3. Summary of Significant Accounting Policies (continued)
(e) Jointly controlled entitiesA jointly controlled entity is an entity which operates under a contractual arrangement between the group or the Authority and other parties, where the contractual arrangement establishes that the group or the Authority and one or more of the other parties share joint control over the economic activity of the entity.
An investment in a jointly controlled entity is accounted for in the group’s financial statements under the equity method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under the equity method, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the group’s share of the jointly controlled entity’s net assets and any impairment loss relating to the investment (notes 3(f) and (m)). The group’s share of the post-acquisition, post-tax results of the jointly controlled entity and any impairment losses for the year are recognised in the consolidated income statement, whereas the group’s share of the post-acquisition post-tax items of the jointly controlled entity’s other comprehensive income is recognised in the consolidated statement of comprehensive income.
When the group’s share of losses exceeds its interest in the jointly controlled entity, the group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the group has incurred legal or constructive obligations or made payments on behalf of the jointly controlled entity. For this purpose, the group’s interest is the carrying amount of the investment under the equity method together with the group’s long-term interest that in substance form part of the group’s net investment in the jointly controlled entity.
Unrealised profits and losses resulting from transactions between the group and its jointly controlled entity are eliminated to the extent of the group’s interests in the jointly controlled entity, except where the unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or loss.
In the Authority’s balance sheet, its investments in jointly controlled entities are stated at cost less impairment losses (note 3(m)), unless classified as held for sale (or included in a disposal group that is classified as held for sale).
(f) Goodwill
Goodwill represents the excess of the cost of an investment in a jointly controlled entity over the group’s interest
in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. In respect of investment
in jointly controlled entity, the carrying amount of goodwill is included in the carrying amount of the interest in the
joint controlled entity and the investment as a whole is tested for impairment whenever there is objective evidence of
impairment (note 3(m)).
Any excess of the group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent
liabilities over the cost of an investment in a jointly controlled entity is recognised immediately in profit or loss.
On disposal of a jointly controlled entity during the year, any attributable amount of goodwill is included in the
calculation of the profit or loss on disposal.
(g) Other investments
Investments in equity securities that do not have a quoted market price in an active market and whose fair value
cannot be reliably measured are classified as other investments and recognised in the balance sheet at cost (which
includes the transaction price and attributable transaction costs) less impairment losses at each balance sheet date.
Impairment losses are measured as the difference between the carrying amount of the financial asset and the estimated
future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of
discounting is material. Impairment losses for equity securities carried at cost are not reversed.
77Annual Report 2009/10
3. Summary of Significant Accounting Policies (continued)
(h) Derivative financial instruments
Derivative financial instruments are recognised initially at fair value. At each balance sheet date the fair value is
remeasured. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss, except where
the derivatives qualify for cash flow hedge accounting (note 3(i)).
(i) Accounting for derivative financial instruments and hedging activities
The group designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or
a firm commitment (fair value hedges) or (2) hedges of the variability in cash flows of a recognised asset or liability
or a highly probable forecast transaction or the foreign currency risk of a committed future transaction (cash flow
hedges).
(i) Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in
profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to
the hedged risk.
(ii) Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised directly in other comprehensive income and accumulated separately in equity in the
hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Amounts accumulated in equity are reclassified from equity to profit or loss in the periods when the hedged
forecast item affects profit or loss.
If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-
financial liability, the associated gain or loss is reclassified from equity to be included in the initial cost or other
carrying amount of the non-financial asset or liability.
If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial
liability, the associated gain or loss is reclassified from equity to profit or loss in the same period or periods
during which the asset acquired or liability assumed affects profit or loss (such as when interest income or
expense is recognised).
When a hedging instrument expires or is sold, terminated or exercised, or no longer meets the criteria for
hedge accounting; or the group revokes designation of the hedge relationship but the hedged forecast
transaction is still expected to occur, the cumulative gain or loss at that point remains in equity until the
transactions occurs and it is recognised in accordance with the above policy. If the hedged forecast transaction
is no longer expected to take place, the cumulative unrealised gain or loss is reclassified from equity to profit or
loss immediately.
(iii) Derivatives that do not qualify for hedge accounting
Changes in the fair value of any derivative financial instruments that do not qualify for hedge accounting are
recognised immediately in profit or loss.
(j) Fixed assets
(i) The Authority was responsible for all of the costs of the formation of the airport site. The land formation cost
and the land premium have been classified as interest in leasehold land under fixed assets. Interest in leasehold
land is stated in the balance sheet at cost less accumulated amortisation and impairment losses (note 3(m)).
78 Hong Kong International Airport
Notes to the Financial Statements
3. Summary of Significant Accounting Policies (continued)
(j) Fixed assets (continued)
(ii) Investment property
Investment properties include leasehold land and its related improvements, and/or buildings held to earn rental
income. These include land held for a currently undetermined future use and property that is being constructed
or developed for future use as investment property.
Investment properties are stated in the balance sheet at cost net of accumulated depreciation and impairment
losses (note 3(m)). Investment properties are depreciated over their estimated useful lives or unexpired term of
the lease, whichever is shorter. Rental income from investment properties is accounted for as described in note
3(vi).
(iii) The following items of other property, plant and equipment are stated in the balance sheet at cost less
accumulated depreciation and impairment losses (note 3(m)):
• buildings held for own use which are situated on leasehold land, where the fair value of the building could
be measured separately from the fair value of the leasehold land at the inception of the lease (note 3(j)(vii));
and
• other items of plant and equipment.
(iv) Repairs and maintenance expenditure in respect of fixed assets is charged to profit or loss as and when
incurred.
(v) Gains or losses arising from the retirement or disposal of an item of other property, plant and equipment are
determined as the difference between the net disposal proceeds and the carrying amount of the item and are
recognised in profit or loss on the date of retirement or disposal.
(vi) Construction in progress
Assets under construction and capital works are stated at cost. Costs comprise direct costs of construction, such
as materials, direct staff costs, an appropriate proportion of production overheads, the initial estimate, where
relevant, of the costs of dismantling and removing the items and restoring the site on which they are located,
and net borrowing costs (note 3(p)) capitalised during the period of construction or installation and testing.
Capitalisation of these costs ceases and the asset concerned is transferred to fixed assets when substantially all
the activities necessary to prepare the asset for its intended use are completed, at which time it commences to
be depreciated in accordance with the policy detailed in note 3(k).
(vii) Leased assets
An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the group
determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time
in return for a payment or a series of payments. Such a determination is made based on an evaluation of the
substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.
Leases of assets under which the group assumes substantially all the risks and rewards of ownership are
classified as being held under finance leases and treated as if the group owned the assets outright. Leases of
assets under which the group has not been transferred substantially all the risks and rewards of ownership are
classified as operating leases.
Where the group has the use of assets held under operating leases, payments made under the leases are
charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except
where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset.
Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments
made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.
79Annual Report 2009/10
3. Summary of Significant Accounting Policies (continued)
(j) Fixed assets (continued)
(vii) Leased assets (continued)
The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of
the lease term.
When the group leases out assets under operating leases, the assets are included in the balance sheet
according to their nature and are depreciated in accordance with the group’s depreciation policies set out in
note 3(k) below. Revenue arising from operating leases is recognised in accordance with the group’s revenue
recognition policies set out in note 3(vi) below.
When the group leases out its interest in leasehold land up to substantially the full period of the underlying
Land Grant and the related risks and rewards are substantially transferred to the lessees, such leases are
accounted for as finance leases. The interest in leasehold land is derecognised and the differences between
the carrying amount of the interest in leasehold land and net proceeds received for such arrangements are
recognised in profit or loss from the commencement dates of such finance leases.
(k) Depreciation
Depreciation is calculated to write off the cost of items of fixed assets less their estimated residual value, if any, using
the straight-line method over their estimated useful lives.
The estimated useful lives are:Interest in leasehold land Unexpired term of leaseAirfields: Runway base courses, taxiways and road non-asphalt layers, aprons and tunnels 15 years to unexpired term of lease Runway wearing courses, taxiways and road asphalt layers, lighting and other airfield facilities 5 to 25 yearsTerminal complexes and ground transportation centre: Building structure and road non-asphalt layers Unexpired term of lease Road asphalt layers, building services and fit-outs 7 to 25 yearsAccess, utilities, other buildings and support facilities: Road and bridge non-asphalt layers 20 years to unexpired term of lease Road and bridge asphalt layers, other building and support facilities 5 to unexpired term of lease Utility supply equipment 5 to 25 yearsSystems, installations, plant and equipment 3 to 30 yearsFurniture, fixtures and equipment 3 to 15 yearsInvestment properties: Building structure Unexpired term of lease Building services and fit-outs 7 to 25 years Furniture, fixtures and equipment 5 to 15 years
Where parts of an item of other property, plant and equipment have different useful lives, the cost of the item is
allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an
asset and its residual value, if any, are reviewed annually.
80 Hong Kong International Airport
Notes to the Financial Statements
3. Summary of Significant Accounting Policies (continued)
(l) Intangible assets (other than goodwill)
Intangible assets that are acquired by the group are stated in the balance sheet at cost less accumulated amortisation
(where the estimated useful life is finite) and impairment losses (note 3(m)). Expenditure on internally generated
goodwill and brands is recognised as an expense in the period in which it is incurred.
Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the assets’
estimated useful lives. The group’s intangible asset, which is a franchise with a finite useful life, is amortised from the
date it became available for use over the franchise period of 20 years.
Both the period and method of amortisation are reviewed annually.
(m) Impairment of assets
(i) Internal and external sources of information are reviewed at each balance sheet date to identify indications that
the following assets may be impaired, or an impairment loss previously recognised no longer exists or may have
decreased:
• interest in leasehold land;
• investment properties;
• other property, plant and equipment;
• intangible assets; and
• investments in subsidiaries and jointly controlled entities.
The recoverable amount of an asset is the greater of its fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. Where
an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is
determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating
unit).
An impairment loss is recognised in profit or loss if the carrying amount of an asset, or the cash-generating
unit to which it belongs, exceeds its recoverable amount. An impairment loss is reversed if there has been a
favourable change in the estimates used to determine the recoverable amount. A reversal of an impairment
loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been
recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the
reversals are recognised.
(ii) Interim financial reporting and impairment
To comply with the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, the
group prepares an interim financial report in compliance with HKAS 34, “Interim financial reporting”, in respect
of the first six months of the financial year. At the end of the interim period, the group applies the same
impairment testing, recognition, and reversal criteria as it would at the end of the financial year. Impairment
losses recognised in an interim period in respect of unquoted equity securities carried at cost are not reversed in
a subsequent period.
81Annual Report 2009/10
3. Summary of Significant Accounting Policies (continued)
(n) Stores and spares
Stores and spares are carried at the lower of cost and net realisable value. Stores and spares are stated at cost and
comprise all costs of purchase and costs incurred in bringing the stores and spares to their present location and
condition and is computed on a weighted average cost basis, less provision for obsolescence. When stores and spares
are consumed, the carrying amount of these stores and spares is recognised as an expense in the year in which the
consumption occurs. The amount of any write-down of stores and spares to their net realisable value and provision
for obsolescence are recognised as an expense in the period the write-down or provision occurs. Any obsolete and
damaged stores and spares are written off to the profit or loss.
(o) Trade and other receivables
Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance
for impairment of doubtful debts, except where the receivables are interest-free loans made to related parties
without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables
are stated at cost less allowance for impairment of doubtful debts.
Impairment losses for bad and doubtful debts are recognised when there is objective evidence of impairment and are
measured as the difference between the carrying amount of the financial asset and the estimated future cash flows,
discounted at the asset’s original effective interest rate where the effect of discounting is material. Objective evidence
of impairment includes observable data that comes to the attention of the group about events that have an impact
on the asset’s estimated future cash flows such as significant financial difficulty of the debtor.
Impairment losses for trade debtors included within trade and other receivables whose recovery is considered
doubtful but not remote are recorded using an allowance account. When the group is satisfied that recovery is
remote, the amount considered irrecoverable is written off against trade debtors directly and any amounts held in
the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to
the allowance account are reversed against the allowance account. Other changes in the allowance account and
subsequent recoveries of amounts previously written off directly are recognised in profit or loss.
(p) Interest-bearing borrowings and borrowing costs
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent
to initial recognition, the unhedged portion of interest-bearing borrowings is stated at amortised cost with any
difference between the amount initially recognised and redemption value being recognised in profit or loss over
the period of the borrowings, together with any interest and fees payable, using the effective interest rate method.
Subsequent to initial recognition, the carrying amount of the portion of interest-bearing borrowings, which is the
subject of a fair value hedge, is remeasured and the change in fair value attributable to the risk being hedged is
recognised in profit or loss to offset the effect of the gain or loss on the related hedging instrument.
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which
necessarily takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the
asset. Other borrowing costs are expensed in the period in which they are incurred.
The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the
asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for
its intended use are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the
activities necessary to prepare the qualifying asset for its intended use are interrupted or complete.
(q) Trade and other payables
Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect
of discounting would be immaterial, in which case they are stated at cost.
82 Hong Kong International Airport
Notes to the Financial Statements
3. Summary of Significant Accounting Policies (continued)
(r) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand, demand deposits with banks and other financial
institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash
and which are subject to an insignificant risk of changes in value, having been within three months of maturity
at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the group’s cash
management are also included as a component of cash and cash equivalents for the purpose of the consolidated
cash flow statement.
(s) Employee benefits
(i) Short term employee benefits and contributions to defined contribution retirement plans
Salaries, performance annual bonuses, paid annual leave, contributions to defined contribution retirement plans
and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered
by employees. Where payment or settlement is deferred and the effect would be material, these amounts are
stated at their present values.
The Authority and its subsidiaries in Hong Kong are required to make contributions to Mandatory Provident
Funds under the Hong Kong Mandatory Provident Fund Schemes Ordinance. Such contributions are recognised
as an expense in profit or loss as incurred.
The employees of the subsidiary in the PRC participate in a defined contribution retirement plan managed by
the local governmental authorities whereby the subsidiary is required to contribute to the plan at fixed rates of
the employees’ salary costs.
(ii) Defined benefit retirement plan obligations
The group’s defined benefit retirement cost and the present value of defined benefit obligations in respect of
the group’s defined benefit retirement plan is calculated annually by the plan’s actuary using the projected unit
credit method.
The net charge to profit or loss mainly comprises the current service cost, plus the unwinding of the discount
on the present value of the plan liabilities less the expected return on plan assets, and is presented in staff costs
and related expenses.
The amount recognised in the balance sheet represents the group’s net exposure to the plan. It is calculated
as the present value of defined benefit obligations less the fair value of the plan assets adjusted to exclude
any cumulative unrecognised actuarial gains and losses. Where the fair value of the plan assets exceeds the
present value of the defined benefit obligations, the asset recognised by the group is limited to the total of any
cumulative unrecognised net actuarial losses and past service costs and the present value of any future refunds
from the plan or reductions in future contributions to the plan.
The present value of the defined benefit obligations and the cumulative unrecognised actuarial gains and losses
are computed as follows:
The group’s present value of defined benefit obligations is determined by estimating the amount of future
benefit that employees have earned in return for their service in the current and prior periods allowing for
future salary increases until the date of termination of employment and that benefit is discounted to determine
the present value of the obligation. The discount rate is the yield at the balance sheet date on high quality
corporate bonds that have maturity dates approximating the terms of the group’s obligations. If there is no
sufficiently deep market in such bonds, the market yield in government bonds is used.
When the benefits of a plan are improved, the portion of the increased benefits relating to past service by
employees is recognised as an expense in profit or loss on a straight-line basis over the average period until the
benefits become vested. If the benefits vest immediately, the expense is recognised immediately in profit or
loss.
83Annual Report 2009/10
3. Summary of Significant Accounting Policies (continued)
(s) Employee benefits (continued)
(ii) Defined benefit retirement plan obligations (continued)
Actuarial gains and losses comprise experience adjustments (i.e. the effects of differences between the previous
actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial assumptions.
Actuarial gains or losses are generally not recognised if they are at or below a threshold amount. This threshold is
set at ten percent of the greater of (i) the present value of the defined benefit obligations and (ii) the fair value
of plan assets. To the extent that the net cumulative actuarial gains or losses exceed that threshold calculated at
the end of the previous reporting period, that portion is recognised in profit or loss over the expected average
remaining working lives of the employees participating in the plan.
(t) Income tax
(i) Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax
and movements in deferred tax assets and liabilities are recognised in profit or loss except to the extent that
they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant
amounts of tax are recognised in other comprehensive income or directly in equity respectively.
(ii) Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
(iii) Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being
the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their
tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.
Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it
is probable that future taxable profits will be available against which that asset can be utilised, are recognised.
Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary
differences include those that will arise from the reversal of existing taxable temporary differences, provided
those differences relate to the same taxation authority and the same taxable entity, and are expected to
reverse either in the same period as the expected reversal of the deductible temporary difference or in periods
into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are
adopted when determining whether existing taxable temporary differences support the recognition of deferred
tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they
relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or
periods, in which the tax loss or credit can be utilised.
The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences
arising from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit (provided they are not part of a business combination), and temporary
differences relating to investments in subsidiaries to the extent that, in case of taxable differences, the group
controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable
future, or in the case of deductible differences, unless it is probable that they will reverse in the future.
The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement
of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the
balance sheet date. Deferred tax assets and liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be
utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will
be available.
Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay
the related dividends is recognised.
84 Hong Kong International Airport
Notes to the Financial Statements
3. Summary of Significant Accounting Policies (continued)
(t) Income tax (continued)
(iii) Current tax balances and deferred tax balances, and movements therein, are presented separately from each
other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets
against deferred tax liabilities, if the Authority or the group has the legally enforceable right to set off current
tax assets against current tax liabilities and the following additional conditions are met:
• in the case of current tax assets and liabilities, the group or the Authority intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously; or
• in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation
authority on either:
– the same taxable entity; or
– different taxable entities, which, in each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and
settle the current tax liabilities on a net basis or realise and settle simultaneously.
(u) Provisions and contingent liabilities
(i) Contingent liabilities acquired in business combinations
Contingent liabilities acquired as part of a business combination are initially recognised at fair value, provided
the fair value can be reliably measured. After their initial recognition at fair value, such contingent liabilities are
recognised at the higher of the amount initially recognised, less accumulated amortisation where appropriate,
and the amount that would be determined in accordance with note 3(u)(ii). Contingent liabilities acquired in a
business combination that cannot be reliably fair valued are disclosed in accordance with note 3(u)(ii).
(ii) Other provisions and contingent liabilities
Provisions are recognised for other liabilities of uncertain timing or amount when the group or the Authority
has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of
economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time
value of money is material, provisions are stated at the present value of the expenditure expected to settle the
obligation.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of
economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or
non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability
of outflow of economic benefits is remote.
(v) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the
economic benefits will flow to the group and the revenue and costs, if applicable, can be measured reliably, revenue is
recognised in profit or loss as follows:
(i) Airport charges, representing landing charges, parking charges and terminal building charges, are recognised
when the airport facilities are utilised.
(ii) Security charges in respect of aviation security services to passengers are recognised when the airport facilities
are utilised.
(iii) Aviation security services revenue from the provision of security services to airlines, franchisees and licensees is
recognised when the services are rendered.
85Annual Report 2009/10
3. Summary of Significant Accounting Policies (continued)
(v) Revenue recognition (continued)
(iv) Franchise revenue from awarded airside support services, retail revenue from awarded retail licences, advertising
revenue from awarded advertising license, other terminal commercial revenue from leasing of check-in counters
and airline lounges and office rental and other service revenue and recoveries, are recognised on an accrual
basis in accordance with the related agreements.
(v) The consideration received in respect of the sale of a portion of the income from the aviation fuel system is
accounted for as income over the period to which the future income relates and on the basis of the estimated
future quantum of income for each period after allowing for the implicit financing cost therein. The amount
received not recognised as income is included in the balance sheet as deferred income.
(vi) Real estate revenue arising from sub-leases of interest in leasehold land and office buildings is recognised in
profit or loss on a straight-line basis over the periods of the operating leases, except where an alternative basis
is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives
granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable.
Contingent rentals are recognised as income in the accounting period in which they are earned. Amounts
received in advance in respect of sub-leases of interest in leasehold land granted are accounted for as deferred
income and are recognised in profit or loss on a straight-line basis over the periods of the respective sub-leases.
(vii) Income arising from finance leases of interest in leasehold land is recognised at the inception of such leases,
when substantially all the risks and rewards incidental to ownership are transferred to the lessees.
(viii) Dividend income from unlisted investments is recognised when the shareholder’s right to receive payment is
established.
(ix) Interest income is recognised as it accrues using the effective interest rate method.
(w) Translation of foreign currencies
Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction
dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates
ruling at the balance sheet date. Exchange gains and losses are recognised in profit or loss, except those arising from
foreign currency borrowings used to hedge a net investment in a foreign operation which are recognised in other
comprehensive income.
Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in
foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the
fair value was determined.
The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the
foreign exchange rates ruling at the dates of the transactions. Balance sheet items, including goodwill arising on
consolidation of foreign operations, are translated into Hong Kong dollars at the closing foreign exchange rates
at the balance sheet date. The resulting exchange differences are recognised in other comprehensive income and
accumulated separately in equity in the exchange reserve.
On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign
operation is reclassified from equity to profit or loss when the profit or loss on disposal is recognised.
86 Hong Kong International Airport
Notes to the Financial Statements
3. Summary of Significant Accounting Policies (continued)
(x) Related parties
For the purposes of these financial statements, a party is considered to be related to the group if:
(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the group or
exercise significant influence over the group in making financial and operating decisions, or has joint control
over the group;
(ii) the group and the party are subject to common control;
(iii) the party is an associate of the group or a joint venture in which the group is a venturer;
(iv) the party is a member of key management personnel of the group or the group’s parent, or a close family
member of such an individual, or is an entity under the control, joint control or significant influence of such
individuals;
(v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or
significant influence of such individuals; or
(vi) the party is a post-employment benefit plan which is for the benefit of employees of the group or of any entity
that is a related party of the group.
Close family members of an individual are those family members who may be expected to influence, or be influenced
by, that individual in their dealings with the entity.
(y) Segment reporting
Operating segments, and the amounts of each segment item reported in the financial statements, are identified from
the financial information provided regularly to the group’s most senior executive management for the purposes of
allocating resources to, and assessing the performance of, the group’s various lines of business and geographical
locations.
Individually material operating segments are not aggregated for financial reporting purposes unless the segments
have similar economic characteristics and are similar in respect of the nature of products and services, the nature
of production processes, the type or class of customers, the methods used to distribute the products or provide the
services, and the nature of the regulatory environment. Operating segments which are not individually material may
be aggregated if they share a majority of these criteria.
4. Segmental InformationServices from which reportable segments derive their revenue
Information reported to the group’s chief operating decision maker for the purposes of resource allocation and assessment
of performance is more focused on the group as a whole, as all of the group’s activities are considered to be primarily
dependent on the airport traffic and are highly integrated and interdependent on each other. Resources are allocated
based on what is beneficial for the group in enhancing the airport experience as a whole rather than any specific
department. Performance assessment is based on the results of the group as a whole with operating parameters set out for
each department. Consequently, management considers there to be only one operating segment under the requirements
of HKFRS 8 and believes that this presentation provides more relevant information.
Reconciliation of segmental information to the information presented in the financial statements has not been presented, as
the reconciling items net of consolidation adjustments are considered to be immaterial to the group.
Information provided to management in respect of group’s revenue and expenses and assets and liabilities is similar to that
reported in these financial statements.
Revenues from major services
The group’s revenues from its major services are set out in the consolidated income statement.
87Annual Report 2009/10
4. Segmental Information (continued)
Geographical Information
No geographical information is shown as the turnover and operating profit of the group is substantially derived from
activities in Hong Kong, other than its interests in jointly controlled entities in the PRC, details of which are disclosed under
note 13 to the financial statements.
Information about major customers
The group’s customer base is diversified and includes only one customer with whom transactions have exceeded 10% of
the group’s revenues.
Included in the turnover of $9,015 million for the year (2009: $8,886 million) are revenues of approximately $2,117 million
(2009: $2,282 million) which arose from this customer. This includes only revenues arising from those entities which are
known to the group to be under common control of this customer. Details of concentrations of credit risk arising from this
customer are set out in note 16(a).
5. Operating Profit before Interest and Finance CostsOperating profit before interest and finance costs of the group and the Authority are arrived at after charging/(crediting):
The group The Authority
$ million 2010 2009 2010 2009
Auditors’ remuneration: – audit services 4 4 3 3 – tax services – 1 – 1 – other services – 1 – 1Stores and spares expensed 70 87 69 86Net loss on disposal of other property, plant and equipment 9 19 9 19Impairment losses on: – trade and other receivables (note 17(b)) 4 38 3 37 – other investments (note 14) 55 70 55 70Depreciation: – assets held for use under operating leases 109 135 112 138 – other assets 1,834 1,851 1,813 1,831Amortisation: – interest in leasehold land 232 232 232 232 – intangible asset 16 16 – –Operating lease charges: minimum lease payments – hire of plant and machinery 4 4 4 4 – hire of other assets (including property rentals) 7 6 2 1Rentals from investment properties less direct outgoings of $8 million (2009: $12 million) for both the group and the Authority (45) (41) (54) (50)Dividends received from a jointly controlled entity – – – (41)
88 Hong Kong International Airport
Notes to the Financial Statements
6. Remuneration of the Members of the Board and Executive Directors and Individuals with the Highest Emoluments(a) Remuneration of the Members of the Board and Executive Directors
Members of the Board, the Chief Executive Officer and Executive Directors are considered as key management personnel of the Authority. There are three components of remuneration paid to the Chief Executive Officer and Executive Directors.
Basic compensationBasic compensation consists of base salary, housing and other allowances and benefits in kind.
Performance-related compensationThis represents discretionary payments depending on individual performance and the performance of the group.
Retirement benefitsRetirement benefits relate to the group’s contribution to retirement funds or gratuities in lieu of retirement scheme contributions accrued.
The emoluments of the Members of the Board and Executive Directors of the Authority are as follows:
2010$’000
BoardMember’s
feeBasic
compensation
Performance-related
compensationRetirement
benefits Total
Members of the BoardNon-executive membersMarvin Cheung Kin-tung 220 – – – 220He Guangbei 110 – – – 110Vincent Fang Kang 110 – – – 110Edmund Leung Kwong-ho 110 – – – 110Andrew Liao Cheung-sing 110 – – – 110Lo Ka-shui 110 – – – 110Wilfred Wong Ying-wai 110 – – – 110Raymond Ho Chung-tai 110 – – – 110Benjamin Hung Pi-cheng 110 – – – 110Chan Kam-lam (appointed in January 2010) 28 – – – 28Albert Ho Chun-yan (appointed in January 2010) 28 – – – 28Allan Wong Chi-yun (appointed in January 2010) 28 – – – 28Director-General of Civil Aviation1 110 – – – 110Secretary for Financial Services and the Treasury1 110 – – – 110Secretary for Transport and Housing1 110 – – – 110
Executive memberStanley Hui Hon-chung (Chief Executive Officer) – 4,033 2,000 492 6,525
Executive DirectorsHoward Eng Kiu-chor – 3,073 1,350 586 5,009Raymond W C Lai – 3,063 1,350 586 4,999
1,514 10,169 4,700 1,664 18,047
1 Members who are public officers. Fees payable to the Members who are public officers are received by the Government rather
than by the individuals concerned.
89Annual Report 2009/10
6. Remuneration of the Members of the Board and Executive Directors and Individuals with the Highest Emoluments (continued)
(a) Remuneration of the Members of the Board and Executive Directors (continued)
2009$’000
BoardMember’s
feeBasic
compensation
Performance-related
compensationRetirement
benefits Total
Members of the BoardNon-executive membersVictor Fung Kwok-king (term of office completed on 31 May 2008)1 – – – – –Marvin Cheung Kin-tung2 201 – – – 201He Guangbei 110 – – – 110
Vincent Fang Kang 110 – – – 110Edmund Leung Kwong-ho 110 – – – 110Andrew Liao Cheung-sing 110 – – – 110Lo Ka-shui 110 – – – 110Wilfred Wong Ying-wai 110 – – – 110Jasper Tsang Yok-sing (resigned in October 2008) 57 – – – 57Raymond Ho Chung-tai (appointed in June 2008) 92 – – – 92Benjamin Hung Pi-cheng (appointed in June 2008) 92 – – – 92Director-General of Civil Aviation3 110 – – – 110Secretary for Financial Services and the Treasury3 110 – – – 110Secretary for Transport and Housing3 110 – – – 110
Executive memberStanley Hui Hon-chung (Chief Executive Officer) – 4,039 1,650 492 6,181
Executive DirectorsHoward Eng Kiu-chor – 3,161 987 263 4,411Raymond W C Lai – 3,061 868 263 4,192
1,432 10,261 3,505 1,018 16,216
1 Victor Fung Kwok-king elected to waive any fee payable to him by the Authority.
2 Marvin Cheung Kin-tung was appointed Chairman of the Authority with effect from 1 June 2008.
3 Members who are public officers. Fees payable to the Members who are public officers are received by the Government rather
than by the individuals concerned.
90 Hong Kong International Airport
Notes to the Financial Statements
6. Remuneration of the Members of the Board and Executive Directors and Individuals with the Highest Emoluments (continued)
(b) Individuals with the Highest Emoluments
Of the five individuals with the highest emoluments, three (2009: three) comprise the Chief Executive Officer and two
Executive Directors whose emoluments are disclosed under note 6(a). The aggregate of the emoluments in respect of
the other two (2009: two) individuals are as follows:
$’000 2010 2009
Basic compensation1 7,167 6,919Performance-related compensation2 1,126 1,304Retirement benefits 853 381
9,146 8,604
The emoluments of the two (2009: two) individuals with the highest emoluments are within the following bands:
2010 2009
$
Number of
individuals
Number of
individuals
3,000,001 – 3,500,000 1 15,000,001 – 5,500,000 – 15,500,001 – 6,000,000 1 –
2 2
1 The basic compensation includes net payment of PRC Individual Income Tax of $1.7 million (2009: $1.5 million) for one of the
individuals on secondment to the PRC according to the terms of the secondment contract. The emoluments for the individual
after including PRC Individual Income Tax fall within the $5.5 million to $6.0 million band (2009: the $5.0 million to $5.5 million
band).
2 The performance-related compensation relates to 2008/09 which was paid during the year. The performance-related
compensation for 2009/10 was not allocated to the individuals as at the date of the approval of the financial statements and
hence is not disclosed.
7. Staff Costs and Related Expenses
The group The Authority
$ million 2010 2009 2010 2009
Contributions to defined contribution retirement plan 42 45 18 22Expenses recognised in respect of defined benefit retirement plan (note 15) 37 36 37 36
Total retirement costs 79 81 55 58Salaries, wages and other benefits 1,079 1,068 574 585
1,158 1,149 629 643
91Annual Report 2009/10
8. Finance Costs
The group The Authority
$ million 2010 2009 2010 2009
Interest on bank loans repayable – within five years 21 105 21 105Interest on notes repayable – within five years 156 147 156 147 – after five years 50 49 50 49Other borrowing costs 8 13 8 13Other interest expense 11 4 8 1
Total interest expense on financial liabilities not stated at fair value through profit or loss 246 318 243 315
Interest on notes stated at fair value through profit or loss repayable – within five years 72 58 72 58 – after five years 3 – 3 –Less: Borrowing costs capitalised into assets under construction (59) (59) (59) (59)
262 317 259 314Net foreign exchange loss/(gain) 5 (11) 5 (11)Cash flow hedges: – net gain on forward foreign exchange contracts, reclassified from equity (23) (36) (23) (36) – net loss on interest rate swaps, reclassified from equity 13 5 13 5Fair value hedges: – net gain on fair value hedging instruments (interest rate swaps)* (42) (99) (42) (99) – net (gain)/loss on underlying hedged interest-bearing borrowings (19) 76 (19) 76
196 252 193 249
* Includes interest received of $59 million (2009: $20 million) in respect of interest rate swaps under fair value hedging arrangements.
The borrowing costs have been capitalised at the average cost of funds to the group calculated on a monthly basis. The
average interest rate used for capitalisation for the year was 2.8% per annum (2009: 3.5%).
92 Hong Kong International Airport
Notes to the Financial Statements
9. Taxation(a) Taxation in the income statement represents:
The group The Authority
$ million 2010 2009 2010 2009
Current tax – Hong Kong Profits tax – Provision for the year 3 1 – –Current tax – Overseas – Provision for the year – 1 – – – Over-provision in respect of prior years (1) – – –Deferred tax (note 9(d)) – Origination and reversal of temporary differences 578 530 578 530
580 532 578 530
No provision for Hong Kong Profits tax has been made in the financial statements in respect of the Authority as the
current year’s taxable income has been offset against carried forward tax losses. The provision for Hong Kong Profits
tax for its Hong Kong subsidiaries for the year ended 31 March 2010 is calculated at 16.5% (2009: 16.5%) of the
estimated assessable profits for the year.
No provision for PRC Corporate Income Tax has been made in the financial statements in respect of the PRC
subsidiaries as there were no estimated assessable profits during the year.
(b) Reconciliation between tax expense and accounting profit at applicable tax rates:
The group The Authority
$ million 2010 2009 2010 2009
Profit before taxation 3,421 3,115 3,257 2,982
Notional tax on profit before taxation, calculated at the rates applicable to profits in the countries concerned 565 516 538 492Tax effect of non-deductible expenses 46 49 45 46Tax effect of non-taxable income (33) (36) (5) (8)Tax effect of unused tax losses not recognised 3 3 – –Over-provision in respect of prior years (1) – – –
Actual tax expense 580 532 578 530
93Annual Report 2009/10
9. Taxation (continued)
(c) Current taxation in the balance sheets represents:
The group
$ million 2010 2009
Provision for the year (note 9(a)) – Hong Kong Profits tax 3 1 – Overseas Profits tax – 1Provisional Hong Kong Profits tax paid (2) –
Tax payable (included in “Trade and other payables”) 1 2
(d) Deferred tax assets and liabilities recognised:
The components of deferred tax (assets)/liabilities of the group and the Authority recognised in the balance sheet and
the movements during the year are as follows:
The group and the Authority
$ millionDeferred tax arising from:
Depreciationallowancesin excess ofthe related
depreciationCash flow
hedgesDeferred
incomeEstimatedtax losses Total
At 1 April 2008 3,195 (1) (267) (889) 2,038Charged to profit or loss 77 – 15 438 530
At 31 March 2009 3,272 (1) (252) (451) 2,568
At 1 April 2009 3,272 (1) (252) (451) 2,568Charged to profit or loss 145 – 19 414 578
At 31 March 2010 3,417 (1) (233) (37) 3,146
(e) Deferred tax assets not recognised:
In accordance with the accounting policy set out in note 3(t), the group has not recognised deferred tax assets in
respect of a subsidiary’s cumulative tax losses of RMB59 million ($68 million) (2009: RMB49 million ($55 million)) as it
is not probable that future taxable profits against which the losses can be utilised will be available in the relevant tax
jurisdiction and entity. The tax losses for the subsidiary in the PRC will expire within five years under the current PRC
Corporate Income Tax legislation.
94 Hong Kong International Airport
Notes to the Financial Statements
10. Fixed Assets(a) The group
Other property, plant and equipment
$ million Airfields
Terminalcomplexes& ground
transportationcentre
Access,utilities,
otherbuildings
& supportfacilities
Systems,installations,
plant &equipment
Furniture,fixtures &
equipmentConstructionin progress Sub-total
Investmentproperties
Interest inleasehold
land Total
Cost
At 1 April 2008 7,663 22,045 12,916 8,332 1,441 1,746 54,143 302 11,360 65,805
Additions/cost
adjustments* 66 473 54 83 94 1,204 1,974 – 162 2,136
Reclassifications 210 – – – – (210) – – – –
Disposals (73) (256) (10) (689) (42) – (1,070) – – (1,070)
At 31 March 2009 7,866 22,262 12,960 7,726 1,493 2,740 55,047 302 11,522 66,871
At 1 April 2009 7,866 22,262 12,960 7,726 1,493 2,740 55,047 302 11,522 66,871
Additions/cost
adjustments* (15) 84 13 118 51 1,049 1,300 – – 1,300
Reclassifications 85 592 990 837 92 (2,596) – – – –
Disposals (29) (150) (27) (173) (16) – (395) – (162) (557)
At 31 March 2010 7,907 22,788 13,936 8,508 1,620 1,193 55,952 302 11,360 67,614
Accumulated
depreciation and
amortisation
At 1 April 2008 1,795 5,575 3,018 4,877 1,039 – 16,304 12 2,258 18,574
Charge for the year 320 747 417 379 112 – 1,975 11 232 2,218
Written back on
disposals (73) (248) (6) (682) (40) – (1,049) – – (1,049)
At 31 March 2009 2,042 6,074 3,429 4,574 1,111 – 17,230 23 2,490 19,743
At 1 April 2009 2,042 6,074 3,429 4,574 1,111 – 17,230 23 2,490 19,743
Charge for the year 301 646 436 411 138 – 1,932 11 232 2,175
Written back on
disposals (26) (144) (26) (171) (16) – (383) – – (383)
At 31 March 2010 2,317 6,576 3,839 4,814 1,233 – 18,779 34 2,722 21,535
Net book value
At 31 March 2010 5,590 16,212 10,097 3,694 387 1,193 37,173 268 8,638 46,079
At 31 March 2009 5,824 16,188 9,531 3,152 382 2,740 37,817 279 9,032 47,128
* Cost adjustments relate to certain fixed assets capitalised at time of commissioning based on contractors’ claimed values. Such
assets’ final values have been adjusted following finalisation of contract claims with contractors at final contract values during
the year.
95Annual Report 2009/10
10. Fixed Assets (continued)
(b) The Authority
Other property, plant and equipment
$ million Airfields
Terminalcomplexes& ground
transportationcentre
Access,utilities,
otherbuildings
& supportfacilities
Systems,installations,
plant &equipment
Furniture,fixtures &
equipmentConstructionin progress Sub-total
Investmentproperties
Interest inleasehold
land Total
Cost
At 1 April 2008 7,663 22,029 12,774 8,302 1,412 1,746 53,926 413 11,360 65,699
Additions/cost
adjustments* 62 467 54 68 89 1,201 1,941 – 162 2,103
Reclassifications 210 – – – – (210) – – – –
Disposals (73) (256) (10) (687) (41) – (1,067) – – (1,067)
At 31 March 2009 7,862 22,240 12,818 7,683 1,460 2,737 54,800 413 11,522 66,735
At 1 April 2009 7,862 22,240 12,818 7,683 1,460 2,737 54,800 413 11,522 66,735
Additions/cost
adjustments* (15) 82 10 112 49 1,050 1,288 – – 1,288
Reclassifications 88 589 990 837 92 (2,596) – – – –
Disposals (29) (149) (26) (170) (16) – (390) (1) (162) (553)
At 31 March 2010 7,906 22,762 13,792 8,462 1,585 1,191 55,698 412 11,360 67,470
Accumulated
depreciation and
amortisation
At 1 April 2008 1,794 5,575 2,986 4,861 1,023 – 16,239 35 2,258 18,532
Charge for the year 320 745 406 376 108 – 1,955 14 232 2,201
Written back on
disposals (73) (248) (6) (680) (39) – (1,046) – – (1,046)
At 31 March 2009 2,041 6,072 3,386 4,557 1,092 – 17,148 49 2,490 19,687
At 1 April 2009 2,041 6,072 3,386 4,557 1,092 – 17,148 49 2,490 19,687
Charge for the year 301 644 425 407 134 – 1,911 14 232 2,157
Written back on
disposals (26) (144) (26) (169) (16) – (381) – – (381)
At 31 March 2010 2,316 6,572 3,785 4,795 1,210 – 18,678 63 2,722 21,463
Net book value
At 31 March 2010 5,590 16,190 10,007 3,667 375 1,191 37,020 349 8,638 46,007
At 31 March 2009 5,821 16,168 9,432 3,126 368 2,737 37,652 364 9,032 47,048
* Cost adjustments relate to certain fixed assets capitalised at time of commissioning based on contractors’ claimed values. Such
assets’ final values have been adjusted following finalisation of contract claims with contractors at final contract values during
the year.
(c) Under the Private Treaty Land Grant issued by the Government for a period from 1 December 1995 to 30 June 2047
(“the Land Grant”), the Government has granted to the Authority up to the year 2047 the legal rights to the entire
airport site at Chek Lap Kok together with the rights necessary to develop such site for the purposes of its business.
The net land formation cost of $11,360 million and the land premium of $2,000 have been classified as interest in
leasehold land under fixed assets.
96 Hong Kong International Airport
Notes to the Financial Statements
10. Fixed Assets (continued)
(d) The group and the Authority engaged an independent firm of surveyors, Knight Frank Petty Limited (“the valuer”),
who have among their staff Fellow members of the Hong Kong Institute of Surveyors with recent experience in the
location and category of properties being valued, to value its investment properties. In order to determine the fair
value of the group’s and the Authority’s investment properties, the valuer has considered the assignment restrictions
on these investment properties in the valuations. The fair value of the group’s and the Authority’s restricted
investment properties as at 31 March 2010 calculated by reference to net rental income allowing for reversionary
income potential amounted to $679 million and $791 million (2009: $553 million and $641 million) respectively.
(e) The Authority has granted sub-leases of its interest in leasehold land for airport related development and the
provision of airside support services under franchise agreements for periods ranging from 5 to 49 years. The group
and the Authority also leases out part of the terminal complexes and related assets under operating leases for periods
generally ranging from two to five years. Where the sub-leases are for substantially the full period of the Land Grant,
they are considered to be in the nature of finance leases and accordingly the carrying value of the related interest in
leasehold land is derecognised. Under the franchise agreements, the franchisees are granted sub-leases of interest in
leasehold land for the periods of the respective franchises. All terms are renegotiated on renewal.
Payments receivable by the Authority under these operating leases and franchise agreements in some instances
are adjusted periodically to reflect prevailing market indices and in some cases contain contingent rentals based on
passenger flow and turnover of tenants and franchisees.
The total future minimum payments (excluding contingent rentals) under non-cancellable operating leases and
franchise agreements receivable by the group and the Authority are as follows:
The group The Authority
$ million 2010 2009 2010 2009
Within one year 1,389 1,213 1,384 1,215After one but within five years 3,171 2,824 3,164 2,811After five years 4,540 4,303 4,538 4,300
9,100 8,340 9,086 8,326
During the year, $4,760 million and $4,770 million (2009: $4,310 million and $4,316 million) for the group and the
Authority were recognised as income in profit or loss in respect of the operating leases and franchise agreements.
The above income includes contingent rentals of $3,523 million (2009: $3,192 million) for both the group and the
Authority.
The cost less accumulated amortisation of the interest in leasehold land for airport related development and the
provision of airside support services under franchise agreements sub-leased to third parties under non-cancellable
sub-lease agreements for both the group and the Authority as at 31 March 2010 was $525 million (2009: $525
million) and amortisation for the year amounted to $14 million (2009: $14 million).
The cost less accumulated depreciation of the fixed assets leased to third parties under non-cancellable operating
leases for the group and the Authority as at 31 March 2010 were $2,827 million and $2,908 million (2009: $2,809
million and $2,894 million) and depreciation for the year amounted to $109 million and $112 million (2009: $135
million and $138 million) respectively.
(f) A review of the useful life of fixed assets is undertaken by the Authority annually. Following a review undertaken
during the year, the estimated useful lives of certain fixed assets were revised with effect from 1 April 2009 resulting
in a net increase in the Authority’s annual depreciation charge of approximately $93 million. A similar review
undertaken during the previous year resulted in a net increase in the Authority’s annual depreciation charge of
approximately $103 million for the previous year.
97Annual Report 2009/10
11. Intangible Asset
The group
$ million 2010 2009
CostAt 1 April 312 305Exchange adjustment 2 7
At 31 March 314 312
Accumulated amortisationAt 1 April 39 22Charge for the year 16 16Exchange adjustment – 1
At 31 March 55 39
Net book valueAt 31 March 259 273
In July 2006, HKIA (China) Limited (“HKIACL”), a wholly-owned subsidiary of the Authority, formed the Hong Kong-
Zhuhai Airport Management Co., Ltd. (“HKZAM”) with Zhuhai Headway Transportation Investment Co., Ltd. (“ZHTICL”).
HKZAM acquired the right to operate and manage Zhuhai Airport (“ZHU”) for 20 years (“the intangible asset”) by paying
an upfront franchise fee of RMB 250 million ($247 million) in addition to an annual franchise fee payable to Zhuhai Airport
Group Limited (“ZHGL”) for 20 years. Over the first three years of the franchise arrangement, the annual franchise fee
was fixed at RMB 3 million ($3 million). Subsequently, it is calculated at the higher of RMB 3 million ($3 million) or a fixed
percentage of the annual turnover of HKZAM. The present value of the minimum annual franchise fees payable and the
upfront franchise fee is recognised as the cost of the intangible asset, and is being amortised over 20 years on a straight-
line basis with effect from 1 October 2006 when HKZAM took over management of ZHU and is included in “Depreciation
and amortisation” in the income statement. The cost and accumulated amortisation of the intangible asset are translated
into Hong Kong dollars at the closing foreign exchange rate at the balance sheet date, and the amortisation charge for
the year at the average foreign exchange rate during the year. The resulting exchange differences are recognised in the
exchange reserve.
98 Hong Kong International Airport
Notes to the Financial Statements
12. Investments in Subsidiaries
The Authority
$ million 2010 2009
Unlisted shares, at cost 5 5
The following list contains only the particulars of subsidiaries which principally affected the results, assets or liabilities of the
group. The class of shares held is ordinary unless otherwise stated. Details of principal subsidiaries are as follows:
Name of company
Place of incorporation and operation
Particulars of issued andpaid up capital
Proportion of ownership interest
Principal activity
Group’s effective interest
Held by the
AuthorityHeld by
a subsidiary
Aviation Security Company Limited (“AVSECO”)
Hong Kong 10,000,000 shares of $1 each
51% 51% – Provision of aviation security services
HKIA Precious Metals Depository Limited
Hong Kong 2 shares of $1 each
100% 100% – Provision of storage space and related services
SkyLink Passenger Services Company Limited (“SkyLink”)
Hong Kong 100,000 shares of $1 each
51% 51% – Provision of passenger check-in services at various ports of Pearl River Delta
HKIA (China) Limited Hong Kong 2 shares of $1 each
100% 100% – Investment holding company
Hong Kong – Zhuhai Airport Management Co., Ltd.*
PRC RMB360,000,000 55% – 55% Airport management and provision of transportation and ground services relating to aviation
* a sino-foreign equity joint venture
99Annual Report 2009/10
13. Interests in Jointly Controlled Entities
The group The Authority
$ million 2010 2009 2010 2009
Unlisted shares, at cost – – 1,994 1,977Share of net assets 2,590 2,389 – –Goodwill 218 217 – –
2,808 2,606 1,994 1,977
Details of the group’s interests in the jointly controlled entities are as follows:
Proportion of ownership interest
Name of joint venture
Form of business structure
Place of incorporation and operation
Particulars of issued and paid up capital
Group’s effective interest
Held by the
Authority Principal activity
Hangzhou Xiaoshan International Airport Co., Ltd. (“HXIACL”)
Incorporated PRC RMB5,686,000,000 35% 35% Management, operation and development of Hangzhou Xiaoshan International Airport (“HXIA”) and provision of related services
Shanghai Hong Kong Airport Management Co., Ltd. (“SHKAMCL”)
Incorporated PRC RMB30,000,000 49% 49% Management and operation of the existing and new terminals at Hongqiao International Airport, Shanghai (“HIA”)
(a) HXIACL
On 19 September 2006, the Authority signed a joint venture agreement with the original shareholders of HXIACL to
jointly operate and manage HXIA at Hangzhou, China. After the completion of the capital injection on 29 November 2006,
HXIACL was transformed from a State-owned enterprise to a Sino-foreign equity joint venture with a period of
operation of 30 years. Currently, the original shareholders of HXIACL, being Zhejiang Airport Management Company,
Hangzhou Investment Holding Co., Ltd. and Hangzhou Xiaoshan State-owned Assets Management Company, jointly
hold a 65% equity interest of HXIACL whereas the Authority holds the remaining 35% equity interest.
Summary of financial information of the HXIACL – group’s effective interest is as follows:
$ million 2010 2009
Non-current assets 3,560 1,938Current assets 481 1,928Non-current liabilities (801) (766)Current liabilities (667) (711)
Net assets 2,573 2,389
100 Hong Kong International Airport
Notes to the Financial Statements
13. Interests in Jointly Controlled Entities (continued)
(a) HXIACL (continued)
$ million 2010 2009
Income 434 384Government subsidies 81 106Expenses (326) (292)
Profit before taxation 189 198Income tax (12) (5)
Profit after taxation 177 193
As at 31 March 2010, the group’s share of net assets of HXIACL includes an amount of $228 million (2009: $147
million) which represents the group’s share of pre-/post-acquisition airport construction fee subsidies (“ACF”) and
other subsidies received from the PRC government, of which $81 million (2009: $106 million) was received during
the year. Such ACF and other subsidies are for restricted use and are not distributable.
HXIACL has 31 December as its financial accounting year end date, which is not coterminous with that of the group.
The Authority has determined that it is more practicable to incorporate its share of HXIACL’s results and net assets
based on HXIACL’s statutory financial year ending 31 December. Accordingly, in these consolidated financial
statements, the results of HXIACL have been accounted for based on its audited financial statements for the year
ended 31 December 2009 and adjusted for significant transactions and events that occurred during the period from
1 January 2010 to 31 March 2010 (2009: based on its audited financial statements for the year ended 31 December 2008
and adjusted for significant transactions and events that occurred during the period from 1 January 2009 to
31 March 2009). The financial information of HXIACL accounted for has been adjusted to comply with the Authority’s
accounting policies.
The outstanding commitments of HXIACL are as follows:
$ million 2010 2009
Commitments outstanding for HXIACL in respect of capital expenditure not provided for in the financial statements are as follows: Contracted for 316 437 Authorised but not contracted for 7,098 4,484
7,414 4,921
It is envisaged that the capital commitments of the jointly controlled entity will be financed independently by the
jointly controlled entity and no commitment has been made by the group to contribute further funds by way of
equity or loans for this purpose. In August 2008, HXIACL arranged loan facilities of RMB 4,700 million ($5,346
million) for the second phase development of the airport facilities and RMB1,128 million ($1,283 million) has been
drawn down from the facilities as at 31 March 2010.
During 2009, HXIACL and a PRC government-owned entity have entered into an agreement, under which HXIACL is
entitled to use a piece of land contributed by the PRC government-owned entity amounting to RMB1,200 million
($1,361 million) initially without any consideration but subject to revision in the future for the second phase of the
airport development.
101Annual Report 2009/10
13. Interests in Jointly Controlled Entities (continued)
(b) SHKAMCLOn 7 September 2009, the Authority signed a joint venture agreement with Shanghai Airport (Group) Company Limited (“SAGCL”) for the establishment of the SHKAMCL, a Sino-foreign equity joint venture. SHKAMCL will manage and operate the existing and new terminals at HIA, under a management contract to be signed for 20 years in return for a management fee to be paid by Shanghai Airport (Group) Co. Ltd. Hongqiao International Airport Company. Pursuant to the joint venture agreement, the Authority and SAGCL will contribute RMB49 million ($55.7 million) and RMB51 million ($58.0 million), in return for a 49% and a 51% equity interest in SHKAMCL respectively. As at 31 March 2010, the Authority and SAGCL have contributed RMB14.7 million ($16.7 million) and RMB15.3 million ($17.4 million) respectively. As at 31 March 2010, the Authority’s outstanding commitment in respect of capital contribution to SHKAMCL not provided for in the financial statements amounts to RMB34.3 million ($39.0 million), which is set out in note 23.
Summary of financial information of the SHKAMCL – group’s effective interest is as follows:
$ million 2010
Current assets 17
Net assets 17
SHKAMCL has 31 December as its financial accounting year end date, which is not coterminous with that of the group. The Authority has determined that it is more practicable to incorporate its share of SHKAMCL’s results and net assets based on SHKAMCL’s statutory financial year ending 31 December. SHKAMCL had no significant results of operation since its incorporation and up to 31 December 2009.
14. Other Investments
The group and the Authority
$ million 2010 2009
Unlisted shares 261 261Less: impairment loss (125) (70)
136 191
Other investments represent the Authority’s 11.8% (2009: 11.8%) equity interest in IEC Holdings Limited, a company set up by the Authority and the Government, which holds an equity interest of 84.9% (2009: 84.9%) in a joint venture company set up to procure the development of the AsiaWorld-Expo exhibition centre. The remaining 15.1% (2009: 15.1%) of the equity interest in the joint venture company is held by a third party consortium. As consideration for the shares in IEC Holdings Limited, the Authority has granted a sub-lease of land on which the AsiaWorld-Expo exhibition centre is situated, to IEC Holdings Limited to 2047. As the land sub-leased to IEC Holdings Limited is for substantially the full period of the Land Grant, the lease is considered to be in the nature of a finance lease and the related cost of land has been derecognised accordingly.
IEC Holdings Limited has granted an under-lease of the land on which the AsiaWorld-Expo exhibition centre is situated until 2031 to the joint venture company which has constructed and operates the exhibition centre and will continue to operate over the period of the lease, at the end of which the land and the exhibition centre and the related facilities will revert to IEC Holdings Limited at nil consideration.
The investment is stated at cost less impairment loss because the shares do not have a quoted market price in an active market and the fair value cannot be measured reliably due to inherent uncertainty in the estimation process and the underlying assumptions relating to the cash flow projection as discussed in note 27(b)(ii).
During the year, an impairment loss of $55 million (2009: $70 million) was recognised on the basis of a material decline in its estimated future cash flows, discounted to present value using a discount rate of 10.25% (2009: 10.25%) per annum below carrying value. The cash flows have taken into consideration the judgement of the management of the investee and the discount rate has been confirmed by an external consultant. Adverse changes in the market in which the investee operates indicate that the cost of the group’s investment may not be fully recovered. Impairment loss on other investments of $55 million (2009: $70 million) (included in “Other operating expenses”) has been recognised in profit or loss in accordance with the policy set out in note 3(g).
102 Hong Kong International Airport
Notes to the Financial Statements
15. Employee Retirement Benefits(a) Defined benefit retirement plan
The Authority makes contributions to a defined benefit retirement plan which covers 12% (2009: 12%) of the group’s employees. The plan is administered by independent trustees with its assets held separately from those of the Authority.
The plan is funded by contributions from the Authority in accordance with an independent actuary’s recommendation based on an annual actuarial valuation. The Authority expects to pay $31 million (2009: $50 million) in contributions to the defined benefit retirement plan in 2011. Based on an independent actuarial valuation of the plan as at 31 March 2010 prepared by qualified staff of HSBC Insurance (Asia-Pacific) Holdings Limited (2009: Watson Wyatt (Hong Kong) Limited) using the projected unit credit method, the Authority’s obligation under the plan is 92% (2009: 71%) covered by the plan assets held by the trustees. The signing actuary is a Fellow member of the Society of Actuaries of the United States.
(i) The amounts recognised in the balance sheet are as follows:
The group and the Authority
$ million 2010 2009
Present value of wholly funded obligations (588) (549)Fair value of plan assets 539 391Net unrecognised actuarial losses 122 221
Net assets* 73 63
* As a result of first time adoption of Hong Kong Statement of Standard Accounting Practice 34, “Employee benefits”,
in financial year 2002/03 and the transitional provisions prescribed therein, the Authority had recognised a defined benefit
asset of $77 million in the balance sheet and an adjustment to the opening reserve as at 1 April 2002 was made
accordingly.
A portion of the above asset is expected to be utilised after more than one year. However, it is not practicable to segregate this amount from the amounts recoverable in the next twelve months, as future contributions will also relate to future services rendered and future changes in actuarial assumptions and market conditions.
(ii) Plan assets consist of the following:
The group and the Authority
$ million 2010 2009
Equity securities 278 182Corporate bonds 221 187Cash 40 22
539 391
(iii) Movements in the present value of the defined benefit obligations:
The group and the Authority
$ million 2010 2009
At 1 April 549 539Benefits paid by the plan (20) (24)Current service cost 45 49Interest cost 12 15Actuarial losses/(gains) 2 (30) – gains due to change in actuarial assumptions (27) (25)
– experience losses/(gains) 29 (5)
At 31 March 588 549
103Annual Report 2009/10
15. Employee Retirement Benefits (continued)
(a) Defined benefit retirement plan (continued)
(iv) Movements in plan assets are as follows:
The group and the Authority
$ million 2010 2009
At 1 April 391 497Contributions paid to the plan 47 23Benefits paid by the plan (20) (24)Actual return/(losses) on plan assets 121 (105) – changes in actuarial expected return on plan assets 28 34
– actuarial gains/(losses) 93 (139)
At 31 March 539 391
(v) Expense recognised in the income statement is as follows:
The group and the Authority
$ million 2010 2009
Current service cost 45 49Interest cost 12 15Actuarial expected return on plan assets (28) (34)Net actuarial losses recognised 8 6
37 36
The expense is recognised in the staff costs and related expenses in the income statement (note 7). The actual
return on plan assets, taking into account all changes in the fair value of the plan assets excluding benefit paid
and contribution received, for the year was a net income of $121 million (2009: net loss of $105 million).
(vi) The principal actuarial assumptions used at the balance sheet dates (expressed as weighted averages) are as
follows:
The group and the Authority
2010 2009
Discount rate 2.80% 2.00%Expected rate of return on plan assets 6.00% 6.00%Future long term salary increases 3.50% 3.50%
The expected long-term rate of return on plan assets for the year ended 31 March 2010 is based on the
portfolio as a whole and market expectations as at 1 April 2009 for returns over the entire life of the obligation
based on historical returns, without adjustments.
104 Hong Kong International Airport
Notes to the Financial Statements
15. Employee Retirement Benefits (continued)
(a) Defined benefit retirement plan (continued)
(vii) Historical information
The group and the Authority
$ million 2010 2009 2008 2007 2006
Present value of the defined benefit obligations (588) (549) (539) (400) (339)Fair value of plan assets 539 391 497 477 422
(Deficit)/surplus in the plan (49) (158) (42) 77 83
Experience (losses)/gains arising on plan liabilities (29) 5 2 (5) (11)Experience gains/(losses) arising on plan assets 93 (139) (14) 27 24
(b) Defined contribution retirement plans(i) The group also operates Mandatory Provident Fund Schemes (“MPF”) under the Hong Kong Mandatory
Provident Fund Schemes Ordinance for employees not covered by the defined benefit retirement plan. The MPF scheme is a defined contribution retirement plan administered by independent trustees. Contributions by the group range from 5% to 15% of employees’ salary and have been charged to profit or loss. Contributions by employees range from 5% to 9%. Voluntary contributions to the plan vest over a period of two to ten years.
(ii) As stipulated by the regulations of the PRC, the subsidiary in the PRC participates in a basic defined contribution
pension plan administered by the Municipal Government under which it is governed. The group has no other material obligation for payment of basic retirement benefits beyond the annual contributions which are calculated at a rate based on the salaries, bonuses and certain allowances of its employees.
16. Financial Risk Management and Fair ValuesThe group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, interest rate risk and foreign currency risk. The group conducts its financial risk management activities in accordance with the policies and practices recommended by the Audit Committee and Finance Committee of the Authority. The group’s exposure to financial risks and the policies and practices used by the group to manage these risks are described below.
(a) Credit riskThe group’s credit risk is primarily attributable to trade and other receivables, over-the-counter derivative financial instruments entered into primarily for hedging purposes and cash and bank balances. Management has credit policies in place and the exposures to these credit risks are monitored on an ongoing basis.
In respect of trade and other receivables, there are procedures in place to closely monitor the payment performance. Individual credit evaluations are performed on customers requiring credit over a certain amount or customers with long over due history. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Trade receivables are generally due within 14 to 30 days from the date of billing. In respect of the group’s rental and franchise income from operating leases and franchise arrangements respectively, sufficient deposits are held to cover any potential exposure to credit risk.
Cash and bank balances are placed with financial institutions with sound credit ratings to minimise credit exposure. Transactions involving derivative financial instruments are with counterparties with sound credit ratings and with whom the group has a signed netting agreement. Given their high credit ratings, management does not expect any investment counterparty to fail to meet its obligations.
The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the industry or country in which the customers operate and therefore significant concentrations of credit risk primarily arise when the group has significant exposure to individual customers. At the balance sheet date, the group has a certain concentration of credit risk as 19% (2009: 18%) and 45% (2009: 40%) of the total trade and other receivables was due from the group’s largest customer and the five largest customers respectively.
105Annual Report 2009/10
16. Financial Risk Management and Fair Values (continued)
(a) Credit risk (continued)
The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet after deducting any impairment allowance. The group does not provide any guarantees which would expose the group or the Authority to credit risk.
Further quantitative disclosures in respect of the group and the Authority’s exposure to credit risk arising from trade and other receivables are set out in note 17.
(b) Liquidity riskAll cash management of the group, including the short term investment of cash surpluses and raising of loans and other borrowings to cover expected cash demands, are managed centrally by the Authority except AVSECO and HKZAM which handle their own cash management. The Authority’s policy is to regularly monitor current and expected liquidity requirements, to ensure that it maintains sufficient reserves of cash and adequate credit facilities from major financial institutions to meet its liquidity requirements in the short and longer term.
The following table details the remaining contractual maturities at the balance sheet date of the group’s and the Authority’s non-derivative financial liabilities and derivative financial liabilities, which are based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates current at the balance sheet date) and the earliest date the group and the Authority can be required to pay:
The group
Contractual undiscounted cash flow
$ million
Balance sheet
carrying amount Total
Within 1 year or
on demand 1-2 years 3-5 yearsMore than
5 years
2010Interest-bearing borrowings 8,193 9,316 2,735 740 4,507 1,334Trade and other payables 1,791 1,846 1,540 60 194 52Interest rate swaps (net settled) (105) (233) (63) (56) (97) (17)
9,879 10,929 4,212 744 4,604 1,369
Derivatives settled gross:Forward foreign exchange contracts held as cash flow hedging instruments – outflow 1,909 – – 1,909 – – inflow (1,950) (2) (2) (1,946) –
(41) (2) (2) (37) –
2009Interest-bearing borrowings 9,377 10,552 1,746 3,341 4,255 1,210Trade and other payables 2,207 2,249 1,970 137 92 50Interest rate swaps (net settled) (120) (150) (35) (40) (75) –
11,464 12,651 3,681 3,438 4,272 1,260
Derivatives settled gross:Forward foreign exchange contracts held as cash flow hedging instruments – outflow 1,909 – – 1,909 – – inflow (1,947) (2) (2) (1,943) –
(38) (2) (2) (34) –
106 Hong Kong International Airport
Notes to the Financial Statements
16. Financial Risk Management and Fair Values (continued)
(b) Liquidity risk (continued)
The Authority
Contractual undiscounted cash flow
$ million
Balance sheet
carrying amount Total
Within 1 year or
on demand 1-2 years 3-5 yearsMore than
5 years
2010Interest-bearing borrowings 8,193 9,316 2,735 740 4,507 1,334Trade and other payables 1,666 1,689 1,438 57 181 13Interest rate swaps (net settled) (105) (233) (63) (56) (97) (17)
9,754 10,772 4,110 741 4,591 1,330
Derivatives settled gross:Forward foreign exchange contracts held as cash flow hedging instruments – outflow 1,909 – – 1,909 – – inflow (1,950) (2) (2) (1,946) –
(41) (2) (2) (37) –
2009Interest-bearing borrowings 9,377 10,552 1,746 3,341 4,255 1,210Trade and other payables 2,084 2,126 1,876 129 86 35Interest rate swaps (net settled) (120) (150) (35) (40) (75) –
11,341 12,528 3,587 3,430 4,266 1,245
Derivatives settled gross:Forward foreign exchange contracts held as cash flow hedging instruments – outflow 1,909 – – 1,909 – – inflow (1,947) (2) (2) (1,943) –
(38) (2) (2) (34) –
As shown in the above analysis, interest-bearing borrowings of the group and the Authority amounting to $2,735
million are due to be repaid in the upcoming 12 months after 31 March 2010. The short term liquidity risk inherent in
this contractual maturity will be addressed by internal source of funds and new external borrowings.
(c) Interest rate risk
The group’s interest rate risk arises primarily from long term interest-bearing borrowings. Borrowings issued at
variable rates and at fixed rates expose the group to cash flow interest rate risk and fair value interest rate risk
respectively. The group adopts a policy of ensuring that between 40% and 60% of its borrowings are effectively on a
fixed rate basis, either through the contractual terms of the interest-bearing financial assets and liabilities or through
the use of interest rate swaps. The group’s interest rate profile as monitored by management is set out in (ii) below.
107Annual Report 2009/10
16. Financial Risk Management and Fair Values (continued)
(c) Interest rate risk (continued)
(i) Hedging
Interest rate swaps, denominated in Hong Kong and United States (“US”) dollars, have been entered into to
achieve an appropriate mix of fixed and floating interest rate exposure within the group’s policy. As at
31 March 2010, the group and the Authority had Hong Kong and US dollar denominated interest rate swaps
with a notional contract amount of $1,800 million (2009: $2,000 million) and US$100 million (2009: US$100
million) respectively. Out of this, $1,200 million (2009: $800) of the Hong Kong dollar and US$100 million
(2009: US$100 million) of the US dollar interest rate swaps are designated as fair value hedges of the fair value
interest rate risk inherent in the fixed interest rate notes. The remaining $600 million (2009: $1,200 million)
Hong Kong dollar interest rate swaps are designated as cash flow hedges of the cash flow interest rate risk
inherent in its floating interest rate bank borrowings.
The Hong Kong dollar denominated interest rate swaps mature over the next ten years (2009: five years)
matching the maturity of the related Hong Kong dollar borrowings. $1,200 million (2009: $800 million) of the
Hong Kong dollar denominated swaps pay floating interest rates linked to Hong Kong Interbank Offered Rate
(“HIBOR”). The remaining $600 million (2009: $1,200 million) fixed rate swaps have fixed interest rates ranging
from 1.25% to 2.05% (2009: 1.25% to 2.955%). The US dollar denominated swaps mature in approximately
three years’ time (2009: four years) matching the maturity of the related US dollar Eurobond and paying
floating interest rates linked to London Interbank Offered Rate plus.
The group classifies interest rate swaps into either fair value or cash flow hedges and states them at their fair
values in accordance with the policy set out in note 3(i).
Details of the fair values of swaps entered into by the Authority at the balance sheet dates are set out in note
16(e). These amounts are recognised as derivative financial instruments in the balance sheet.
(ii) Interest rate profile
The following table details the interest rate profile of the group’s and the Authority’s debt borrowings at the
balance sheet dates, after taking into account the effect of interest rate swaps designated as cash flow hedging
instruments and fair value hedging instruments ((i) above).
The group and the Authority
2010 2009
Effective
interest rate % $ million
Effective
interest rate % $ million
Fixed rate borrowingsBank loans* 1.25% – 2.05% 600 1.35% – 3.13% 1,199Fixed rate notes 2.36% – 5.12% 3,830 4.38% – 5.12% 3,527Retail notes – 4.67% 453
4,430 5,179
Variable rate borrowingsBank loans 0.05% – 0.61% 1,680 0.13% – 3.72% 2,497Fixed rate notes** (0.07%) – 0.90% 2,083 0.58% – 2.40% 1,701
3,763 4,198
Total borrowings 8,193 9,377
Fixed rate borrowings as a percentage of total borrowings 54% 55%
* Swapped to fixed rate
** Swapped to floating rate
108 Hong Kong International Airport
Notes to the Financial Statements
16. Financial Risk Management and Fair Values (continued)
(c) Interest rate risk (continued)
(iii) Sensitivity analysis
As at 31 March 2010, it is estimated that a general increase/decrease of 50 basis points in interest rates, with
all other variables held constant, would have decreased/increased the group’s and the Authority’s profit after
taxation and retained profits by approximately $11 million (2009: $12 million). Other components of
consolidated equity would have increased/decreased by approximately $1 million (2009: $5 million) in response
to the general increase/decrease in interest rates. The effect of interest-bearing bank deposits is expected to be
not significant and is not taken into account in the analysis.
The sensitivity analysis above indicates the instantaneous change in the group’s and the Authority’s profit after
taxation (and retained profits) and other components of consolidated equity that would arise assuming that the
change in interest rates had occurred at the balance sheet date and had been applied to re-measure those
financial instruments held by the group and the Authority which expose the group and the Authority to fair
value interest rate risk at the balance sheet date. In respect of the exposure to cash flow interest rate risk arising
from floating interest rate non-derivative instruments held by the group and the Authority at the balance sheet
date, the impact on the group’s and the Authority’s profit after taxation (and retained profits) and other
components of consolidated equity is estimated as an annualised impact on interest expense or income of such
a change in interest rates. The analysis has been performed on the same basis for 2009.
(d) Foreign currency risk
(i) Recognised assets and liabilities
The group and the Authority are exposed to foreign currency risk primarily through the issue of notes that are
denominated in a currency other than the functional currency of the operations to which they relate. The
currency giving rise to this risk is primarily US dollars.
It is the Authority’s policy to require all major contracts to be in Hong Kong dollars. The few exceptions to this
have involved small value contracts or contracts that were hedged at the outset.
As at 31 March 2010, the group and the Authority hedged over 70% (2009: over 70%) of its estimated foreign
currency exposure in respect of notes previously issued. The group and the Authority use forward exchange
contracts to hedge its foreign currency risk and have classified these as cash flow hedges. All of the forward
exchange contracts have remaining maturities of less than four years (2009: less than five years) after the
balance sheet date.
As at 31 March 2010, the group and the Authority had forward exchange contracts with notional amount of
US$250 million (2009: US$250 million) to hedge US dollar denominated notes with a net fair value of $16
million recognised as derivative financial assets (2009: $5 million as derivative financial liabilities).
(ii) Exposure to currency risk
As at 31 March 2010, the group and the Authority are mainly exposed to US dollar currency risk arising from
forecast transactions or recognised assets or liabilities in respect of notes issued at US$350 million (2009:
US$350 million), of which US$250 million (2009: US$250 million) has been hedged through the use of forward
exchange contracts, and exposure in respect of trade and other receivables of US$6 million (2009: US$5 million).
The group has not hedged the foreign currency risk in respect of their investments in PRC incorporated entities.
(iii) Sensitivity analysis
As the Hong Kong dollar is pegged to US dollar at a range between 7.75 to 7.85, management considers that
the foreign currency risk associated with the unhedged US dollar exposure is not material to the group and the
Authority. Accordingly, no sensitivity analysis in respect of these unhedged exposures is considered necessary.
109Annual Report 2009/10
16. Financial Risk Management and Fair Values (continued)
(e) Fair values
Financial instruments carried at fair value
The following table presents the carrying value of financial instruments measured at fair value at the balance sheet
date across the three levels of the fair value hierarchy defined in HKFRS 7, “Financial Instruments: Disclosures”, with
the fair value of each financial instrument categorised in its entirety based on the lowest level of input that is
significant to that fair value measurement. The levels are defined as follows:
• Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical
financial instruments
• Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using
valuation techniques in which all significant inputs are directly or indirectly based on observable market data
• Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based
on observable market data
As at 31 March 2010, the group’s and Authority’s derivative financial instruments are carried at fair value. These
instruments fall under Level 2 of the fair value hierarchy described above. During the year there were no significant
transfers of instruments in or out of Level 2.
Fair values and notional amounts of derivative financial instruments outstanding at the balance sheet dates are
summarised as follows:
The group and the Authority
2010 2009
$ millionNotional amount Assets Liabilities
Notional amount Assets Liabilities
Cash flow hedges Forward foreign exchange contracts US$250 21 (5) US$250 6 (11) Interest rate swaps $600 – (3) $1,200 1 (6)Fair value hedges Interest rate swaps US$100 66 – US$100 82 – Interest rate swaps $1,200 42 – $800 43 –
Total 129 (8) 132 (17)
Less: Portion to be recovered/(settled) within one yearCash flow hedges Forward foreign exchange contracts US$250 2 – US$250 2 – Interest rate swaps $600 – (3) $1,200 1 (5)Fair value hedges Interest rate swaps US$100 28 – US$100 19 – Interest rate swaps $1,200 23 – $800 15 –
53 (3) 37 (5)
Portion to be recovered/ (settled) after one year 76 (5) 95 (12)
110 Hong Kong International Airport
Notes to the Financial Statements
16. Financial Risk Management and Fair Values (continued)
(e) Fair values (continued)
Financial instruments carried at fair value (continued)
Derivative financial instruments qualifying as cash flow hedges as at 31 March 2010 have a maturity of 0.5 to 3.5
years (2009: 0.5 to 4.5 years) from the balance sheet date.
As at 31 March 2010, the carrying value and fair value of fixed rate notes of notional amount of $5,818 million
(2009: $5,566 million), amounted to $5,913 million and $6,198 million (2009: $5,681 million and $6,244 million)
respectively.
All other financial instruments are carried at amounts not materially different from their fair values at the balance
sheet dates. Intra-group borrowings are unsecured, interest free and have no fixed repayment terms. Given these
terms, it is not meaningful to disclose fair values.
(f) Estimation of fair values
The following summarises the major methods and assumptions used in estimating the fair values of financial
instruments.
(i) Derivatives
Forward exchange contracts are either marked to market using quoted market prices or by discounting the
contractual forward price and deducting the current spot rate. The fair value of interest rate swaps is the
estimated amount that the Authority would receive or pay to terminate the swap at the balance sheet date,
taking into account current interest rates and the current creditworthiness of the swap counterparties.
Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best
estimates and the discount rate is a market related rate for a similar instrument at the balance sheet date.
Where other pricing models are used, inputs are based on market related data at the balance sheet date.
(ii) Interest-bearing borrowings
The fair value is estimated as the present value of future cash flows, discounted at current market interest rates
for similar financial instruments.
(iii) Interest rates used for determining fair value
The group and the Authority use the market yield curve as at balance sheet dates to discount financial
instruments. The interest rates used for discounting borrowings and derivatives are as follows:
2010 2009
Hong Kong dollars 0.10% – 3.26% 0.32% – 2.05%US dollars 0.42% – 2.09% 1.70% – 2.13%
111Annual Report 2009/10
17. Trade and Other Receivables
The group The Authority
$ million 2010 2009 2010 2009
Trade debtors 1,175 1,021 1,129 979Less: allowance for doubtful debts (note 17(b)) (56) (57) (54) (56)
1,119 964 1,075 923Other debtors 21 15 20 12Amounts due from subsidiaries – – 223 217
1,140 979 1,318 1,152Prepayments 25 20 12 13Deposits and debentures 15 11 9 5
1,180 1,010 1,339 1,170
All of the trade and other receivables (including amounts due from subsidiaries) are expected to be recovered or recognised
as an expense within one year, except for an amount of $222 million (2009: $215 million) in respect of amounts due from
a subsidiary, which is expected to be recovered or recognised as an expense after more than one year.
As at 31 March 2010, amounts due from subsidiaries are after impairment allowance of $32 million (2009: $32 million).
Amounts due from subsidiaries are unsecured, interest free and have no fixed terms of repayment.
(a) The ageing analysis of trade debtors (net of allowance for doubtful debts) included above is as follows:
The group The Authority
$ million 2010 2009 2010 2009
Amounts not yet due 1,061 923 1,037 899Less than one month past due 36 27 26 19One to three months past due 9 7 5 3More than three months past due 13 7 7 2
1,119 964 1,075 923
Trade debtors are generally due within 14 to 30 days from the date of billing. The group’s credit policy is set out in
note 16(a).
Included in the amounts of trade debtors not yet due as at 31 March 2010 is an amount of $259 million (2009: $nil)
which represents the portion of franchise and rental payments due from franchisees and tenants operating at HKIA
and for which payment have been deferred for up to one year, pursuant to the relief packages offered by the
Authority during the year.
112 Hong Kong International Airport
Notes to the Financial Statements
17. Trade and Other Receivables (continued)
(b) Impairment of trade debtors
Impairment losses in respect of trade debtors are recorded using an allowance account unless the group considers
that recovery of the amount is remote, in which case the impairment loss is written off against trade debtors directly
(note 3(o)).
The movement in the allowance for doubtful debts during the year, including both specific and collective loss
components, is as follows:
The group The Authority
$ million 2010 2009 2010 2009
At 1 April 57 19 56 19Impairment loss recognised 4 38 3 37Uncollectible amounts written off (5) – (5) –
At 31 March 56 57 54 56
As at 31 March 2010, both the group’s and the Authority’s trade debtors of $43 million (2009: $54 million) were
individually determined to be impaired. The individually impaired trade debtors related to customers that were in
financial difficulties and management assessed that only a portion of the trade debtors is expected to be recovered.
Consequently, specific allowances for doubtful debts of $38 million (2009: $52 million) for both the group and the
Authority were recognised. The group and the Authority do not hold any collateral (2009: $2 million) over individually
impaired trade debtors of $5 million (2009: $2 million) for which no provision has been made.
If it is determined that no objective evidence of impairment exists for individually assessed trade debtors, whether
significant or not, these trade debtor balances are included in a group of trade debtor balances with similar credit risk
characteristics and that group is collectively assessed for impairment.
(c) Trade debtors that are not impaired
The ageing analysis of trade debtors that are neither individually nor collectively considered to be impaired are as
follows:
The group The Authority
$ million 2010 2009 2010 2009
Neither past due nor impaired 808 923 783 899
Less than one month past due 21 20 11 13One to three months past due 4 3 – –More than three months past due 4 4 – –
29 27 11 13
837 950 794 912
Trade debtors that were neither past due nor impaired relate to a wide range of customers for whom there was no
recent history of default.
Trade debtors that were past due but not impaired relate to a number of independent customers that have a good
track record with the group. Based on past experience, management believes that no impairment allowance is
necessary in respect of these balances as there has not been a significant change in credit quality and the balances
are still considered fully recoverable. The group and the Authority hold cash deposits and bank guarantees of
$3 million and $2 million (2009: $2 million and $1 million) as collateral over certain past due but not impaired trade
debtors totalling $29 million and $11 million (2009: $27 million and $13 million) respectively.
113Annual Report 2009/10
18. Cash and Bank Balances
The group The Authority
$ million 2010 2009 2010 2009
Deposits with banks within three months of maturity at acquisition 370 96 262 31Cash at bank and in hand 261 247 208 199
Cash and cash equivalents 631 343 470 230Deposits with banks with over three months of maturity at acquisition 27 67 – –
658 410 470 230
As at 31 March 2010, effective interest rate ranges for deposits with banks which are within and over three months of maturity at acquisition are 0.0001% to 0.45% (2009: 0.01% to 0.76%) and 0.63% to 1.0925% (2009: 0.38% to 3.3%) respectively.
As at 31 March 2010, cash and cash equivalents include deposits with banks of $52 million (2009: $47 million) held by a subsidiary that are not freely remittable to the holding company because of currency exchange restrictions in the PRC.
19. Interest-bearing Borrowings
The group and the Authority
$ million 2010 2009
Notes payableUS dollar Eurobond due 2013 (a) 2,790 2,802HK dollar Retail notes due 2010 (b) – 453HK dollar Fixed rate notes due 2016 (c) 400 400HK dollar Fixed rate notes due 2021 (d) 600 600HK dollar Fixed rate notes due 2010 to 2014 (e) 400 600HK dollar Fixed rate notes due 2010 to 2013 (f) 832 840HK dollar Fixed rate notes due 2012 to 2019 (g) 907 –
5,929 5,695Bank loans (h) to (j) 2,280 3,700
8,209 9,395Less: Unamortised finance costs (16) (18)
8,193 9,377
(a) The Authority issued 5.0% notes due 2013 with a principal amount of US$350 million at an issue price of 99.078 in September 2003. The notes are unsecured and repayable in full on the due date. The notes are listed on the Luxembourg Stock Exchange.
(b) In 2003, the Authority issued three Hong Kong dollar (“HK dollar”) fixed rate retail notes totalling $896 million. Their annual coupons and tenors ranged from 2.3% to 4.5% and two years to seven years respectively. All of the above mentioned retail notes were unsecured. Their issue prices ranged from 98.12 to 99.62.
Out of the three HK dollar fixed rate retail notes, one with principal amount of $304 million and maturity of three years was repaid in March 2006. Another one with principal amount of $139 million and maturity of two years was extended for two years at the option of the Authority in March 2005 and was repaid in full in March 2007.
The remaining HK dollar fixed rate retail note with principal amount of $453 million and maturity of seven years was repaid in full in March 2010.
114 Hong Kong International Airport
Notes to the Financial Statements
19. Interest-bearing Borrowings (continued)
(c) In April 2006, the Authority issued HK dollar fixed rate notes with principal amount of $400 million through private placement. These fixed rate notes were issued at par with an annual coupon rate of 5.1% per annum and maturity of 10 years. The notes are unsecured and repayable in full upon maturity.
(d) The Authority issued two tranches of HK dollar fixed rate notes of $300 million each in February and March 2006. Both tranches were issued at par with annual coupons of 4.8% and 4.85% respectively and maturities of 15 years each. The notes are unsecured and repayable in full upon maturity.
(e) Between February and March 2007, the Authority issued three tranches of HK dollar fixed rate notes of $200 million each through private placement. All three tranches were issued at par with quarterly coupon rates ranging from 4.38% to 4.48% per annum and maturity ranging between three to seven years. The notes are unsecured and repayable in full upon maturity. The tranche of $200 million with maturity of three years was repaid in full in February 2010.
(f) In July and August 2008, the Authority issued four HK dollar fixed rate notes totalling $800 million. These fixed rate notes were issued at par with annual coupon rates of between 3.36% and 3.98% per annum and maturity of between two years and five years. The notes are unsecured and repayable in full upon maturity.
(g) Between April and July 2009, the Authority issued three HK dollar fixed rate notes with a total principal amount of $900 million through private placements. These fixed rate notes were issued at par with annual coupon rates ranging from 2.00% to 3.85% per annum and maturity ranging from three to ten years. The notes are unsecured and repayable in full upon maturity.
(h) In October 2004, the Authority signed a credit agreement for a $6,000 million HK dollar unsecured syndicated bank loan. The facility consists of a 3-year revolving credit tranche and a 5-year term/revolving credit tranche of $3,000 million each with repayment commencing from the end of the third anniversary of the credit agreement. Interest is payable on amounts drawn down at a rate relating to HIBOR. In 2008, the 3-year revolving credit tranche was fully repaid and the 5-year term/revolving credit facility was voluntarily reduced to $600 million. The 5-year term/revolving credit facility was repaid in full in October 2009.
(i) In September 2007, the Authority signed a three-year unsecured HK dollar revolving credit facility of $6,000 million. Interest is payable on amounts drawn down at a rate relating to HIBOR. As at 31 March 2010, $2,200 million (2009: $2,900 million) of the revolving credit facility was drawn down.
(j) During the year, the Authority also drew down from uncommitted money market line facilities of $2,688 million (2009: $2,500 million). Interest is payable on amounts drawn down at a rate relating to HIBOR. An amount of$80 million (2009: $200 million) was outstanding as at 31 March 2010.
(k) As at 31 March 2010, the unsecured interest-bearing borrowings were repayable as follows:
The group and the Authority
2010 2009
$ million Notes payable Bank loans Total Total
Within one year or on demand 200 2,280 2,480 1,453
After one year but within two years 512 – 512 3,100After two years but within five years 4,103 – 4,103 3,826After five years 1,098 – 1,098 998
5,713 – 5,713 7,924
5,913 2,280 8,193 9,377
(l) None of the interest-bearing borrowings is subject to any covenants imposed by the lenders. All of the non-current interest-bearing borrowings are carried at amortised cost except for HK dollar fixed rate notes and US dollar Eurobond with total principal amounts of $1,200 million and US$100 million (2009: $800 million and US$100 million) respectively, which are designated as fair value hedged items and carried at fair value of $2,083 million (2009: $1,701 million). None of the non-current interest-bearing borrowings is expected to be settled within one year. Further details of the group’s management of liquidity risk are set out in note 16(b).
115Annual Report 2009/10
20. Trade and Other Payables
The group The Authority
$ million 2010 2009 2010 2009
Creditors and accrued charges 1,236 1,713 1,112 1,589Deposits received 435 375 432 373Contract retentions 120 119 120 119Amounts due to subsidiaries – – 2 3
Financial liabilities measured at amortised cost 1,791 2,207 1,666 2,084
Classified in the balance sheet as: Current liabilities 1,534 1,970 1,438 1,876 Non-current liabilities 257 237 228 208
1,791 2,207 1,666 2,084
As at 31 March 2010, all of the trade and other payables are expected to be settled or recognised as income within one
year except for $257 million and $228 million (2009: $237 million and $208 million) for the group and the Authority
respectively, which are expected to be settled after more than one year. The amounts due after one year mainly relate to
licence deposits received from retail licencees and contract retentions, the majority of which are due to be repaid within
two to five years.
The ageing analysis of creditors and accrued charges included above by due dates is as follows:
The group The Authority
$ million 2010 2009 2010 2009
Due within 30 days or on demand 337 397 283 356Due after 30 days but within 60 days 145 235 142 230Due after 60 days but within 90 days 122 189 119 185Due after 90 days 632 892 568 818
Total 1,236 1,713 1,112 1,589
21. Deferred IncomeDeferred income represents consideration received for the sale of a portion of the income from the aviation fuel system for
a period up to 2018 and amounts received in respect of sub-leases of interest in leasehold land of the airport site. They are
accounted for in accordance with the accounting policy detailed in notes 3(v)(v) and 3(v)(vi) respectively.
The amount expected to be recognised as income more than one year after the balance sheet date is included in non-
current liabilities.
116 Hong Kong International Airport
Notes to the Financial Statements
22. Capital, Reserves and Dividends(a) Movements in components of equity
The reconciliation between the opening and closing balances of each component of the group’s consolidated and
Authority’s equity is set out in the consolidated and Authority statements of changes in equity on pages 69 and 70
respectively.
(b) Dividends
$ million 2010 2009
Final dividend payable to the equity shareholder of the Authority in respect of the previous financial year, approved and paid during the year of $7,178.28 per ordinary share (2009: $6,525.71 per ordinary share) 2,200 2,000Final dividend proposed by the Authority after the balance sheet date of $7,504.57 per ordinary share (2009: $7,178.28 per ordinary share) 2,300 2,200Special dividend proposed by the Authority after the balance sheet date of $7,178.28 per ordinary share (2009: $nil per ordinary share) 2,200 –
The final and special dividends declared after the balance sheet date have not been recognised as liabilities at the
balance sheet date.
(c) Share Capital
The Authority
$ million 2010 2009
Authorised, issued, allotted and fully paid: 306,480 ordinary shares of $100,000 each (2009: 306,480 shares) 30,648 30,648
30,648 30,648
(d) Nature and purpose of reserves
(i) Exchange reserve
The exchange reserve comprises all foreign exchange differences arising from the translation of the financial
statements of foreign operations. The reserve is dealt with in accordance with the accounting policy set out in
note 3(w).
(ii) Capital reserve
The capital reserve comprises the share of profits of a jointly controlled entity in the PRC which are not
distributable as required by relevant government regulations and the retained profits of AVSECO which
according to its memorandum of association and the shareholders’ agreement cannot be distributed.
(iii) Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging
instruments used in cash flow hedges pending subsequent recognition of the hedged cash flow dealt with in
accordance with the accounting policy adopted for cash flow hedges set out in note 3(i).
117Annual Report 2009/10
22. Capital, Reserves and Dividends (continued)
(d) Nature and purpose of reserves (continued)
(iv) Distributability of reserves
As at 31 March 2010, the aggregate amount of reserves available for distribution to the equity shareholder of
the Authority was $4,998 million (2009: $4,519 million). After the balance sheet date, the Board proposed a
final dividend and a special dividend of $7,504.57 and $7,178.28 per ordinary share (2009: $7,178.28 and $nil
per ordinary share), amounting to $2,300 million (2009: $2,200 million) and $2,200 million (2009: $nil)
respectively. These dividends have not been recognised as liabilities at the balance sheet date.
(v) Capital management
The primary objectives of the group when managing capital are to safeguard the group’s ability to continue as
a going concern, maintain a strong credit rating and a healthy capital ratio to support the business and to
enhance shareholder value.
The group manages its capital structure by taking into consideration its future capital requirements, capital
efficiency and projected cash flow. To adjust its capital structure, the group may raise or reduce its outstanding
debt and determine the dividend payment on its share capital. The group is also empowered by the Ordinance
to either increase or reduce its share capital under the direction of the Financial Secretary and the Legislative
Council. The Ordinance provides that these directions be made following consultation with the Authority.
The group monitors its capital structure on the basis of a total debt/capital ratio. The total debt/capital ratios of
the group and the Authority at the balance sheet dates are as follows:
The group The Authority
$ million Note 2010 2009 2010 2009
Total debt1 19 8,193 9,377 8,193 9,377Total equity 36,689 36,038 35,643 35,163
Total capital2 44,882 45,415 43,836 44,540
Total debt/capital ratio 18% 21% 19% 21%
1 Total debt equals to interest-bearing borrowings.
2 Total capital equals to total debt plus total equity.
Neither the Authority nor any of its subsidiaries are subject to externally imposed capital requirements.
118 Hong Kong International Airport
Notes to the Financial Statements
23. Outstanding Commitments
The group The Authority
$ million 2010 2009 2010 2009
Commitments outstanding not provided for in the financial statements are as follows:
Capital expenditure Contracted for 214 502 214 499 Authorised but not contracted for 1,849 2,487 1,828 2,474
2,063 2,989 2,042 2,973 Capital contribution in respect of a jointly controlled entity in the PRC, SHKAMCL (note 13(b)) 39 – 39 –
2,102 2,989 2,081 2,973
The outstanding commitments of the group’s jointly controlled entity, HXIACL, which are not included in the above, are
disclosed in note 13(a).
24. Contingent Liabilities(a) The group is currently under discussion with contractors regarding claims relating to several construction and system
upgrade projects. Detailed documentation for these claims is not yet fully available to the Authority. The group has
internally assessed and provided for the likely amount that is required for the settlement of these claims that have
arisen due to time delays, additional costs and other unforeseen circumstances. The claims provision is estimated
based on an assessment of the group’s likely liability by in-house professionally qualified personnel, and may differ
from the actual claims settlement. The amount of the claims received and the likely liability assessed by the group
have not been disclosed as the management is of the view that such information is commercially sensitive and may
prejudice the group’s position during negotiations.
(b) The Inland Revenue Department (“IRD”) has challenged the validity of tax allowances in an amount of $2,391 million
claimed by the Authority in respect of certain fixed assets. The corresponding tax impact would be approximately
$417 million computed at applicable tax rates. The Authority has responded to the IRD and is awaiting their
assessment. The Authority remains confident that its claims are valid and supportable. Accordingly, no provision for
additional taxation has been made in respect of this contingent liability as at 31 March 2009 and 2010.
119Annual Report 2009/10
25. Material Related Party TransactionsThe Authority is wholly owned by the Government. Transactions between the Authority and Government departments,
agencies or Government controlled entities, other than those transactions such as the payment of fees, taxes, leases and
rates, etc. that arise in the normal dealings between the Government and the Authority, are considered to be related party
transactions pursuant to HKAS 24, “Related Party Disclosures” and are identified separately in these financial statements.
Members of the Board and the Executive Directors, and parties related to them, are also considered to be related parties of
the Authority. Material transactions with these parties are separately disclosed. Remuneration paid to Members of the
Board and the Executive Directors is disclosed in note 6.
During the year, the Authority has had the following material related party transactions:
(a) The Authority has entered into service agreements with the Government under which the Government is to provide
aviation meteorological and air traffic control services and aircraft rescue and fire fighting services at the airport. The
amounts incurred for the year amounted to $735 million (2009: $722 million) and the amounts due to the
Government as at 31 March 2010 with respect to the above services amounted to $nil (2009: $6 million).
(b) In addition, the Authority has also entered into agreements with the Government under which the Government
provides electrical and mechanical maintenance services at the airport. The amounts incurred for these services for
the year amounted to $123 million (2009: $109 million). As at 31 March 2010, the amounts due to the Government
with respect to the above services amounted to $60 million (2009: $47 million).
(c) The Authority has entered into an agreement with AVSECO, a subsidiary in which the Government is the other
shareholder, for the provision of airport related security services to the Authority on a cost reimbursement basis. The
amounts incurred by the Authority for these services for the year amounted to $406 million (2009: $393 million). In
addition, the Authority licensed certain areas to AVSECO for a total fee of $20 million (2009: $16 million) during the
year. As at 31 March 2010, the amounts due from AVSECO with respect to rentals and other recoveries amounted to
$1 million (2009: $2 million) and amounts due to AVSECO with respect to security services amounted to $1 million
(2009: $3 million).
(d) Pursuant to a shareholders’ agreement dated 21 August 2003, the Authority and the Government have formed a
company, IEC Holdings Limited, in which the Authority holds an 11.8% (2009: 11.8%) equity interest, to participate
and co-operate with a third party consortium in the development, funding and operation of the AsiaWorld-Expo
exhibition centre. The Authority has sub-leased to IEC Holdings Limited to 2047 the leasehold land on which the
exhibition centre has been built (note 14).
(e) The Authority has entered into an agreement with MTR Corporation Limited (“MTRC”) under which MTRC provides
maintenance services to the Automated People Mover System and Cars in both Terminals 1 and 2. The amount
incurred by the Authority for these services for the year amounted to $45 million (2009: $34 million). As at 31 March
2010, the amounts due to MTRC with respect to the maintenance service amounted to $16 million (2009: $8 million).
(f) The Authority has provided property rental and management services at the airport to MTRC. The aggregate amounts
received for the year amounted to $8 million (2009: $6 million). As at 31 March 2010, the aggregate amounts due
from MTRC amounted to $0.4 million (2009: $nil).
(g) The Authority has provided property management services, fitting-out works and other services at the airport to
various Government departments, agencies and Government controlled entities. The aggregate amounts received for
the year amounted to 18 million (2009: $38 million). As at 31 March 2010, the aggregate amounts due from these
departments, agencies or entities amounted to $1 million (2009: $0.4 million).
120 Hong Kong International Airport
Notes to the Financial Statements
25. Material Related Party Transactions (continued)
(h) The Authority has received various administrative, building plan submission and other services from various Government departments, agencies and Government controlled entities. The aggregate amounts paid for the above services, and aerodrome licence and other fees for the year amounted to $12 million (2009: $13 million). As at 31 March 2010, there was no outstanding amount due to these departments, agencies or entities (2009: $nil).
(i) AVSECO has provided security-related services to various Government departments, agencies and Government controlled entities other than the Authority. The aggregate amounts received for the year amounted to $40 million (2009: $24 million). As at 31 March 2010, the aggregate amounts due from these departments, agencies or entities amounted to $3 million (2009: $3 million).
26. Immediate and Ultimate Controlling PartyAs at 31 March 2010, the directors consider the immediate parent and ultimate controlling party of the group to be the Hong Kong SAR Government.
27. Accounting Judgements and Estimates(a) Critical accounting judgements in applying the group’s accounting policies
In applying the group’s accounting policies, management has made the following accounting judgements:
(i) Interest in leasehold landOn 1 December 1995, the Authority was granted the rights to the airport site at Chek Lap Kok for a nominal land premium of $2,000. The Authority was responsible for all of the costs for the formation of the airport site, with respect to which $11,571 million was initially incurred. The land formed is considered to have all the characteristics of land in Hong Kong and will revert to the lessor at the end of the Land Grant. Such cost is considered to have been incurred to obtain the benefits of a leasehold land held under an operating lease. Accordingly, the land premium and the land formation costs have been classified as interest in leasehold land under fixed assets. Upon the granting of finance leases of portions of the land concerned, the cost of leasehold land excluded from the balance sheet is based on an apportionment of the overall land cost.
(ii) Sub-lease of leasehold landThe Authority sub-leases part of its interest in leasehold land to various Government departments, agencies or Government controlled entities at ’nil’ rental for substantially the full period of the Land Grant, to provide services for the sole benefit of the airport and its users. It is considered that as these sub-leases are for the sole benefit of the Authority for enhancing services at the airport, it is in substance held for the full and exclusive benefit of the Authority and accordingly such sub-leases continue to be treated as interest in leasehold land under fixed assets in the financial statements of the Authority and are not derecognised.
(iii) Interests in jointly controlled entitiesOn 29 November 2006, the group acquired a 35% equity interest in HXIACL and accounts for its interest in HXIACL as a jointly controlled entity. HXIACL receives ACF and other subsidies from the PRC government as is the case with most other airports in the PRC. The ACF and other subsidies received cannot be distributed as dividends and are to be used for airport development purposes as specified by the PRC government. Such ACF and other subsidies received are considered to be a capital contribution from the PRC government and are accounted for as a “capital reserve” in HXIACL’s PRC statutory financial statements.
The group is of the view that HXIACL and all its shareholders can enjoy the economic benefits arising from the ACF and other subsidies received for airport development purposes in proportion to their shareholdings and that such ACF and other subsidies are revenue in nature but may only be used for restricted purposes. Further, although certain PRC government documents note that such ACF and other subsidies belong to the PRC government, certain other joint venture documents indicate that the amounts of ACF and other subsidies can be shared by the shareholders of HXIACL in proportion to their equity shareholdings and, accordingly, the group has equity accounted for its share of ACF and other subsidies in the consolidated income statement, with a subsequent transfer to the capital reserve.
121Annual Report 2009/10
27. Accounting Judgements and Estimates (continued)
(b) Major sources of estimation uncertainty
Notes 15 and 16(f) contain information about the assumptions and their risk factors relating to defined benefit
retirement obligations and the fair value of financial instruments. Other major areas of estimation uncertainty are as
follows:
(i) Estimated useful lives and depreciation of property, plant and equipment
In assessing the estimated useful lives of property, plant and equipment, management takes into account
factors such as the expected usage of the asset by the group based on past experience, the expected physical
wear and tear (which depends on operational factors), technical obsolescence arising from changes or
improvements in production or from a change in the market demand for the product or service output of the
asset. The estimation of the useful life is a matter of judgement based on the experience of the group.
Management reviews the useful lives of property, plant and equipment annually, and if expectations are
significantly different from previous estimates of useful lives, the useful lives and, therefore, the depreciation
rate for the future periods is adjusted accordingly.
(ii) Impairment of other investments
In assessing whether there is any impairment in the carrying value of the group’s “other investments”,
management takes into consideration the projected volume and activity level and cash flows of the underlying
business of the investments, discounted to present value. These projections are based on assumptions that take
into consideration management’s knowledge of the business environment and their judgement on future
performance. There is inherent uncertainty in the estimation process and the underlying assumptions relating to
the future and, accordingly actual performance may differ significantly from that projected.
(iii) Project provisions
The group establishes project provisions for the settlement of estimated claims that may arise due to time
delays, additional costs or other unforeseen circumstances common to major construction contracts. The claims
provisions are estimated based on a best assessment of the group’s liabilities under each contract by
professionally qualified personnel, which may differ from the actual claims settlement.
(iv) Income tax and deferred tax assets
Certain treatments adopted by the Authority in the tax returns in the past years are yet to be finalised with the
IRD. In assessing the Authority’s income tax and deferred taxation in the current year financial statements, the
Authority has followed the tax treatments it has adopted in those tax returns, which may be different from the
final outcome in due course.
The group reviews the carrying amount of deferred taxes at each balance sheet date and reduces deferred tax
assets to the extent it is no longer probable that sufficient taxable income will be available to allow all or part of
the deferred tax to be utilised. However, there is no assurance that the group will generate sufficient taxable
income to allow all or part of its deferred tax assets to be utilised.
(v) Valuation of investment properties
The valuation of investment properties requires management’s input of various assumptions and factors relevant
to the valuation. The group appoints independent professionally qualified valuers to conduct annual
revaluations of its investment properties which take into consideration the net income allowing for reversionary
potential and other assumptions which are based on market conditions existing at the balance sheet date,
current market sales prices and the appropriate capitalisation rate.
122 Hong Kong International Airport
Notes to the Financial Statements
28. Non-Adjusting Post Balance Sheet EventsAfter the balance sheet date, the Board declared final and special dividends for the year ended 31 March 2010, the details
of which are disclosed in note 22(b).
29. Comparative figuresAs a result of the application of HKAS 1 (revised 2007), “Presentation of financial statements”, certain comparative figures
have been adjusted to conform to current year’s presentation and to provide comparative amounts in respect of items
disclosed for the first time in the current year. Further details of these developments are disclosed in note 3(c).
30. Possible Impact of Amendments, New Standards and Interpretations Issued but Not Yet Effective for the Year Ended 31 March 2010Up to the date of issue of these financial statements, the HKICPA has issued the following amendments, new standards
and interpretations which are not yet effective for the year ended 31 March 2010 and which have not been adopted in
these financial statements.
Effective for annual periodsbeginning on or after
HKFRS 3 (Revised), “Business combinations” 1 July 2009Amendments to HKAS 39, “Financial instruments: Recognition and measurement – Eligible hedged items” 1 July 2009Amendments to HKAS 27, “Consolidated and separate financial statements” 1 July 2009Improvements to HKFRSs 2009 1 July 2009 or 1 January 2010HKAS 24 (revised 2009) “Related party disclosures” and consequential amendments to HKFRS 8, “Operating segments” 1 January 2011HKFRS 9 “Financial Instruments” 1 January 2013
The group is in the process of making an assessment of what the impact of these amendments, new standards and
interpretations is expected to be in the period of initial application. So far it has concluded that the adoption of them is
unlikely to have a significant impact on the Authority’s results of operations and financial position.
Five-year Financial & Operational Summary
123Annual Report 2009/10
(in HK$ million) 05/06 06/07 07/08 08/09 09/10
Income Statement
Turnover 7,076 7,738 8,577 8,886 9,015
Operating expenses before depreciation and amortisation (2,820) (3,085) (3,292) (3,497) (3,402)
Operating profit before depreciation and amortisation 4,256 4,653 5,285 5,389 5,613
Depreciation and amortisation (1,914) (2,014) (2,307) (2,234) (2,191)
Interest and finance costs (334) (378) (425) (233) (178)
Share of profits less losses of jointly controlled entities – 88 89 193 177
Profit before taxation 2,008 2,349 2,642 3,115 3,421
Income tax (390) (430) (374) (532) (580)
Profit for the year 1,618 1,919 2,268 2,583 2,841
Attributable to:
Equity shareholder of the Authority 1,615 1,920 2,273 2,588 2,844
Minority interests 3 (1) (5) (5) (3)
Balance Sheet
Non-current assets 47,345 49,792 50,286 50,356 49,431
Current assets 1,003 1,233 1,531 1,508 1,939
Current liabilities (2,036) (5,629) (2,455) (3,541) (4,138)
Net current liabilities (1,033) (4,396) (924) (2,033) (2,199)
Total assets less current liabilities 46,312 45,396 49,362 48,323 47,232
Non-current liabilities (12,625) (10,896) (13,969) (12,285) (10,543)
Net assets 33,687 34,500 35,393 36,038 36,689
Share capital 30,648 30,648 30,648 30,648 30,648
Reserves 3,006 3,656 4,539 5,185 5,839
Minority interests 33 196 206 205 202
Total Equity 33,687 34,500 35,393 36,038 36,689
Key Financial and Operational Statistics
Dividend declared (HK$ million) 1,300 1,600 2,000 2,200 2,300
Special dividend declared (HK$ million) – – – – 2,200
Return on equity 4.9% 5.6% 6.5% 7.2% 7.8%
Total debt/capital ratio 23% 24% 23% 21% 18%
Passenger traffic1,2 (millions of passengers) 41.6 45.1 48.9 47.7 46.9
Cargo throughput1,3 (millions of tonnes) 3.5 3.6 3.8 3.4 3.6
Air traffic movements1 (thousands) 270 283 300 296 280
1 “Operational Statistics” is based on the Airport Authority’s traffic data of Hong Kong International Airport only.
2 “Passenger traffic” includes originating, terminating, transfer and transit passengers. Transfer and transit passengers are counted twice.
3 “Cargo throughput” includes originating, terminating and transshipment cargo. Transshipment cargo is counted twice, Airmail is excluded.
Annual Report 2009/10Hong Kong International Airport 125124 Hong Kong International Airport124
AeroflotAeroLogic* Air AsiaAir CanadaAir Cargo Germany* Air ChinaAir FranceAir Hong Kong* Air IndiaAir MauritiusAir New ZealandAir NiuginiAir PacificAirBridgeCargo* ANAAsiana AirlinesAtlas Air* Bangkok AirwaysBiman BangladeshBritish AirwaysCargoitalia* Cargolux* Cargolux Italia*
Cathay PacificCebu Pacific AirChina AirlinesChina Cargo Airlines* China EasternChina SouthernContinentalDeccan Cargo & Express* Delta Air LinesDETA Air* Donghai Airlines* DragonairEL AL IsraelEmirates Ethiopian AirlinesEVA AirEvergreen* Federal Express* FinnairGaruda IndonesiaHong Kong Airlines Hong Kong ExpressJade Cargo*
Japan AirlinesJet Airways Jetstar Jett8* Kalitta Air* Kenya Airways Kingfisher AirlinesKLMKorean AirLufthansaLufthansa Cargo* Malaysia AirlinesMandarin AirlinesMartinair Cargo* Nepal AirlinesNippon Cargo Airlines* Orient Thai Pakistan International AirlinesPhilippine Airlines Polar Air Cargo* Qantas AirwaysQatar AirwaysRoyal Brunei
Royal Jordanian Saudi Arabian AirlinesShanghai AirlinesShanghai Airlines Cargo* Shenzhen AirlinesSingapore AirlinesSingapore Airlines Cargo* South AfricanSriLankanSwiss Air LinesThai AirAsia Thai AirwaysTiger AirwaysTNT Airways* Transmile Air Services* Turkish AirlinesUnited AirlinesUPS* Vietnam AirlinesVirgin AtlanticXiamen AirlinesYangtze River Express*
*Freighter services only
Airlines Operating at HKIA as at March 2010
Scheduled Destinations Served from HKIA as at March 2010
North Asia Beijing Busan Changchun Changsha Chengdu Chongqing Dalian Fukuoka Fuzhou Guangzhou Guilin Guiyang Haikou Hangzhou Harbin Hefei Jinan Jinjiang Kaohsiung Kunming Meixian Nagoya Nanchang Nanjing Nanning Ningbo Okinawa Osaka/Kansai QingdaoSanyaSapporo
Seoul/Incheon Shanghai Shantou Shenyang Shenzhen*Taichung/ChingchuankangTaipei Taiyuan TianjinTokyo/Haneda Tokyo/Narita Wenzhou Wuhan Wuxi Xiamen Xian Xuzhou Yancheng Yiwu Zhanjiang Zhengzhou South East Asia B S Begawan Bangkok Cebu Clark Denpasar Hanoi Ho Chi Minh Jakarta Koh Samui
Kota Kinabalu Kuala Lumpur Kuching Manila Penang Phnom Penh Phuket Singapore Subang* Surabaya Middle East/Central Asia/South Asia Almaty*AmmanBahrainBangaloreChennaiColomboDelhiDhakaDohaDubaiIslamabadJeddahKarachiKathmanduLahoreMumbaiRiyadhSharjah*Tel Aviv
Europe Amsterdam Barcelona* Brussels* Budapest Ferihegy* Cologne*Frankfurt Hahn*Helsinki Istanbul Krasnoyarsk*Leipzig*Liege*London/Heathrow London/Stansted*Luxembourg*Manchester*Milan/Malpensa Moscow/Sheremetyevo Munich Paris Rome Stockholm*Zurich
Australasia/Pacific Islands Adelaide Auckland Brisbane Cairns Melbourne Nadi
Perth Port Moresby Sydney Africa Addis Ababa Johannesburg Mauritius Nairobi
North America Anchorage*Atlanta*Chicago/O’hare Cincinnati*Columbus* Dallas*Honolulu Houston*Los Angeles Louisville*Memphis*Miami*New York/John Kennedy Newark Oakland*Ontario* Philadelphia*San Francisco Seattle*Toronto Vancouver
*Freighter services only
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