1. M Fung and CK Law Aviation Policy and Research Centre CUHK
The Third Runway Expansion at Hong Kong International Airport- Issues and Economic Analysis 
M Fung and CK Law
Aviation Policy and Research Centre
CUHK

4. Global Aviation Market
Air Transport Industry in Hong Kong
Third Runway Expansion
Issues and Economic Applications
Teaching and Learning Materials

5. Global Aviation Market

6. Global flows in a digital age: How trade, finance, people and data connect the world economy, McKinsey Global Institute, 2014.

7. IATA Traffic Flows Between Regions in 2011
This figure shows the distribution of passenger traffic flows across the 28 IATA Route Areas, as operated by IATA member airlines in It can be seen that Asia, North America and Europe were three largest aviation ma
kets, together accounted for 42% of total scheduled RPKs. Their market shares were further increased to 66% if the inter-continental routes linking the three regions are added together. Intraregional market: Asia, N. America and Europe; Inter-continental: EU and N. America; Asia and EU; Asia and N. America
Percentage of Total Scheduled Revenue Passenger-Kilometres
Source: IATA Watts (published in 2012), IATA Financial Forecast March 2013

8. Year 2012 Air Traffic Distribution Matrix
RPKs
Asia Pacific
North America
Europe
Middle East
Latin America
Africa
59%
15%
16%
37% 1% 6%
14%
50%
23% 9%
34% 4%
22%
36%
31%
30%
51%
10% 3% -
18%
35% 7% 0%
20%
Total traffic to and from region
100%
This table reports airline traffic distribution in Majority of the traffic (59%) in Asia Pacific was within the region, whereas only 64% of the traffic in Europe was associated with traffic to/from other regions. North America – Europe remains the leading inter-continental market in the world, with Asian routes becoming increasingly important over the years.
Source: Boeing 2013

9. Regional Distribution of Airport Passenger Traffic by World Regions in 2006 vs. 2011
An analysis of traffic developments among world regions from 2006 to 2011 shows some interesting trends (see Figure 7 below). With 1.53 billion passenger throughput in 2006, North American airports controlled 35% of global market share, substantially outpaced that of Europe (1.35 billion passenger throughput or 31% market share) and Asia Pacific (0.98 billion passenger throughput or 22% market share).
However, from 2006 to 2011, there was virtually no growth of traffic at North American airports while Europe and Asia Pacific recorded 3.1% and 9.7% year-on-year growth rates, respectively. In 2011, passenger throughput at European and Asia Pacific airports rose to 1.57 billion and 1.56 billion, respectively, overtaking that of North America (1.53 billion).
Europe and Asia Pacific’s market share of global airport passenger throughput each increased to 29% in 2011 while North America saw its market share reduced to 28%. This new power shift is set to continue with the Asia Pacific airports increasing its importance in the global aviation market given projected strong economic growth of the region.
Source: ACI Worldwide Airport Traffic Report 2007 & 2012

10. Top 12 Airports by Passengers (Millions) in 2006 and 2012
The top 12 global airports by passenger throughput in 2006 and 2012 are shown in Table 8 below. North America and Asia Pacific each has four airports in the league table, followed by Europe (3 airports) and Middle East (1 airport).
In terms of growth rates, Dubai airport has doubled its passenger volume from 29 million in 2006 to 58 million in 2012, making it the 10th largest airport in the world. Beijing airport also achieved an impressive growth rate of 68% during the same period. With 82 million passengers handled, it ranked the second largest airport only behind Atlanta airport in the US.
Another high growth airport is Hong Kong International Airport, which saw its passenger volume increased by 28% from 44 million in 2006 to 56 million in Analysis of the Top 12 passenger airports shows that overall, airports in emerging economies (i.e. Middle East, China, Hong Kong) had a much higher growth rates than those in mature economies (i.e. North America, Europe and Japan).
Source: ACI Worldwide Airport Traffic Report

11. Top 12 Airports by Cargo (Tonnes) Handled in 2006 vs. 2012
This table shows the top 12 airports by cargo handled in 2006 and Asia Pacific dominated the league table with five airports followed by North America (4 airports), Europe (2 airports) and Middle East (1 airport).
Hong Kong International Airport was the busiest cargo airport with an increase of 13% of cargo handled from 2006 to With 36% growth rate during the same period, Shanghai Pudong International Airport is another fast growing airport and ranked the third in the league table. The dominant positions of Hong Kong and Shanghai airports reflected the strength of Chinese economy.
Interestingly, Dubai airport achieved the highest growth rate (51%) among the 12 airports examined, an indication of the success of Emirates’ strategy of developing Dubai into a global hub. An analysis of cargo airports reinforces the patterns that we have observed in the Top 12 passenger airports - a power shift from mature economies to emerging economies.
Source: ACI Worldwide Airport Traffic Reports

12. Global Growth in Passenger Traffic and GDP
There is a high degree of correlation between GDP and traffic growth as plotted in Figure 8 below. Travel demand grows faster than GDP. Historically, worldwide, air traffic grew at around twice the rate of GDP. Nevertheless, the effect of GDP on demand for air travel is affected by market maturity as demand for air travel weakens as the market become more mature.
Source: ICAO for traffic growth, IMF for GDP (PPP)

13. Airbus Air Traffic Forecasts – Largest Origin & Destination Flows in 2032
Apart from GDP, international trade and airfare, demand for air travel is affected by a number of other factors, such as the rise of the middle class in emerging economies, urbanisation, liberalisation and deregulation of air transport markets, the expansion of the LCC business model. Reflecting these factors, Airbus forecasts that domestic China would become the largest aviation market by 2032 overtaking the domestic US market.
Source: Airbus (2013)

14. Net Profit/Loss and Revenues for World Commercial Airlines (1978-2010)
The financial performance of the airline industry is highly cyclical as shown in this figure.
The cyclicality of the airline industry is the result of close relationship between economic growth and airline traffic. When economy grows, demand for air travel increases at a faster rate. When economy slows down, traffic declines even more. The cyclical nature of the airline industry has profound impact on airline traffic and yield.
Source: ICAO, IATA

15. Historical Prices for Crude Oil and Jet Fuel
There are signs that the aviation industry may not sustain the trend of unit cost reduction due to a substantial increase in fuel price in recent years, especially since Fuel is now the largest cost component for airlines even in developed markets where labour used to be the dominant cost. In North America, currently fuel costs account for 35-40% of airlines’ total cost.
Source: Boeing (2013) and EIA

16. Energy Intensity of New Aircraft Models
Newer aircrafts are more fuel efficient in terms of energy needed to carry a passenger over a kilometre/mile distance. A young fleet also reduces aircraft maintenance costs. However, new aircrafts are also more expensive, thus carriers have to balance the fuel cost saving vs. higher capital investments.
Source: IATA (2013)

17. Passenger Numbers by Airline Business Models 2003 – 2012
It can be seen that network carriers dominated the industry in terms of passengers carried, but the growth rate was slow (47%) over the period compared to that of LCCs, which saw 178% growth in the same period. By contrast, the number of passengers carried by regional airlines and charter carriers were in decline.
Note: Share by top 200 passenger airlines
Source: Airline Business, August 2013

18. Financial Returns of Different Airline Business Models (2010)
Although there are many variations of the LCC business model, in essence, LCCs provide low-fare air travel services that eliminate various “frills” such as free meals and in-flight entertainment offered by network carriers. Other main features of the LCC business model include: point-to-point operations, high flight frequency on density routes; single aircraft types which simplifies scheduling, maintenance, flight operations and training activities, and high aircraft utilization; use of secondary or un-congested airports with minute aircraft turnaround times; and single, unrestricted fares.
These operational characteristics have enabled LCCs to achieve substantially lower unit costs than network carriers, which has turned LCCs into leading players in many liberalized/developed markets, such as Southwest and JetBlue in the US, Ryanair and EasyJet in Europe, as well as Air Asia and Jetstar in the Asia Pacific.
The LCC segment has been the major growth area across all markets. Many LCCs have achieved better financial performance than network carriers. Table 1.3 shows that the operation margin of LCCs in 2010 was 7.6%, substantially higher than that of network airlines (5.3%).
Source: Airline Business, August 2011

19. Accumulated Net Losses and Gains of Legacy and Low-Cost Airlines in US
In the last decade, the largest network carriers (legacy carriers which include Alaska Airlines, American Airlines, Continental Airlines, Delta Air Lines, Northwest Airlines, United Airlines, and US Airways) had accumulated a total net loss of $62.8 billion by the end of After 2009 these network carriers have improved their financial performances, albeit at very moderate rates. Low-cost carriers as a group had performed better, achieving a total profit of $2.1 billion during the report period.
Source: The US DOT (2012)

20. Alliance Membership as of July 2012
The airline industry has three major strategic alliances between airlines, namely, Star Alliance, SkyTeam and One World. The membership of each alliance is shown in this figure.
Source: Websites of Star, SkyTeam and Oneworld

21. Top 20 Airlines by Passenger Traffic (RPKs) in 2012
Airlines from the US, Europe and Asia Pacific dominated the league table with six airlines from each region in the list. But the growth rates of US carriers were relatively low reflecting the stagnant of the North American market. By contrast, Turkish Airlines, Emirates and Qatar recorded a staggering growth rate of 26.6%, 17.6% and 13.7%, respectively, making them one of the largest airlines in the world.
In the Asia Pacific, Cathay Pacific, Qantas and Singapore Airlines remain among the region’s largest airlines, however, the top three Asia Pacific carriers in terms of RPKs in 2012 were all from China, namely, China Eastern, China Southern, and Air China.
Source: Airline Business, August 2013

22. Scheduled Freight Tonne - Kilometres 2012
International
Domestic
Rank
Airline
Millions 1
Emirates
9,319 2
Cathay Pacific Airways
8,433 3
Korean Air
8,099 4
FedEx
7,787 5
Lufthansa
7,170 6
Singapore Airlines
6,694 7
British Airways
5,452 8
UPS Airlines
4,728 9
China Airlines
4,538 10
EVA Air
4,470
Rank
Airline
Millions 1
FedEx
8,321 2
UPS Airlines
4,964 3
China Southern Airlines
1,333 4
Air China
990 5
Polar Air Cargo
480 6
Hainan Airlines
446 7
All Nippon Airways
428 8
United Airlines
391 9
Shenzhen Airlines
389 10
American Airlines
343
Although many LCCs are getting increasing ancillary revenues, virtually no LCCs have planned to develop cargo operations as a strategic business. This is because LCCs usually use narrow-body aircrafts such as A320 and B737, which offer rather limited cargo space and capacity. In addition, to reduce operation costs LCCs need to achieve short aircraft turn-around time at airports, and thus, it is not economical to make any specific arrangements for small volumes of cargo. As reported in Table, none of the world’s largest cargo operators is an LCC. In the foreseeable future, cargo operations will be dominated by express / logistics carriers (e.g. FedEx and UPS), as well as network carriers and their cargo subsidiaries (e.g. Cathay Pacific, Korean Air).
Source: IATA World Air Transport Statistics 57th Edition

23. Air Transport Industry in HK
Market Data

24. Aircraft Movements of Local and Foreign Airlines (2001-2012)
As HKIA is an international aviation hub in Asia, more than 100 international airlines offer scheduled or non-scheduled passenger or cargo services to and from Hong Kong. In this respect, it is easier to realise that foreign airlines would operate more flights at HKIA than those that were operated by Hong Kong’s local airlines for transporting air passengers and cargo to other major cities worldwide
Source: HKAA (2013)

25. Aircraft Movements of HK’s Local Airlines (2001-2012)
HKIA’s annual aircraft movements have largely been influenced by the operations of both Cathay Pacific and Dragonair. The number of flights operated by Cathay Pacific has increased by 76.3% over the years, representing approximately 25% of HKIA’s total aircraft movements each year.
Hong Kong Airlines has recently begun to play an increasingly important role in Hong Kong’s aviation industry. Its annual flight operations have increased significantly (168%) between 2010 and 2012, aimed at meeting the increased demand for air passenger travel and cargo transportation. In particular, it operated 20,000 more flights in Unlike its sister airline, Hong Kong Express has operated just around 7,000 flights each year since 2008, representing a share of 2.0‒2.4% of HKIA’s annual aircraft movement during these years.
Source: HKAA (2013)

26. Air Passenger Throughput of HKIA and for Local and Foreign Airlines (1997-2012)
Air passenger numbers increased slightly from 1997 (29.7 million) to 2001 (32.0 million). HKIA’s passenger throughput was hit by the global financial crisis in 2001, and the significant decline in international travellers seen in 2003 (26.7 million) due to the SARS outbreak, which caused weak travel demand worldwide. Since 2005, HKIA’s passenger throughput has maintained its growth, with an average of 5.1% growth per annum, and also set the new record of 55.6 million passengers in 2012.
Local airlines grew their market share in handling HKIA’s passenger throughput, from 41.8% in 2001 to 56.8% in 2012 ‒ a healthy upward trend throughout the entire period ‒ whereas foreign airlines’ share shrank to 43.2% by 2012.
Source: HKAA (2013)

27. Air Passenger Throughput of HK’s Local Airlines (2001-2012)
Cathay Pacific has played a significant role as Hong Kong’s flag-carrier in supporting HKIA’s growth, taking at least 32.3% of HKIA’s passenger throughput over the years. Also, air passenger numbers (95.1%) transported by Cathay Pacific increased between 2001 (10.3 million) and 2012 (20.2 million).
Dragonair also made a substantial contribution to the growth in air passenger throughput at HKIA, particularly with a market share of greater than 14% after Dragonair also transported 7.9 million passengers during 2012.
Hong Kong Airlines reached a milestone of 2.5 million passengers in 2012, representing approximately 4.6% of HKIA’s passenger throughput.
Source: HKAA (2013)

28. Connecting Traffic for Local and Foreign Airlines (2001-2012)
Hong Kong’s local airlines handled more international travellers who transited or transferred through HKIA to their destinations, and also increased their share of HKIA’s total connecting traffic sharply. In 2001, they handled approximately 5.9 million transfer passengers (i.e. 54.7% of HKIA’s total connecting traffic) but soared to 14.2 million in 2012 (i.e. 81.9% of HKIA’s total connecting traffic). However, foreign airlines only transported 3.1 million connecting passengers in 2012 and their significance weakened over time. Hong Kong’s local airlines only handled and transported transfer passengers travelling through HKIA.
Source: HKAA (2013)

29. Connecting Traffic Handled by HK’s Local Airlines (2001-2012)
Cathay Pacific is the largest airline transporting the vast majority of connecting traffic (transfer passengers) via HKIA to their destinations, with passenger numbers ranging from 4.6 million (43.2% of total transfer passengers) in 2001 to 9.7 million (55.9% of total transfer passengers) in 2012.
Dragonair almost doubled its market share of HKIA’s total connecting traffic during this same period, gaining approximately 20.2% of the market (3.5 million transfer passengers) in 2012.
Source: HKAA (2013)

30. Key Air Passenger Markets of HK (2001-2012)
Southeast Asia was the largest region served by Hong Kong for the years from 2001 to 2012 (approximately 15.0 million air passengers travelling to and from Hong Kong in 2012), followed by North Asia (6.4 million), Continental Europe (4.1 million), the United States and Canada (3.7 million), and Australasia (2.7 million),while Mainland China alone accounted for 12.3 million. After 2010, the number of air passengers from the Middle East and Asia Other – exceeded 1.0 million, respectively. Africa was still the least frequent region connected by Hong Kong (having less than 1% of HKIA’s air passenger throughput).
Significantly, as a single air passenger market source for Hong Kong, Mainland China and Taiwan maintained their paramount importance in HKIA’s air passenger throughput, equalling 22.2% and 14.0% during 2012.
Source: HKAA (2013)

31. Air Cargo Throughput of Local and Foreign Airlines (2001-2012)
Foreign airlines (including passenger and all-cargo airlines) transported more airfreight than Hong Kong’s local airlines. The key foreign all-cargo operators operating at HKIA are Cargolux, Altas, FedEx, and UPS
More than half of HKIA’s cargo throughput was handled and transported by foreign airlines between 2001 and 2012 (approximately 55.8‒61.5%) 
Source: HKAA (2013)

32. Air Cargo Throughput of HK’s Local Airlines (2001-2012)
Cathay Pacific never handled less than 28.6% of Hong Kong’s air cargo throughput over the years and reached 33.6% (1.39 million tonnes of cargo) in 2010.
Air Hong Kong has played an increasingly important role in supporting HKIA’s air cargo growth. Its market share went up gradually from 1.3% in 2003 to 6.1% in Accordingly, its total express cargo volumes grew almost seven-fold between 2003 and 2012.
In contrast, Dragonair’s air cargo operations declined after 2005, which has reduced its importance regarding HKIA’s air cargo growth, sliding to only 3.6% of the market in 2012.
Hong Kong Airlines took over Dragonair, becoming the third largest local carrier for transporting air cargo in 2012, having a market share of 4.4% (approximately 0.18 million tonnes of cargo). Even more importantly, Hong Kong Airlines’ cargo volumes began to catch up to Air Hong Kong during 2012.
Source: HKAA (2013)

33. Key Air Cargo Markets of HK (2001-2012)
As of 2012, the regions of Continental Europe, Southeast Asia, and the US and Canada were the three largest air cargo markets served by HKIA, taking approximately 49.9% of HKIA’s air cargo throughput ‒ HKIA handled around 0.67 million tonnes of cargo for each of these three regions.
Source: HKAA (2013)

34. Cathay Pacific Frequencies Per Week (Summer Schedule 2014)
Destination
Frequency per week
Adelaide 4
Denpasar 9
Manila 42
Sapporo
Amsterdam 7
Dubai 14
Melbourne 21
Seoul
Auckland
Frankfurt
Milan
Shanghai
Bahrain
Fukuoka
Moscow 3
Singapore 63
Bangkok 59
Ho Chi Minh city 16
Mumbai 10
Surabaya
Beijing
Hyderabad
Nagoya
Sydney 28
Brisbane 11
Jakarta
New York 35
Taipei
106
Cairns
Johannesburg
Osaka
Tokyo
Cebu
Karachi
Paris
Toronto
Chennai
Kuala Lumpur
Perth
Vancouver
Chicago
London
Riyadh 5
Colombo
Los Angeles
Rome
Delhi
Maldives
San Francisco
Figures here excluding the code-sharing flights (i.e. not operated by CX).
By 2013, its flight networks increased to 182 destinations in 41 countries with the support of its partner airlines, as well as operating a fleet of 140 aircraft. CX and KA carried 29.9 million passengers, an increase of 3.3% compared to 2012.
CX and KA carried 1.5 million tonnes of cargo and mail in 2013, a reduction of 1.5% compared to (2013 CX Annual report)
Source: Cathay Pacific System Timetable for Summer Schedule 2014, Cathay Pacific Press Release (2014)
Note: The data was as on 2 September 2014.

35. Dragonair Frequencies per Week (Summer Schedule 2014)
Destination
Frequency
Beijing 56
Haikou 7
Phuket 14
Bengalore
Hangzhou 28
Qingdao
Pusan
Hanoi 10
Sanya 5
Changsha
Jeju 4
SHA
Chengdu
Kaohsiung 38
PVG 91
Chiang Mai
Kathmandu 6
Siem Reap
Chongqing
Kolkata
Taichung
Clark 3
Kota Kinabalu
Taipei 12
Da Nang
Kunming
Wenzhou
Denpasar Bali 2
Manila
Wuhan
Dhaka
Nanjing
Xiamen
Fukuoka
Ningbo
Xian
Fuzhou
Okinawa
Yangon
Guangzhou
Penang 8
Zhengzhou
Guilin
Phnom Penh
Its fleet size grew up to 41 Airbus aircraft (a mix of single-aisle A320s and A321s, and the wide-body A330s) in 2013, offering scheduled passenger and cargo services to 47 destinations.
Source: Dragonair System Timetable for Summer Schedule 2014
Note: The data was as on 5 September 2014.

36. Hong Kong Airlines Frequencies Per Week (Summer Schedule 2014)
Destination
Frequency
per week
Beijing 28
Guiyang 7
Shanghai – Pudong 21
Bangkok 35
Haikou
Shanhai - Hongqiao
Chengdu
Hangzhou
Taipei
Chongqing
Hanoi
Taiyuan 2
Denpasar 14
Nanjing
Tianjin 5
Fuzhou
Nanning
Xiamen 6
Guilin
Sanya
Xuzhou
As of 2012, they transported 2.5 million passengers and 0.2 million tonnes of cargo.
Currently (up to September 2014), they have 23 aircrafts (5 of them are freighters).
(Source: HK Airlines webpage)
Source: Hong Kong Airlines Timetable for Summer Schedule 2014
Note: The data was as on 5 September 2014.

37. Hong Kong Express Frequencies Per Week (Summer Schedule 2014)
Destination
Frequency
per week
Busan 6
Osaka 14
Chiang Mai 3
Penang 7
Fukuoka
Phuket 4
Incheon 17
Quanzhou*
Kota Kinabalu
Taichung
Kunming
Tokyo-Haneda
Nagoya
Zhengzhou^ 5
Ningbo
*Effective from 14 October – 25 October
^Effective from 24 September – 25 October
As of June 2013, Hong Kong Airlines announced plans to implement a “dual-brand” strategy that will brand itself as a premium full-service airlines targeting its planned long-haul aspirations, as well as transforming its sister carrier (Hong Kong Express) into a low-cost carrier (LCC) targeting the Asian short-haul market (there has been rapid growth in short-haul leisure travel) and exploring Hong Kong’s low-cost market potential.
HK Express started to operate in October 2013 as a low cost carrier. Now they are operating 6 A320s and planning to expand the fleet up to 11 planes.
(Source: HK Express webpage)
Source: Hong Kong Express Timetable for Summer Schedule 2014
Note: The data was as on 5 September 2014.

38. Air Transport Industry in HK
Economic Contribution

39. Total Value Added by HK’s Aviation Sector (2005-2011)
 In 2011, the total economic contribution from the aviation sector (combining the VA by air transport and incidental air transport services, tourism by air, trade services by air, and other sectors use air transport services) towards Hong Kong’s economy was HK$308,399 million (including the direct benefits: HK$254,065 million plus the indirect benefits: HK$54,334) , representing 8.23% of Hong Kong’s GDP.
Source: HK Census and Statistics Department (2013)

40. Proportion of the Workforce Engaged in HK’s Aviation Industry (2005-2011)
The total numbers of employees engaged in the aviation sector made up 7.04% of Hong Kong’s total labour force ‒ 252,000 employees in Currently, HKIA is the largest employer and the key contributor in Hong Kong’s air transportation industry employing around 65,000 people, strengthening Hong Kong's position as a leading international and regional aviation centre in Asia. The employment figures for Hong Kong’s aviation industry are scheduled to be released by Hong Kong Census and Statistics Department at the beginning of 2014.
Source: HK Census and Statistics Department (2013)

41. Air Transport Industry in HK
A5 in the PRD Region

43. Five Major GPRD Airports
Within the GPRD, there are five major airports, namely, HKIA, Guangzhou Baiyun International Airport, Shenzhen Bao’an International Airport, Macao International Airport and Zhuhai Airport.
Source: HKAA (2011)

44. Selected International Destinations Connected to Airports in the PRD Region—Hong Kong
Frequency
per week (Passenger)
per week
(Cargo)
Asia
Bangkok*
183 13
Seoul
157 30
Singapore
163 23
Taipei
298 49
Australia
Sydney 35 3
Europe
London 56 2
North America
Los Angeles 28 22
New York 7
Vancouver 21
Over 100 airlines operate from HKIA, linking Hong Kong with about 180 locations around the world, including 44 destinations on the Chinese Mainland.
147 out of 180 are destinations for passenger flights.
Newly added destinations in 2014: Dallas, Seattle, Kagoshima (passenger), Mexico City (freight)
Number of destinations for scheduled flights at March 2014: 180
Newly added in 2014 for passenger flights: Dallas, Seattle and Kagoshima
Source: HKAA Annual Report ( ), webpage of HK Airport (2014)
Data from October for passengers, 6-12 October for cargo
*Bangkok includes 2 airports: Bangkok and DMK

45. Selected International Destinations Connected to Airports in the PRD Region—Guangzhou
Frequency
per week
(Passenger and Cargo)
Asia
Bangkok*
101
Seoul 73
Singapore 76
Taipei 40
Australia
Sydney 54
Europe
London 7
North America
Los Angeles 15
New York 5
Vancouver
枢纽建设方面：全年新增13条国际航线，新增国际通航点6个，国际和地区通航点达到60个，国际航班量增加到每周731班，中转旅客稳步增长。顺利实现国际一号货站全面启用，机场货站处理能力从10万吨提升至52万吨
(2013 年白雲機場年報,
Number of destinations for scheduled flights in 2013: more than 160 cities (Domestic and international)
Source: Webpage of Guangzhou Baiyun Airport (2014)
Data from October
*Bangkok includes 2 airports: Bangkok and DMK

46. Selected International Destinations Connected to Airports in the PRD Region—Shenzhen
Frequency per week
(Passenger and cargo)
Bangkok* 26
Seoul 30
Singapore 25
Taipei 22
Shenzhen’s international networks consisted of five Asian destinations: Bangkok, Koto Kinabalu, Kuala Lumpur, Seoul, and Singapore.
截至报告期末，共有36家国内外航空公司开通深圳航线，航线总数151条，其中，国内航线128条、港澳台地区航线3条、国际航线20条。通航城市102个，其中国内城市82个、港澳台地区城市5个、国际城市15个。全年新增拉萨、包头、延吉、威海、大理等14个国内新航点，普吉岛1个国际新航点，加密了新加坡、曼谷两条国际航线。
(深圳機場2013 年報,
Number of destinations for scheduled flights: 107 (Domestic: 92, HK-Macau-Taiwan:4, international: 11)
Source: Webpage of Shenzhen Baoan Airport (2014)
Data from 4 – 10 October *Bangkok includes 2 airports: Bangkok and DMK

47. Daily Frequency of Destinations in the Mainland by Two Airports
Beijing
Shanghai
(Pudong and Hongqiao)
Hangzhou
Hong Kong (HKG) 22 43 9
Shenzhen (SZX) 34 49 21
Source: Webpages of HK International Airport and Shenzhen Baoan Airport (2014)
Sample day: 24 October 2014
Figures include passenger and cargo direct flights only.

48. Selected International Destinations Connected to Airports in the PRD Region—Macau
Frequency per week
(Passenger)
Bangkok* 49
Seoul 21
Singapore 14
Taipei 77
Macau and Shenzhen’s international networks are more oriented to connect to the key Asian cities.
Two cities (Kuala Lumpur and Taipei) provided 93 flights (more than 16,000 seats) to Macau, followed by Bangkok (62 flights), Singapore (54 flights), and Kaohsiung (53 flights).
New destinations stating on Macau Airport’s webpage: Osaka, Clark (Philippines), Jeju (South Korea), Chiang Mai (Thailand), Da Nang, Hanoi (Vietnam)
Number of destinations for scheduled flights: 37 (Mainland and Taiwan: 23, international: 14)
Webpage of Macau Airport (2014)
*Bangkok includes 2 airports: Bangkok and DMK
Data on 4 October provided by Macau Airport

49. No international routes Number of domestic destinations: 41
Key International Destinations Connected to Airports in the PRD Region—Zhuhai
No international routes
Number of domestic destinations: 41
Zhuhai has not connected to any international destinations.
Webpage of Zhuhai Airport (2014)

50. Planned Developments of Airports in the Region
Between 2008 and 2030, the global GDP is forecast to grow at a compound annual growth rate(CAGR) of 4% and the Mainland GDP growth at an even higher rate of 7%.
Accordingly, the aviation market is also expected to grow robustly. In the light of this rising demand for air travel, many airports in this region are responding by mapping out plans to enhance their facilities.
Source: HKAA (2011)

51. Handover Points Between the HK and Guangzhou Flight Information Regions
The three parties (the Civil Aviation Administration of China (CAAC), the Hong Kong Civil Aviation Department (HKCAD), and the Civil Aviation Authority of Macau (CAA Macau) established a tripartite cooperation platform to rationalise three different air traffic control (ATC) systems in the PRD region, and to redesign more efficient flight routes and procedures for commercial aviation activities. Often, concerted discussions are undertaken to study and address the matters relating to the PRD’s airspace management (e.g. airspace congestion).
One of the successful examples of this tripartite cooperation platform is that a new handover point (named as ‘LANDA’) was set up and put into effect in September 2011 (see Figure 2). It deals with flights transiting through Hong Kong’s FIR and landing at Shenzhen, and it is located between the Hong Kong and Guangzhou FIRs. This new handover point was expected to significantly reduce traffic complexity around HKIA, thereby enhancing air traffic management efficiency.
Source: HK Government

52. The Third Runway Expansion

53. Global Air Traffic versus Economic Growth
This figure demonstrated that air traffic growth bears a strong correlation with the global GDP growth.
Source: HKAA (2011)

54. A Structured Air Traffic Demand Forecast Process
The first step of the master planning process is to determine the long-term air traffic demand forecast up to International Air Transport Association (IATA) Consulting has been commissioned to undertake this task, which is a very structured
process involving –
(a)Evaluating the best model to apply for the forecast;
(b) Compiling gross domestic product (GDP) forecast;
(c) Producing preliminary traffic forecasts based on GDP;
(d) Adjusting traffic forecasts based upon the latest market changes;
(e) Carrying out reality checks with aviation-related industries;
(f) Determining a set of primary projections for passenger and cargo traffic and air traffic movements (ATMs, also known as flight movements); and
(g) Conducting sensitivity analysis to produce a range of estimates for high, low and base cases.
Source: HKAA (2011)

55. Great Pearl River Delta Airports Passenger and Cargo Traffic Forecast
IATA Consulting estimates that the aviation market in the Greater PRD (GPRD)7 will grow to 387 million passenger trips and 18 million tonnes of cargo by 2030.
Source: HKAA (2011)

56. HKIA Air Traffic Movement Projection (Up to 2030)
According to the GDP regression based forecasting model, and taking into account various aspects of HKIA’s market environment, such as industry trends, regional market dynamics, changes in policies and so on, IATA Consulting estimates that air traffic demand forecasts for HKIA will fall within the range of 89 – 105 million passengers and 8 – 9.8 million tonnes of cargo by 2030, growing at respective CAGRs of 2.8% – 3.6% and 3.7% – 4.6% between 2008 and 2030.
-> Flight movements will reach about 550,000 – 650,000, growing at a CAGR of 2.8% – 3.6%.
Source: HKAA (2011)

57. HKIA Passenger Traffic Projection (Up to 2030)
IATA Consulting estimates that air traffic demand forecasts for HKIA will fall within the range of 89 – 105 million passengers and 8 – 9.8 million tonnes of cargo by 2030, growing at respective CAGRs of 2.8% – 3.6% and 3.7% – 4.6% between 2008 and 2030.
Source: HKAA (2011)

58. HKIA Cargo Traffic Projection (Up to 2030)
-> IATA Consulting estimates that air traffic demand forecasts for HKIA will fall within the range of 89 – 105 million passengers and 8 – 9.8 million tonnes of cargo by 2030, growing at respective CAGRs of 2.8% – 3.6% and 3.7% – 4.6% between 2008 and 2030.
Source: HKAA (2011)

59. Traffic Forecasts from Boeing and Airbus
Source: HKAA (2011)

60. Two-runway System: Airport Layout Plan in 2030
Including:
Passenger terminal expansion (HK$6.9 billion)
Apron and passenger concourse expansion (HK$8.3 billion)
Baggage Handling System (BHS) enhancement (HK$2.1 billion)
Road network and landside transportation facilities expansion (HK$3.8 billion)
Source: HKAA (2011)

61. Base Case Constrained Air Traffic Movement Forecast
Under this option, HKIA will be able to cope with air traffic demand up to 2020 (base case) (see Figure 5.2). Beyond that, HKIA would not be able to accommodate any more additional flight movements.
Source: HKAA (2011)

62. Base Case Constrained Passenger Traffic Movement Forecast
While runway capacity would be reached in 2020 (base case), the actual passengers and cargo throughput would continue to grow nominally beyond 2020, up to HKIA’s maximum handling capacity of 74 million passengers and 6 million tonnes of cargo.
Source: HKAA (2011)

63. Base Case Constrained Cargo Traffic Movement Forecast
Source: HKAA (2011)

64. Three-runway System: Airport Layout Plan in 2030
Including:
Land formation (HK$38.9 billion)
Third runway, related taxiway systems and airfield facilities (HK$7.5 billion)
Third runway aprons and passenger concourses (HK$14.0 billion)
Midfield Concourse and Freighter Apron expansion (HK$4.5 billion)
Reconfiguration of Passenger Terminal 2 (T2) (HK$8.6 billion)
Automated People Mover (APM) extension (HK$4.2 billion)
Baggage Handling System (BHS) enhancement (HK$4.3 billion)
Road network and landside transportation facilities expansion (HK$4.2 billion)
Source: HKAA (2011)

65. Cost and Benefit Flows of Option 1
ESA estimates that the direct, indirect and induced contribution of HKIA to Hong Kong’s GDP in 2030 under this option would be HK$120 billion, equivalent to around 3.3% of Hong Kong’s GDP forecast for (compared to 4.6% in 2008). Direct employment would be increased from 62,000 in 2008 to 101,000 in 2030.
Indirect and induced employment would be increased from 124,000 in 2008 to 143,000 in 2030.
(In 2009 dollars)
Source: HKAA (2011)

66. Cost and Benefit Flows of Option 2
ESA estimates that given the higher construction costs under this option, the direct, indirect and induced contribution to Hong Kong’s GDP in 2030 would be HK$167 billion, equivalent to around 4.6% of the Hong Kong’s GDP forecast for 2030 (compared to 4.6% in 2008).
Direct employment associated with HKIA would reach 141,000 and indirect and induced employment would increase to about 199,000 by 2030.
(In 2009 dollars)
Source: HKAA (2011)

67. Summary of the Economic Impact Analysis
Option 1 is no doubt a less expensive option in terms of capital investment and would bring about an ENPV of HK$432 billion. Option 2, however, has a projected ENPV of HK$912 billion and is a “front-loaded” investment that is projected to generate a much higher value added in the long term.
Between the two options, Option 2 brings a substantially higher economic contribution in the long term (a difference of HK$480 billion in ENPV) and provides a significantly greater boost to local employment.
(ENPV refers to the difference between the present value of the future economic benefits from an investment and the present value of the investment amount)
Source: HKAA (2011)

68. HKIA—Financing of 3rd Runway and Slot Allocation
Dr CK Law, Director of Policy
Aviation Policy and Research Center
CUHK (31/10/2014)

69. Content (a) Financing Options for the 3rd Runway
--Original Financing Plan
--HKAA Proposal for 3rd Runway
--User-pay Principle—China
--User-pay Principle—US
--Passenger Surcharge for HK

70. Content (b) Slot Allocation --IATA Principle of Slot Allocation
--London Airports—Slot Trading
--US—Slot Trading and Proposed Slot Auctions
--Current Cases of Slot Auctions
--Lessons for HK

71. Original Financing Plan for HKIA
In the 1991 financing arrangement of HKIA:
--direct equity injection by HK Government:
HK$36 billion;
--maximum debt from borrowing (for first phase development works): HK$11.6 billion.
(b)
So this was a financing package of about 75% equity and 25% debt (user-pay principle was not implemented).
-> The max. amounts were based on the agreement between the Chinese and British governments
-> In fact, the final proportion of debt was even smaller.

72. HKAA’s Proposed Financing Sources for 3rd Runway
Net income and retained earnings of HKAA
(b)
Reducing the ratio of dividend payment to the HK Government , using the extra cash for construction, plus other forms of direct government funding
(c)
Using user-pay-principle to collect a surcharge from users
(d)
Arranging traditional bank loans and issuing bonds
-> Net income (after dividend payments to the government)
-> Ratio of dividend payment is 80% currently
Source: HKAA (2011)

73. Financing Options under the User-Pay Principle—China
In March 2012, Ministry of Finance in China issued a notice about Civil Aviation Development Fund (《民航發展基金徵收使用管理暫行辦法》).
(Domestic air passengers have to pay RMB 50 per movement, international air passengers have to pay RMB 90 per movement (including RMB 20 for Tourism Development Fund).)
(b)
Air carriers also have to pay for Civil Aviation Development Fund according to the maximum take-off weight of aircrafts, flying distances and routes.
Domestic air passengers have to pay RMB 50 per movement;
International air passengers have to pay RMB 90 per movement (including RMB 20 for Tourism Development Fund).

74. Financing Options under the User-Pay Principle—the US
The PFC programme authorises the Federal Aviation Administration (FAA) to allow airports to impose fees on passengers to finance airport development projects and planning as defined in the law.
(The PFC could be imposed at a level of US$1, US$2, US$3, US$4 and US$4.50 per passenger.)
(b)
For example: Chicago O’Hare International Airport: FAA permitted US$6.4b PFC to be collected up to 1/1/2038 (about 43% of estimated total cost for airport expansion, at US$15 billion).

75. User-pay Principle for 3rd Runway --Additional Passenger Surcharge (1)
Can be levied similar to the existing framework of passenger departure tax (HK$120 per passenger, HK$2.2b tax revenue for 2013).
Air passenger departure tax is for the general revenue purpose, but not for the construction of HK airport.
Assuming 20 million passengers would pay this surcharge annually at HK$100 each, the total revenue would be HK$2 billion a year.
A 20-year programme, e.g. from 2016 to 2035, would easily yield HK$40 billion at 2013’s money.
-> Air passenger departure tax: currently at HK$120 each for the general revenue purpose
-> Estimation: this is equivalent to 40% of the total shortfall of HK$100 billion of the construction cost), given rising passenger numbers and periodic increment of the surcharge to maintain its real value.
-> The level of levy and duration of collection would be the two major parameters adopted for the adjustment to attain the total revenue required.

76. User-pay Principle for 3rd Runway --Additional Passenger Surcharge (2)
A charge can be levied under “Scheme of Airport Charges” in HK Law Chapter 483 by HK Airport Authority.
(f)
Currently, a terminal building charge is in effect (HK$23 per non-transit passenger), which is levied on air carriers. This charge would require the approval of the Chief Executive, but not LegCo.

77. Recommended Funding Sources for HKIA’s 3rd Runway
HKAA internal capital
Government direct funding
User-pay Principle
Borrowing
Total
HK$ (billion)
136
Percentage (%)
100
Best lending rate was 8.1% during 1991 and 1997 on average. It is 5% currently.

78. IATA’s Principles of Slot Allocation
(a) According to the latest estimation by HKIA, the current capacity of 420,000 flights per year would be reached by 2016/17. We are running out of slots sooner than expected.
(b) 4 major cornerstones in IATA Worldwide Slot Guidelines are :
certainty of access;
flexibility to mix and match slots to meet operational challenges and changing market needs;
sustainability of costs; and
transparency of allocation
(c) 4 major principles:
Historic slots
Changes to historic slots
Slot pool
New entrants
Historic slots: If the airline can demonstrate that the series (of slots) was operated at least 80% of the time during the period allocated in the previous equivalent season, those series of slots would be granted as historic precedence by coordinators. Coordinators would firstly allocate the historic slots during the slot allocation process.
Changes to historic slots: These requests should have priority over new requests for the same slot within the capacity available.
Slot pool: The remaining slots (once coordinators have allocated historic slots and changes to historic slots) would be formed as a slot pool, including any new created slots.
New entrants: 50% of slots contained in the pool at initial slot allocation must be allocated to new entrants, unless requests by new entrants are less than 50%.
Source: IATA (2013)

79. Congestion as Negative ExternalityMB PS
Quantity of flights
Price
MCS
MCP A B C D QS PP QC QP
This figure shows the efficient quantity of flights. (Cohen et al. 2009) There are 3 curves in this figure: one downward-sloping marginal benefit curve and two upward-sloping marginal costs curves (social costs and personal costs respectively). The horizontal component of two marginal cost curves measures the cost of an additional flight. When the number of flights is small, the incremental cost of additional flights is about the same. The costs borne by a scheduling airline increases when the number of flights exceeds QC.
Actually, congestion occurs if we assume that the capacity of the airport is fixed in QC. From the figure, there is a divergence of social marginal cost and private marginal cost. Currently, the number of flights is at QP. If we include the social costs, QS is the optimal level of congestion and the price of taking a flight will increase from PP to PS. The vertical distance between MCS and MCP is the social cost.
QS is still beyond the capacity level, QC. Hence, the congestion still occurs. The only difference is that at this level of congestion, we have included the social costs.
Source: Figure 1 adapted from Cohen et al. (2009)

80. London Airports— Slot Trading (1)
Heathrow Airport and Gatwick Airports are “Level 3” Airport (HKIA as well) under IATA classification.
For most of the time, the demand of runway movement exceeds the capacity of runway movement.
Airport Coordination Limited (ACL) as the independent airport coordinator, which is monitored by Civil Aviation Authority.
In Summer 2014, air transport movement cap for two runways was about 85 movements per day.
-> For 85 movements, the data is extracted from ACL statistical report directly. It offers the limit of movements from 0500 to Actually, LHR is not in a full curfew at all. According to LHR night noise fact sheet, there is a night period and night quota. Certain types of aircrafts which produce higher noise would not be allowed to enter LHR. Even the aircrafts are relatively quieter, only a few flights will be allowed to land / depart from LHR.
Currently, the night period is from 2300 to 0700 (local time).
The ‘Night Period’ is 23:00 to 07:00 hours local during which
period the noisiest types of aircraft (classified QC/8 and QC/16)
may not be scheduled to land or take-off.
The ‘Night Quota Period’ is from to hours local,
during which period aircraft movements are restricted by a limit
on the number of movements with noise quotas as an additional
measure. These number of movements and quota counts
allowed are set for each season as opposed to each night.
Source: IATA (2013), ACL (2014)

81. London Airports— Slot Trading (2)
(e)
Currently, slots are traded in the secondary market (Online Platform: slottrade.aero), monitored by CAA. The objective is to improve the efficiency of slot utilization.
(f)
ACL is responsible for facilitation of trading slots by providing the online platform.
(g)
Airlines are the main participants for bilateral negotiations in the trading.
Trading mechanisms mentioned by ACL in slottrade.aero:
Airlines can initiate a desire to trade slots (such as buying, selling, leasing in, leasing out or swapping) by posting in SlotTrade.
If airlines are interested, they are invited to register an Express of Interest before the deadline date.
Airlines enter into bilateral discussions to agree a trade and these discussions are offline and not part of the slottrade.aero website service.
If an agreement is reached between the airlines, then a slot transaction is enacted with the coordinator of the airport, who will confirm feasibility if possible.
Source: slottrade.aero (2014), ACL (2014)

82. London Airports— Slot Trading (3)
(h)
Usually, the price for slot trading is confidential. (ACL asks airlines to disclose the price on a voluntary basis).
(i)
In 2013, two deals valuing Heathrow slots about GBP 15 million per daily pair according to news.
(j)
In the Summer 2012 season, there were 23 transactions, involving 122 slots-per-week traded (just above 1%, total slots-per-week allocated was 9,524, about 1,360 flights per day). Many valuable slots were traded in earlier years already.
Source: slottrade.aero (2014), ACL (2014), CAPA (2013)

83. Trading Volume of London Heathrow and Gatwick Airport from S08 to S12
LHR (Heathrow)
LGW (Gatwick)
Season/ Year
Number of transactions
Slots-per- week traded
Total slots- per-week allocated
Percentage of slots-per- week traded
S08 17
220
9,482
2.32% 28
194
6,060
3.20%
W08
244
9,271
2.63% 8
113
4,267
2.65%
S09 15
313
9,512
3.29% 11
264
5,758
4.58%
W09 10
409
9,280
4.41% 5
267
4,242
6.29%
S10 18
435
9,524
4.57% 9
246
5,658
4.35%
W10
265
2.86% 3 43
4,857
0.89%
S11
156
1.64% 4 77
5,575
1.38%
W11 6
248
9,305
2.67%
4,135
0.00%
S12 23
122
1.28% 33
5,696
0.58%
Source: slottrade.aero (2014), table complied by APRC (2014)

84. Slot Secondary Trading and Proposed Slot Auctions in the US (1)
In 1960s, Reagan National and 3 New York City area airports were congested so FAA implemented High Density Rule (HDR) to limit the number of flights operated for all or part of the day.
FAA adopted a buy/sell rule on slots in 1986, as it believed that a secondary market in slots would address concerns by new entrant airlines and smaller carriers about access and competition at High Density Rule-controlled airports.
FAA proposed congestion management rules (including slot auctions) for LaGuardia, Newark and John F. Kennedy Airport in 2008 for easing the congestion.
Source: Colangelo (2012), US GAO (2012), Williams (2009)

85. Slot Secondary Trading and Proposed Slot Auctions in the US (2)
Based on this proposal, most of the existing slots at all three airports would be "grandfathered" to their current owners. This would allow incumbent carriers to retain the vast majority of the slots they already operate.
(e)
Carriers would hold these slots (called "common slots") as lease agreements for 10 years. At JFK and EWR, each carrier would retain 100% of its current slots up to 20, plus 90% of all of its slots over 20 (meaning 10% of these would be taken out immediately for auctions). Once the proposed rule expired, all interests of “common” slots would revert to FAA.
(f)
The FAA would then auction those slots withdrawn from eligible carriers (initially called "limited slots") to successful bidders over a staggered 5-year period. Those slots awarded through the withdrawal-and-auction process would have shorter leases.
(g)
Once the limited slots are auctioned and leased to the highest bidder, they then would become "unrestricted" slots. The unrestricted slots, unlike common and limited slots, would not be subject to withdrawal by the FAA, but would instead expire at the end of the specified lease term. “Unrestricted” slots would expire when the rule sunsets (i.e. 10 years).
(h)
But this auction scheme has never been implemented.
Source: The mechanism was sumamrised by Williams (2009). 73 Federal Register (2008)
Remarks: The one at LaGuardia was quite similar to this one at JFK and Newark.

86. Current Cases of Slot Auction: New York LaGuardia Airport (2011)
A joint waiver request from Delta Air Lines and US Airways was granted—to remove the prohibition on purchasing slots at LaGuardia Airport (LGA).
Auction of 32 slots at LGA and 16 slots at Washington Reagan Airport (DCA), by a blind, cash-only sale through an FAA-managed website.
JetBlue Airways bid US$72 million for 8 roundtrips a day at both LGA and DCA in the auction. WestJet, a Canadian carrier, will pay $17.6 million for eight slot pairs at LaGuardia.
Notice: US Department of Transportation and FAA jointly granted this wavier.
1. Since the slots at LGA are not allowed to be purchased and sold under the Order, carriers could only apply for a waiver of the order for purchases and sale of slots
2.The full amount of the proceeds could be retained by the selling carrier. The seller and purchaser will be required to notify the FAA that the transaction has been completed and certify that only monetary consideration will be or has been exchanged for the slots.
For the auction: to limited incumbent and new entrant carriers having fewer than five percent of the total slot holdings at DCA and LGA respectively
Source: 76 Federal Register in 2011, US DOT (2011), WSJ (2011)

87. Current Cases of Slot Auction: Washington Reagan Airport (2014)
US Department of Justice ordered to have auctions for slots owned by America Airlines, as an approval of merger of America Airlines and US Airways.
According to the settlement for the merger with DOJ, American and US Airways agreed to give up 52 slot pairs at Reagan airport. 
(c) Results on 30 January 2014:
5 slot pairs remained unaccounted from the 52 DCA slot pairs.
Of those 52, Southwest now has 27 and JetBlue 20.
-> Southwest (the 12 it announced this morning plus 8 it had already been leasing from AA and gets to keep on a permanent basis, per the DOJ settlement).
-> No details about the price / destinations of slots were released in news.
-> Please notice, this auction was launched by DOJ instead of FAA or DOT. It was because in 2008, FAA wanted to promote the slot auction policies but it was stopped by the Obama’s administration in It was a great controversy at that time.
Source: USAToday (2014), Southwest Airlines (2014)

88. Slot Trading/Auction Lessons for Hong Kong
Hong Kong is running out of slots soon.
In order to enhance the efficiency of slot utilization, HK government should consider:
(a)
Allowing secondary slot trading.
(b)
Auctioning remaining slots in the next few years.
(c)
Encouraging existing airlines to surrender under-utilized slots.
(UK ACL could impose financial sanctions, up to GBP 20,000 for each instance of misuse of slots, on air carriers which misuse the slots. In Summer 2013, British Airways was fined for GBP 2,000 as it operated off slots in Gatwick Airport.)

89. Environmental Issues
Carbon Emission

90. Social Costs
Airport expansion
Infrastructure cost
Damages to ecology, like marine
Increasing flights due to expansion
Noise
Air pollution (SOx)
Carbon

91. Example Social costs of London Heathrow Airport Expansion
Source: A New Approach to Evaluating Runway 3, New Economics Foundation, 2010

92. Carbon Emission: Evaluation from HKAA
HKAA evaluated the carbon emission in August 2014
In the coming 50 years (from 2012 to 2061), the amount of carbon emission brought by the operation of third runway would be 266 million tonnes. The social costs involved will be HKD 54.7 billion. (For the whole journey of flights, including carbon emission in HK and destinations)
The amount of carbon emission brought by the operation of third runway in the coming 50 years, will only be 32 million tonnes and the social costs will be HKD 7.3 billion only, excluding the emission in overseas destinations.
Source: 明報財經網 (2014)

93. Results from Social Return on Investment by HK Friends of Earth, HK Dolphin Conservation Society and The Professional Commons
機場管理局將於星期五公布興建機場第三條跑道的環評報告，由香港地球之友、香港海豚保育學會和公共專業聯盟組成的評估小組上星期六（6月14日）率先發表「社會代價及回報評估」（Social Return on Investment, SROI）研究結果，發現總社會及環境成本可達6,688億，令第三跑道出現「負經濟收益」，倒蝕逾千億，並非如當局所言「必賺」。
1. 氣候變化成本
民航活動與氣候變化有著密切關係，2013年4月發表的一份國際碳排放報告《Aviation Carbon Footprint: Global Scheduled International Passenger Flights 2012》指出，香港國際機場的碳排放佔世界排名第三（10,367公噸），僅次於第一的倫敦希斯路機場（16,404公噸）和第二的杜拜國際機場（10,968公噸）。
小組在預測2023至2061年，第三跑道建成後的碳排放總量時，考慮了「香港國際機場離境飛機架次的增長率」、「機場三條跑道系統的承擔能力」和「航空技術進步提升能源效率的可能性」，根據英國政府的能源及氣候變化部制定的碳排放價目表，以價格低、中、高，分別反映對氣候變化的樂觀、基本和悲觀的預測情境。因此，氣候變化成本的範圍由樂觀時約1,054億港元，至悲觀時約6,263億港元不等。
2.（a）中華白海豚社會價值
新跑道將建於本港3個中華白海豚棲息熱點的中心，阻礙海豚的流動，亦會破壞沙洲及龍鼓洲海岸公園和大小磨刀洲海岸公園作為海豚棲身地，勢令稀有的白海豚數目進一步減少。
小組與香港浸會大學合作，在去年12月以電話抽樣訪問1,007名香港居民，結果顯示有7成受訪者願意為保育白海豚生境付出金錢，平均金額為$253。據政府統計處推算，2013年香港整體人口約719萬人，得出市民願付金額總值159億。
結果又顯示8成6受訪者，願意更改行經中華白海豚棲息地的渡輪航線，平均增加航程時間21分鐘。政府統計處資料顯示2012年香港居民平均時薪$55，以此將額外的航程時間轉換成金額，再乘以香港居民經港澳碼頭及中港碼頭出入境的每年平均人數，得出總值26.7億。
因此，香港社會未來願意為中華白海豚生態付出的保育成本總共186億。
（b）觀豚活動旅遊經濟價值
此外，觀賞野生白海豚是受歡迎的生態旅遊活動，若白海豚滅絕，亦將影響旅遊業收益。小組訪問觀豚活動的主要營運商，香港海豚觀察公司和5間大澳快艇公司，計算他們在2013年的收益推算未來10年的總收入可達12.3億元。
小組又透過問卷調查，訪問本地居民和旅客，發現受訪者參與觀豚活動的意慾超過5成。小組假設這些觀豚者，在未來十年只參加一次本地觀豚活動，每位觀豚人士願意付出$573至$779不等，遠遠高於現時香港海豚觀察公司收取每位350元的費用。因此未來10年潛在的旅遊經濟價值共有175億。
總結以上結果，把社會價值（186億）和經濟價值（175億）相加，中華白海豚在未來10年的總價值是361億。
（有關研究的中華白海豚部份，詳細可看〈中華白海豚值361億 三跑工程毀生態旅遊〉。）
3. 飛機噪音成本
根據民航處的資料，一年內超過25%時間錄得超過65分貝噪音的地區，包括欣澳、青龍頭、汀九及馬灣。小組預計將來第三條跑道落成後，噪音會向西北方向延伸，波及屯門，特別是黃金海岸一帶。小組採用噪音貶值指數（Noise Depreciation Index, NDI），計算樓價因飛機噪音破壞寧靜生活環境的跌幅。根據各受影響地區的平均樓價（2013年3月至6月），小組計算出香港國際機場的NDI為1.2（即飛機噪音每上升1分貝，樓價便平均下降1.2%）。以政府統計處2011年全港人口普查的數據，估算受影響地區的居住人口和家庭數目，結果顯示每上升1分貝噪音，各區每戶家庭所承擔的噪音成本分別是：馬灣 （$61,788）、青龍頭（$58,109）、汀九（$61,433）和香港黃金海岸（$53,521）。在三種不同的預設情況下，受影響家庭的總噪音成本由樂觀時$86,881至悲觀時$360,773不等。
Source: 獨立媒體 (2014)

94. Divergence between private and social costs
Social optimum:
Marginal Social Cost (MSC)
= Marginal Social Benefit (MSB)
Result of negative externality:
MSC > MSB
=> Overproduction

95. Methods to handle the problem
Major economic principle:
Internalize all the negative externalities in decision making
How to do it in practice?
Quota
Tax
Other methods and regulations

96. Quota
Fix the pollution quota at social optimum (Q2)

97. Example - Quota European Emission Trading System (EU ETS)
The European Union committed to reducing its GHG emissions by 8% under the Kyoto Protocol.
The EU ETS was set up to help the 27 Member States achieve their targets by capping CO2 emissions from the main emissions producing industries.
Three phases
launch period
: Expansion to cover three new States (Liechtenstein, Norway and Iceland); In 2012, expansion to cover the aviation sector.
: to reduce emissions by 20% by 2020 compared with 1990; Expansion to cover more gases (nitrous oxide and PFCs) and new sectors (petrochemicals, ammonia and aluminum, etc.)

98. Teaching and Learning Resources
Hubbard & O’Brien, 2014, Economics, Pearson.

99. Policy Analysis and Opportunity Costs
Uwe Reinhardt, an economist at Princeton University, wrote the following in a column in the New York Times: Cost-effectiveness analysis seeks to establish which of several alternative strategies capable of achieving a given therapeutic goal is the least-cost strategy. It seems a sensible form of inquiry in a nation that is dismayed over the rising cost of health care …. Opponents of cost-effectiveness analysis include individuals who sincerely believe that health and life are “priceless”.

100. Policy Analysis and Opportunity Costs
Are health and life priceless? Are there any decisions you make during your everyday life that indicate whether you consider health and life to be priceless?

101. Life is priceless??

102. Policy Analysis and Opportunity Costs
Lawrence Summers served as secretary of the treasury in the Clinton administration from 1999 to 2001 and as director of the National Economic Council in the Obama administration from 2009 to He has been quoted as giving the following moral defense of the economic approach: there is nothing morally unattractive about saying: We need to analyze which way spending money on health care will produce more benefit and which less, and using our money as efficiently as we can. I don’t think there is anything immoral about seeking to achieve environmental benefits at the lowest possible costs.

103. Policy Analysis and Opportunity Costs
Would it be more ethical to reduce pollution without worrying about the cost or by taking the cost into account? Briefly explain.

104. Third Runway of HKIA