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Update on Aviation Developments in Hong Kong and the PRC

L2b Aviation member Claudio de Bedin, partner with de Bedin & Lee, LLP, shares a brief update on aviation developments in Hong Kong and the People’s Republic of China (PRC).

PRC

1.      The Civil Aviation Administration of China (CAAC) plans to make China a global leader of aviation

By 2020, China wants to see itself as the global leader in air transport, by doubling the number of its airports, to a target of 450 by 2035. To achieve this, Beijing, Guangzhou and Shanghai will be earmarked as international hubs. By 2022, and subject to China’s growth, it will overtake the US as the world’s largest aviation market. The International Air Transport Association (IATA) predicts China will serve 1.5 billion passengers per year by 2036, and will require more than 7,500 new aircraft over the next 20 years.

2.      The Greater Bay Area

The Greater Bay Area (“GBA”) is the Chinese Government’s plan to link integrated economic and business hubs to cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, and 6 other cities in Guangdong Province, around Southern China’s Pearl River Delta.

The GBA is intended to be a centre for innovation and economic growth that will rival the Bay Areas of San Francisco, New York and Tokyo. On 18 February 2019, an Outline Development Plan for the GBA was published. In relation to aviation, the Development Plan seeks to:

·        maintain and support Hong Kong’s status as an international aviation hub;

·        support the construction of Hong Kong Airport’s third runway;

·        expand the GBAs aviation networks, including the adoption of an inter-modal code sharing service;

·        leverage Hong Kong’s strengths in financial and logistics services, by developing high value added freight, and aircraft leasing and aviation financing services;

·        support Macau airport in developing regional business aircraft services;

·        strengthen airspace coordination and air traffic management collaboration, optimise airspace structure, enhance the efficiency of the utilisation of airspace resources, and enhance air traffic management capacity;

·        focus on management reform in low-altitude airspace, expedite the development of general aviation, steadily develop cross-boundary helicopter services, and set up general aviation demonstration zones in Shenzhen and Zhuhai; and

·        proceed with the setting up of airport economy zones in Guangzhou and Shenzhen.

3.      The Civil Aviation Administration of China (CAAC) and the Guangdong Provincial Government signed a Strategic Agreement on 5 November 2018 to accelerate construction of a group of world-class airports in the GBA

The Strategic Agreement is consistent with the Outline Development Plan for the GBA referred to above. It states that:

·        the CAAC will support Guangdong to develop a plan for an airport group in the GBA to build, with the support of Hong Kong and Macau, an integrated airport cluster;

·        the airspace for both civil and military airports in the Pearl River Delta region will be adjusted, in order to optimise it;

·        there will be a focus on enhancing the competitiveness of Guangzhou and Shenzhen airports as international aviation hubs;

·          there will be a stronger cooperation between Guangdong, Hong Kong and Macau, airports; and

·        there will be support for the development of the general aviation industry in Guangdong.

The estimated traffic and volume of freight within the GBA is a source of great appeal. Forecasts expect the region’s current GDP to nearly double to US$2.8 trillion by 2025. By 2030, airports in the GBA are likely to handle 371 million passengers per year, compared to 202 million handled in 2017.

Hong Kong

4.      Hong Kong International Airport is encouraging intermodal ticketing and upstream check-in

This is where passengers can check in for their flight in the GBA, before boarding a ferry or taking a coach to the airport in Hong Kong. These arrangements were included in a Memorandum of Understanding signed on 19 February 2019 between Hong Kong and the CAAC. This expanded the existing airline code-share arrangements for land and sea transport between the PRC Mainland and Hong Kong. Hong Kong Airport is also aiming to take advantage of the substantial e-commerce development around the GBA, with intermodal cargo facilities for transshipments both by air-sea, and air-road.

5.      Hong King International Airports planned third runway

In 2016 reclamation of land, equivalent to that of building an entire new airport, next to the current one, was undertaken to lay the foundation for the 3.8 km third runway. There will also be more than 15 kms of associated taxiways. The third runway project will also include the construction of a new air traffic control tower and a new passenger terminal with 57 aircraft parking positions. This will be connected to the existing terminals by an automated people mover system and a new baggage handling system. The project also involves expanding the existing Terminal 2.  

6.      In 2018 the International Civil Aviation Organization (ICAO) launched a new policy to enhance international standards on air cargo security

In anticipation of an upsurge in screening demand, and in order to avoid an adverse impact on the air cargo industry in Hong Kong, at the end of October 2018 the Government launched a new scheme to enable and regulate cargo screening in off airport locations. Under the scheme, industry operators such as freight forwarders and shared warehouse operators will be able to conduct cargo screening operations in their premises by registering with Hong Kong’s Civil Aviation Department to become Regulated Air Cargo Screening Facilities.

7.      Development a premium logistics centre to the south of Hong Kong Airport

With an estimated floor area of 380,000 square metres, the joint venture, led by Cainiao Network, will design, construct, finance and manage the logistics centre, which is scheduled to commence operation in 2023.

8.      Hong Kong Airport and Brussels Airport have launched an airport-to-airport corridor for temperature-sensitive medicines

Pharma shipments transported between Hong Kong and Brussels will be handled in compliance with the CEIV Pharma standards and carried by CEIV Pharma-certified airlines. Hong Kong Airport is adding 19 temperature-controlled cool dollies to its ground fleet for the ramp transfer of pharma goods by air. The Airport is also building apron shelters to protect pharma shipments from direct exposure to the elements, which should mitigate the risk of damaged cargo claims. 

9.      On 10 September 2018 a new Air Accident Investigation Authority (AAIA) was established in Hong Kong

The AAIA was created due to concern around the Civil Aviation Department’s (“CAD”) lack of independence, and the potential for conflict of interest when conducting investigations. This meets the requirement Civil Aviation Organisation (ICAO) which calls on all contracting states to establish independent air accident investigation authorities by November 2018.

10.   On 29 November 2018 the Hong Kong Government passed new legislation, the Travel Industry Ordinance

The Ordinance was introduced to improve the regulation of travel agents, tour guides, and tour escorts, particularly the conduct of organised tour groups, mostly from the PRC Mainland. The Ordinance is intended to provide a comprehensive licensing and regulatory system for travel agents etc. to enhance the professionalism of the Hong Kong travel industry. It expressly provides airlines are not deemed to be ‘travel agents’ simply by providing the means of carriage from or to Hong Kong. In addition, a company will not be deemed to be a travel agent if, in the discretion of the Travel Industry Authority, the relevant business activities are ancillary to the company’s principal business.

11.   Unmanned Aerial Systems (UAS) or ‘drone’ operations

Both the Airport Authority and Hong Kong’s CAD are examining steps taken by other international airports to enhance the Airport’s ability to monitor drone activity, and to prevent any adverse impact on the airport’s operations. The CAD’s plan is to consult the Hong Kong Government on the legislative proposal in the second quarter of 2019, and to develop a strategic framework of implementation measures for the short, medium and long-term. 

12.   Cathay Pacific to acquire budget airline Hong Kong Express

In March 2019 Cathay Pacific announced that they will acquire budget airline Hong Kong Express for HK$4.93billion (US$628 million) within this year. The purchase price will be paid via a combination of cash and promissory loan notes. Once the transaction is completed Hong Kong Express will become a wholly-owned subsidiary of Cathy Pacific which will still operate under its own name as a low cost carrier. The acquisition has been described by a Cathay Pacific spokesperson as “an attractive and practical way for the Cathay Group to support the long-term development and growth of our aviation business“.

This article was originally published by Claudio de Bedin with de Bedin & Lee, LLP.

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