Bond to help Hong Kong airport runway weather cash storm
- Investors can play their part as Hong Kong airport seeks to open its third such facility, but there is no time to lose for struggling aviation hub
An enthusiastic response has greeted the Hong Kong Airport Authority’s first retail bond offering targeting the general public in 20 years.
The approach to funding a third runway is welcome at a time of tight government resources and may be a model for future fundraising efforts.
However, the imminent debut of the new runway is a reminder of how much more the city must do to restore its role as an international aviation hub.
Banks and brokers have been waiving a range of fees for retail investors eyeing the HK$5 billion (US$639 million) bond. The minimum investment is as little as HK$10,000, which makes it affordable for many retail investors.
Several have been drawn by expectations that interest rates will start falling in July, allowing them to lock in a return of 4.25 per cent for 2.5 years under the high-quality name of Airport Authority Hong Kong (AAHK).
The retail bond offering last Wednesday followed the debut earlier this month of a Hong Kong dollar one that tapped the local public institutional bond market for the first time, pricing a HK$4 billion senior offering to fund improvements, including the new runway.
Such funding is important when government support is expected to be less than forthcoming during the city’s worse-than-expected deficit. Officials have been trying to balance ways to raise revenue and cut spending amid a fragile economic recovery.
Meanwhile, the city’s aviation sector has struggled to keep up with the rest of the world on the road to recovery since the pandemic.
Many hope the third runway will help Hong Kong reclaim its status as an aviation hub, which languished under tough travel restrictions. The airport is expected to be able to handle an extra 30 million passengers a year when the new runway is in operation.
The pace of the Hong Kong aviation industry’s recovery has been held back primarily by an inability to hire sufficient ground staff and aircrew.
While it is encouraging to see recruitment efforts, the new runway is months away from going into service. There is no time to waste to ensure Hong Kong puts that extra capacity to good use.
