The Hindu Business Line : An airport that will let your imagination fly

THE manager at Hong Kong International Airport (HKIA) was telling us about the nine-hole golf course that was planned within the airport grounds. I wondered why an airport would invest money in a golf course. This was the land they have for future expansion, he explained, and they initially planned to landscape it so it would look nice. Then they decided that they would earn some money on it in the meantime and so decided to put a golf course in. People in transit with a few hours to spare would pay to putter around a nice golf course.

It is this kind of thinking that has earned HKIA several accolades. In 2004, for the fourth consecutive year, it was voted the world's best airport based on a survey by Skytrax, an independent aviation research organisation. It was also named Cargo Airport of the Year in 2002, it has scored second place for overall passenger satisfaction from the International Air Transport Association in 2001, and so on.

Building and running an airport is a complex affair. An airport is not just a place to handle planes, passengers and cargo. It has become a window and a door to globalisation. It is a critical piece of infrastructure for a nation on the move. HKIA does not define itself as an airport that meets the needs of Hong Kong's seven million population. It instead has figured that it has half the world's population of about three billion people living within five hours' flying time of HKIA. That gives it a different outlook and a different purpose for its existence. More immediately, it wants to continue being a significant airport to serve the needs of the rapidly-growing Pearl River Delta region of China and has air, road and sea transport links with various cities in the region.

The airport has a vision that goes beyond that of what you would expect of an airport. It sees itself as providing a total airport experience, which includes shopping, hotels, leisure activities, as well as conference and exhibition facilities.

Edith Penrose, an English economist, proposed a theory of the growth of the firm which explained that the spare resources of the firm drove its direction of growth. Thus, if a business software firm had a few brilliant designers who had spare time on their hands and were also avidly interested in video games, you may find the firm wandering into the entertainment line of business too. The mind power of the software engineers is a resource that would be employed to develop new products in areas that they would be fruitful.

Infrastructure plays a similar role for a nation. When there is excess capacity in roads, railways, ports, telecommunication, and so on, economic activity seems to grow to make use of it. If there is a road going into the village, then traders are tempted to go in and sell a few things as much as the villager is tempted to go out and find a new market for his products.

HKIA, which began in July 1998, has an existing air cargo capacity of about three million tonnes and is already operating close to 2.6 million tonnes. Hence it has plans to expand to about nine million tonnes. About 29 per cent of Hong Kong's total external trade is air- borne cargo. In the face of the growing importance of Shanghai as a major business centre in that part of the world, HKIA is keenly aware of its need to keep facilities at the top to tap into the needs of half the world's population that it is eyeing. Other initiatives on the cards include a dedicated express cargo facility, and a logistics centre for processing time-critical cargo. This latter would allow for logistics and supply chain management services.

HKIA has a present capacity of 45 million passengers and operates at about 70 per cent of capacity, but has plans to expand up to 87 million as the need arises. Over 75 airlines serve more than 140 cities worldwide from here. By its present reckoning, it will reach capacity by 2020 and will start expansion well before. And all built on a man-made island, with land reclaimed from the sea.

The airport has contracted out most services, including baggage handling, security, operation of shuttle trains to focus on its main business. While owned by the government, it has plans for privatisation to recover the investment. HKIA also has a fast and efficient train that connects the airport to the city.

In contrast, Los Angeles airport, another major hub of the world, is finding it difficult to keep pace with the demands placed on it. It was rebuilt to serve the needs of the Los Angeles Olympics in 1984 and is now one of the busiest airports in terms of passengers beginning and ending travel there. Yet, systems are creaking and capacity is being stretched to its limits. For example, the air-conditioning system is so over loaded that huge fans are brought in to help. The authorities have been working on a master plan for over 10 years and there is still not one that is ready or approved. Residents of Bangalore know how that feels. They have also been hearing of a proposed international airport for a decade that they will believe it only when it happens. Meanwhile, the loss of business for the region must be incalculable.

Perhaps you need to be a small city-state to feel claustrophobic and, thereby, let your imagination fly through the means of a world-class airport. Dubai, although in the midst of oil-rich West Asia, has not been similarly blessed. Oil and gas only contributes about 6 per cent of its output and reserves are low and expected to be exhausted in about 10 years. So, the nation has been using its income from oil to reinvest in other businesses that would support tourism and make it a business hub. And a world-class airport is one of them. After all, it calculates that there are 1.5 billion people within two hours of flying time. So its airport capacity is being tripled to handle about 60 million passengers a year. When Dubai began building its capacity in infrastructure, there were plenty of sceptics. The container port and the dry dock that were built are now doing great business although at that time seen as white elephants.

I ran into a sceptic of excess capacity in infrastructure while talking about the magnetic levitation train in Shanghai. Too expensive for the purpose, he complained. Perhaps. Shanghai's train connects the swanky new Pudong airport with the Longyang Road Station, on the outskirts of the city. It whisked me through a distance of about 30 km in eight minutes, reaching a maximum speed of 430 km per hour. Sure, the distance was such that it reached peak speed for just about three minutes. And the trains were almost empty. The fare is 50RMB (Rs 270) one-way and the government is giving a discount of 10 RMB if you have a ticket to fly that day. But give it just a few years and you can be sure there will be a line to get a ticket and we will all wonder what we did before that train was put in.

When it comes to infrastructure, excess capacity, in itself, generates growth.

(The author is professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is cgopinat@suffolk.edu)