On December 18, the Chinese-foreign joint venture company (JV) formed by Hangzhou Xiaoshan International Airport Co. Ltd and Airport Authority Hong Kong (AA) announced its inauguration in Hangzhou after completing all official approval procedures and capital injection. The JV is tasked to make Hangzhou Xiaoshan International Airport a world-class airport by enhancing operation efficiency, improving service quality and management standards, and carrying out the RMB6.8 billion second phase expansion.

The National Development and Reform Commission has approved HXIA's second phase expansion plan in August 2006. Target for completion by 2011, the plan includes the construction of a 4F-grade runway which is able to accommodate super jumbos like A380, a new international passenger terminal, the second domestic passenger terminal and other related facilities. The expansion will boost HXIA's annual handling capacity to 25.6 million passengers, 500,000 tonnes of cargo and 260,000 aircraft movements by 2015.

HXIA is the first civilian airport in the Chinese Mainland with direct foreign investment. The successful launch of the joint venture is an important initiative of the Closer Economic Partnership Arrangement (CEPA) signed between Zhejiang and Hong Kong, and a major milestone in the reformation of China's civilian airport industry.

Since the signing of the JV agreement in April last year, the number of flights serving Hong Kong-Hangzhou has more than doubled, to 140 from around 60 a week.

Riding on the Mainland's economic reform and open-door policy, Zhejiang is one of the fastest growing provinces in China. AA Chairman Dr Victor Fung said,"CEPA has laid a very good foundation for the co-operation between Hong Kong and Mainland companies. HKIA and HXIA are located in the two economic powerhouses of China - the Pearl River Delta (PRD) and the Yangtze River Delta (YRD). The JV will greatly enhance the competitiveness of the two airports by combining Hong Kong's sprawling international network with Hangzhou's extensive domestic coverage. It will also foster closer economic and cultural ties between YRD and PRD, and promote long-term prosperity of the two regions."

Mr Chen Haimei, Chairman of HXIA Co. Ltd, believed that the inauguration of the JV will provide a new platform for the development of the two airports. He said, "The partnership with HKIA will bring capital, advanced airport management expertise and know-how, and an extensive international air network to HXIA. This will further improve the management quality of HXIA and contribute to its second phase development." Mr Chen also expressed his warmest welcome to Mr Eric Wong from AA for taking up the position as General Manager of HXIA. Mr Wong, who has profound experience in airport management, is the first Hong Kong citizen to manage a Mainland airport.

Dr David J Pang, AA's Chief Executive Officer, pointed out that YRD's civil aviation market has entered a high growth period thanks to the region's rising living standard and its focus on developing high value-added industries. As an integral part of the YRD economic zone, Hangzhou is an excellent bridgehead for Hong Kong International Airport (HKIA) to reach out to the region's enormous passenger and cargo sources.

"We are confident that the two airports will better serve the need of the region's economic growth by strengthening our competitiveness through sharing experience and leveraging each other's competitive advantages. Our partnership can enable us to fully capture the potential of a robust market environment through strengthening a safe, secure and well-run airport," said Dr Pang.

Shareholders of Hangzhou and Hong Kong airports signed in Hangzhou the agreement for a capital increase subscription of Hangzhou Xiaoshan International Airport Co Ltd in April 2005 to invite AA to become a strategic investor for the management of HXIA.

Under the agreement, HXIA Co. Ltd will be transformed from a state-owned limited company into a limited liability joint venture company with a registered capital of RMB5,686 million (about HK$5,600 million). The AA now holds 35% equity interest of HXIA Co Ltd by investing RMB1.99 billion (HK$1.9 billion) and has appointed four members to the Board.

Since opening in 2000, HXIA's passenger and cargo throughputs and aircraft movements have been growing at an annual rate of about 30%. In 2005, passenger volume and cargo tonnage rose 28% and 29% over 2004, to 8.09 million and 166,000 tonnes, respectively. HXIA ranks No. 8 among civilian airports in the Mainland and No.3 in Eastern China following Shanghai's Pudong and Hongqiao airports.