The latest operating results from the Airport Authority Hong Kong were released a couple of days ago and appeared to be pretty impressive, superficially at least.

The board of directors reported that profits were HK$1.92 billion, and that the government received HK$1.6 billion in dividends, while all the accompanying charts that the newspapers produced in their reports on the results showed lines that started in the bottom left corner which rose nicely to the top right-hand corner.

So, all seems well and good, especially as the return on equity, which is a key measure of any investment, has been slowly gaining altitude and touched 5.6 percent, which, while still far short of being acceptable, is markedly better than the 4.3 percent seen in the previous year.

During the press conference held to announce the results we were also told that Hong Kong had become the world's fifth-busiest airport for international passengers, with 45.1 million people going through the terminal in the past 12 months, while the airport's international cargo supremacy continued.

However, on closer reading of the reports, and amid all this supposedly good news, it became readily apparent that there are some large problems surrounding the future of our airport.

The most critical problem that the airport faces, which is actually the most critical problem that any airport can face, is that it is getting full.

Senior executives from the Airport Authority Hong Kong were quoted as saying that the airport is already operating at relatively saturated levels and that in the light of planned expansion by local carriers, they have to find ways to expand the airport's capacity.

So it seems that the growing demand from airlines for our airport is going to be met by applying the same solution to the problem that we have been applying to our roads for the past few decades - namely, if there is excess demand we will have to increase supply and build more capacity, rather than use price to ration demand and allocate scarce resources.

So, despite all the supposedly upbeat news from the airport, the reality is that the airport is hitting constraints at an annual throughput of 45 million passengers.

This should be seen in the light of the fact that the old Kai Tak airport managed to get almost 30 million through its crowded gates in 1996.

So, it seems that the airport is actually very far from being the success that the headlines would have us believe; in terms of the real world, and the taxpayers' dollars that it has eaten up, it is in fact verging on being a fiasco.

Stripping away the hubris from the press reports, it seems that we spent HK$200 billion on a new airport and all the necessary transport infrastructure, such as the fast-rail link and the bridges, only 10 years ago yet it is now straining at the seams, while handling only 50 percent more passengers than our old rundown airport.

And here we get to the root of the problem.

The passenger numbers were originally based on the airport being used by a much higher proportion of wide- body, long-haul traffic, with one plane per minute on each runway.

What in fact has happened is that our premium long-haul international airport is now stretched by a huge surge in short-haul traffic which has created enormous, yet inefficient, growth in the use of the airport by smaller planes.

That growth in short-haul traffic comes from the sharp increase in mainland arrivals and departures, which is filling runways while delivering much smaller loads from each plane.

It is fairly obvious that there is not much chance that the demands on our airport will dissipate of their own accord.

But it is also not inevitable that we need to build a third runway and expand capacity.

First off, before doing anything else, we need to stop taking some sort of perverted pride in the fact that, from an airlines stance, we are one of the world's cheapest major airports from which to operate.

Our airport is not a social service and it is about time that we started to price it like a real business.

Our return on the money that we have invested in the airport, at under 6 percent, is far too low, and even when we look at that return we should remember that it is being increasingly generated by rental income from the retail shops that we, the taxpayers, patronize.

Before wasting even more taxpayers' money, and creating more environmental damage by building a third runway, we need to increase sharply the fees that airlines pay for using our airport, causing low-value traffic that cannot justify paying higher landing fees to divert to nearby under-used airports.

The taxpayer cannot go on subsidizing the airlines' shareholders, while being asked to fund unfettered and inefficient expansion.

The Tung administration previously ducked the privatization of the airport. It is time get the file out again.