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Against the Tide: Airport Expansion in the COVID-19 Era

With airports facing historical declines in passenger traffic and with some airports having to close down entire terminals for indefinite periods of time, cutting down on capital expenditure for capacity-augmentation projects appears to be a rational decision. Indeed, that has been a decision taken up by most airport operators.

However, there have been airport operators around the world taking long-term views of the airport business, and have not been stopped by the pandemic in terms of carrying out large-scale capital development projects.

Among these airport operators is Airport Authority Hong Kong, which secured a five-year loan facility worth HKD 35 bil (US$4.5 bil) with 21 local and international banks in June 2020. The facilities would be used for funding AA’s capital expenditure, including that of the Three-runway System (3RS) project and for general corporate purposes. The Airport Authority Hong Kong is on track to commence operation of the third runway in 2022 and the entire 3RS in 2024.

Hong Kong International Airport is not the only airport in the region which will carry on with its expansion plans. Large-scale airport expansion projects are still continuing to be undertaken in mainland China.

An expansion project at Xi'an Xianyang International Airport with an investment of RMB 47.6 bil (US$6.8 bil) was launched in July 2020. The new expansion project of Xi'an Xianyang International Airport will make it the largest airport construction project in northwest China in terms of the building volume and investment scale, according to the West China Airport Group. The expansion includes expansion projects targeting the terminal, air traffic control and fuel supply.

The expansion of Xi'an Xianyang International Airport is not the only large-scale airport development project that is on-going in China. It is in fact one of the 30 large-scale airport development projects that had resumed construction by mid-April 2020, according to the Chinese government. Another of these 30 projects would be the construction of the new Chengdu Tianfu International Airport, which is due for completion in 2021.

In the United States, the San Diego Regional County Airport Authority announced in April 2020 that it would continue with the projected US$3 bil proposed expansion of Terminal 1 of San Diego Airport.

In March 2020, Denver International Airport resumed construction resumed on the first phase of the Great Hall project with a budget of US$770 mil. However, according to emails obtained exclusively by The Denver Post, the project was facing a budgetary problems by early August which would affect the on-time completion of the project.

Houston Airport System announced on earlier this month that it would continue its US$1.3 bil capital improvement program, the IAH Terminal Redevelopment Program, despite travel decline from the ongoing coronavirus pandemic.

The pandemic has not stopped the construction of new airports in the United States. The new Salt Lake City Airport is designed to accommodate 26 million passengers and will replace the five existing concourses of the current airport with two linear concourses—the North Concourse and the South Concourse—which will be connected by a passenger tunnel. The US$4 bil project is being built in phases with the first phase to open in September 2020 and the second phase to be completed in 2024.

Elsewhere in the world, Argentina's Ministry of Transport announced this month that the country would make an investment of over US$1.4 bil in airport infrastructure over the next few years.

It is difficult to comment at this moment when the capital investment on airport infrastructure will generate returns, but we believe that decisions by airport operators to carry with capital improvement projects have been made after consultation with the various stakeholders involved.

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