Hong Kong airport operator Airport Authority Hong Kong (AAHK) has managed to secure HK$35 billion or roughly $4.9 billion in new financing. According to the company, it managed to secure the funds through various loan facilities provided by 21 local and international banks.
About half of the total amount will be under a revolving credit facility, while the rest will be given under a term loan contract. AAHK claims that the granting of the new loan facilities is further proof of the bank's confidence in the recovery of the aviation sector after the pandemic blows over.
In a press statement, AAHK revealed that it had been given a special rate by the banks, the lowest rates for syndicated bank loan deals. It revealed that it was given all-in pricing of 82 basis points over the Hong Kong Inter-Bank Offered Rate. The airport operator stated that the new capital will be used towards funding its capital expenditure, which will include the construction and expansion of its Three-runway System.
AAHK initially planned to only raise about HK$20 billion to secure its liquidity amid the global travel demand slump. However, due to the "overwhelming" demand from banks, the company decided to increase its target financing amount. AAHK chairman, Jack So, mentioned in a statement the loans represent the strong faith and support of the banking sector in the future prospects of the Hong Kong International Airport's business.
Similar to other airports around the world, passenger traffic at the Hong Kong International Airport plummeted to unprecedented lows. The border closures and the government-imposed lockdowns and shelter-in-place orders effectively ground the global travel industry to a halt. In Hong Kong, passenger volume at the city's international airport dropped by 99.4 percent in May. The number of flights had dropped by around 68.7 percent during the same month, with most of the flights ferrying cargo instead of people.
Industry experts have pointed out that the Hong Kong International Airport could be facing deeper challenges even after the pandemic. The founder of the Institute of Aviation Research, Lei Zhang, stated that most customers in the post-pandemic era will likely prefer to take direct flights, which means that international transfer destinations such as Hong Kong will face added challenges.
Even before the pandemic hit, AAHK was facing steep declines in revenues as the city was ravaged by months of civil unrest, which had affected tourism. The company is also facing stiff competition from other major airports such as those in Singapore and South Korea, which have started to offer flights to major cities in the Greater Bay Area.
