Annual Report of HKIA

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ContentsCore Values

HKIA Facts / Performance Highights

Chairman’s Statement

Chief Executive Officer’s Statement

The Board and Executive Directors

Financial and Operational Highlights

Corporate Governance

Event Highlights

Passenger Services

Cargo and Aviation Services

Airfield and Systems

Mainland Projects

Corporate Social Responsibility

Looking Forward

Financial Review

Report of the Members of the Board

Independent Auditor’s Report

Financial Statements

Five-year Financial and Operational Summary

Airlines and Destinations

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3

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12

15

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Hong Kong International Airport (“HKIA”) aims to maintain a leadership position in airport management and aviation-related businesses to strengthen Hong Kong as a centre of international and regional aviation by:

• upholding high standards of safety and security• operating efficiently with care for the environment• applying prudent commercial principles• striving to exceed customer expectations• working in partnership with stakeholders• valuing human resources• fostering a culture of innovation

AIRPORT AUTHORITY HONG KONG (the Airport Authority) is a statutory corporation wholly owned by the

Hong Kong SAR Government. The Airport Authority is responsible for the operation and development of HKIA.

Hong Kong International Airport2

At Hong Kong International Airport (“HKIA”), six core values guide our staff and business partners in their day-to-day work and long-term plans. In a rapidly changing business environment, these principles are both constant and non-negotiable.

Annual Report 2010/11 3

AirportSiteArea 1,255 hectares

TotalTerminalArea 750,000 square metres

Airlines about 95

Destinations around 160

Runways 2

HKIA Facts

Performance Highlights


Chairman Statement

Dr the Hon Marvin Cheung Kin-tung, Chairman



Dear Stakeholders,

The Financial Year ended 31 March 2011 (“FY 2010/11”), was an outstanding year for Hong Kong International

Airport (“HKIA”). We set records in all measures of our performance: Passenger volume rose 9.7% to 51.5 million;

cargo throughput grew 16.5% to 4.2 million tonnes; and air traffic movements increased 12.9% to 316,000. Since

1996, HKIA has been the world’s busiest international cargo airport; this year we surpassed Memphis International

Airport to become the world’s busiest cargo airport. Our international passenger volume now ranks 3rd in the World.

Our strong performance in FY 2010/11 resulted in an increase in our net profit to HK$4.0 billion which is an increase

of 41.9% over the previous year. Of that amount, HK$3.1 billion will be paid to our sole shareholder, the Hong Kong

SAR Government, as dividend. This will bring the total amount paid to the Hong Kong SAR Government since the date

of inception up to HK$22.1 billion, representing a return of capital of HK$6 billion and dividends of HK$16.1 billion.



HKIA Master Plan 2030This year’s achievements highlight the enormous growth

in Hong Kong’s aviation industry since the days of Kai Tak

Airport with its single, congested runway. The decision to

build a new airport at Chek Lap Kok, completed with two

runways and expanded passenger and cargo handling

capacities, enabled Hong Kong to satisfy the rapid

increase in demand for aviation services not only from

Hong Kong but also from the Pearl River Delta area,

which has enjoyed sustained economic growth in the past

13 to 14 years. This has resulted in significant benefits for

the Hong Kong economy in the same period.

With the return to double-digit traffic growth in FY

2010/11 and a revised forecast of continued traffic

growth, it is clear that HKIA will reach capacity in the

foreseeable future. As planning and building airport

infrastructure requires long lead times, we must act now

to avoid a capacity shortage that will constrict the growth

of the aviation industry and the resulting impact on Hong

Kong’s economic development.

Airport Authority Hong Kong (“AAHK”) produces a

20-year development master plan every five years.

In June 2011, we will launch the HKIA Master Plan 2030,

which updates HKIA’s demand forecasts until the year

2030 and sets out two options for the development of

the airport. One option examines the possibilities for

further development on the existing Airport Island with

the current two runways to maximise its capacity, while

the other examines the implications of building a third

runway at HKIA.

Either option will have significant and long-term

implications not only for the Airport but also for Hong

Kong as a whole. Accordingly, we will launch a

comprehensive consultation exercise to seek views from

all stakeholders and the general public on the strategic

directions of HKIA. We will listen closely to these views

before making a recommendation to the Hong Kong SAR

Government on the way forward so as to ensure that

HKIA’s development plans serve the best interests of the

entire community.

A Sustainable FutureIn our day-to-day operations and development activities,

we adhere to the principles of corporate sustainability. We

are committed to being a good corporate citizen and to

maintaining a green airport.

In December 2010, AAHK together with about 40 business

partners announced a multifaceted programme to reduce

the airport’s carbon emissions by 25% per workload unit

(defined as one passenger or 100 kilogrammes of cargo)

“As planning and building airport infrastructure requires long lead times, we must act now to avoid a capacity shortage that will constrict the growth of the aviation industry and the resulting impact on Hong Kong’s economic development.”


Finally, I would like to thank the five outgoing board

members, the Hon Vincent Fang Kang, Ir Edmund Leung

Kwong-ho, Mr Andrew Liao Cheung-sing, Dr Lo Ka-shui

and Mr Wilfred Wong Ying-wai, all of them will be

finishing their terms with effect from 1 June 2011, for

their guidance and support over the previous years.

During this time, timely and significant investments were

made to enhance the airport’s handling capacity to meet

growing traffic demand while HKIA was rewarded with

a number of ‘world’s best airport’ designations by

various regional and international organisations.

Dr the Hon Marvin Cheung Kin-tung

Chairman

Hong Kong, 23 May 2011

by 2015, using 2008 as the base year. HKIA was the

world’s first airport to introduce such a programme, which

was also the first voluntary, sector-wide carbon-intensity

reduction pledge in Hong Kong.

Whenever we develop new facilities, we use

environmentally friendly technologies and designs. For

example, the Midfield Concourse will feature reflective

glazing that reduces the need for air conditioning;

north-facing skylights that maximise the availability of

natural light; high-efficiency lighting with energy-saving

daylight sensors; and air-conditioning chillers that use

rainwater and reclaimed grey water.

Our commitment to the community is not limited to

environmental issues. We support activities ranging from

job fairs to cultural events for the elderly and educational

programmes for young people.

A Strong TeamAAHK benefited from the efforts of many talented people

during the year. I am particularly grateful to our

employees and business partners, and to the 65,000

individuals who comprise the airport community. I would

also like to recognise the Hong Kong SAR Government

for its continued support.

I would like to offer a warm welcome to Ms Anita Fung,

who joined the Board in June 2010. Ms Fung replaces

Mr He Guangbei, who made many valuable contributions

during his two terms on the Board.

Mr Stanley Hui Hon-chung, Chief Executive Officer


Dear Stakeholders,

I am pleased to report that fiscal 2010/11, ended 31 March 2011, was a remarkable year for Hong Kong International

Airport (“HKIA”). Buoyed by the Mainland’s and Hong Kong’s sustained economic expansion, a rebound in global trade

and improved demand for aviation services, HKIA achieved record growth. Passenger volume, cargo throughput and air

traffic movements rose 9.7%, 16.5% and 12.9%, respectively, from fiscal 2009/10.

This strong operational performance, coupled with management’s relentless efforts to improve productivity and

efficiency, helped Airport Authority Hong Kong (“AAHK”) deliver solid financial results. Revenues were HK$10,583 million,

an increase of 17.4%. Profit attributable to equity shareholder grew 41.9%, to HK$4,035 million. Return on equity rose

to 11.1%.




“Indeed, current traffic growth forecast suggests that HKIA will likely be saturated around 2020. If we wish to meet the forecast traffic demand beyond 2020, then a new or a third runway at HKIA is needed.”


Award-winning ServicesOur record-breaking year would not have been possible

without timely investments in our facilities and services.

In 2010/11, we put the finishing touches on a HK$4.5

billion capacity and service enhancement programme that

started in 2005/2006 for Terminal 1 and the airfield.

The programme merged the two Arrivals Immigration

halls, reconfigured the Departures Immigration halls,

doubled the baggage handling system’s capacity to

16,000 bags per hour and provided additional cargo

parking stands. The additional cargo stands have already

been put to good use, enabling the airport to handle

more freighter services. The enhancement programme

was completed on time and on budget.

These improvements, and other routine capital

expenditures, help us to meet traffic growth and maintain

high levels of customer service and satisfaction. Since

opening in 1998, HKIA has been recognised as the

world’s best airport nearly 40 times. In 2010/11, for the

fifth consecutive year, Airports Council International

named HKIA the world’s best airport among facilities

serving over 40 million passengers annually. We were also

named the world’s best airport by Skytrax – the eighth

time we have won this accolade. In addition, TTG travel

publications rated HKIA the best airport for the eighth

time in a row, and Business Traveller China named HKIA

the best airport in China for the fourth time. We also

received the Air Transport Research Society’s Asia-Pacific

Airport Efficiency Excellence Award for the fourth

consecutive year.

Planning for the FutureTo ensure that HKIA is ready for future demand and

maintain the level of service that has won HKIA more than

40 accolades in the past years, we have prepared both

mid- and long-term expansion plans. In the third quarter of

2011, we will begin developing the midfield, which is the

only large, undeveloped area on the airside of the Airport

Island. Phase 1 of this project includes a new passenger

concourse with 20 aircraft stands, a cross-field taxiway and

an extension to the automated people mover that will link

the Midfield Concourse to Terminal 1. When these facilities

are completed in 2015, 10 million passengers will be able

to embark and disembark via the concourse’s air bridges

each year.

Meanwhile, we update our long-term plan every five years.

In June 2011, we will release HKIA Master Plan 2030, a

comprehensive road map for the airport’s development

over the next two decades. We expect air traffic demand

to reach about 97 million passengers, 8.9 million tonnes of

cargo and 602,000 flight movements per year by 2030.

The current two-runway system at HKIA will not be able to

cope with the above forecast demand long before 2030.

Indeed, current traffic growth forecast suggests that HKIA

will likely be saturated around 2020. If we wish to meet

the forecast traffic demand beyond 2020, then a new or a

third runway at HKIA is needed. Following the release of

HKIA Master Plan 2030, a public consultation exercise will

be launched to seek the views of the community on the

best development plan for HKIA.


Hangzhou Xiaoshan International Airport, in which AAHK

holds a 35% interest, opened a 96,000-square-metre

international passenger terminal in July 2010 which

provided modern terminal facilities for international

passengers departing/arriving at the airport. AAHK’s joint

venture with Shanghai Airport (Group) Co., Ltd. –

Shanghai Hong Kong Airport Management Co., Ltd. –

performed well during the year, while Zhuhai Airport,

which is managed by a joint venture between the Zhuhai

Municipal People’s Government and AAHK, saw further

financial improvement in calendar 2010.

Recognition of SupportI would like to express my gratitude to the Board and the

Hong Kong SAR Government for their guidance and

steadfast support during the year.

I would also like to thank our 1,100 employees, our

business partners and the 65,000 members of the airport

community for making HKIA synonymous with service,

safety and efficiency.

Mr Stanley Hui Hon-chung

Chief Executive Officer


AAHK fully supports the government-led cross-boundary

infrastructure projects that are being built near HKIA.

In particular, we appreciate the Hong Kong SAR

Government’s decision to locate the Boundary Crossing

Facilities (“BCF”) for the Hong Kong – Zhuhai – Macao

Bridge next to the Airport Island, making it convenient

for passengers to transfer between the bridge and the

airport. Furthermore, the plan to build the Tuen Mun –

Chek Lap Kok Link at the same time as the BCF will expand

the reach of the airport to residents of the Northwest New

Territories. These projects will enhance cross-boundary

flows of people and goods, provide convenient new

options for passengers travelling to and from HKIA, and

enhance the airport’s multi-modal connectivity.

Connectivity with the Pearl River DeltaFast, efficient links to the Pearl River Delta (“PRD”) are

one of HKIA’s great strengths. High-speed ferries sailing

from SkyPier connect HKIA with eight ports in the PRD

and Macao and have served over 10 million passengers

since 2003. Road connectivity has also grown, with coach

services linking HKIA to 115 Mainland cities and towns via

hubs at Huanggang and Shenzhen Bay, up from 95 in

2009/10. A fleet of 290 limousines now serves PRD

destinations, an increase of 130 from last year.

We continue to promote collaboration with major hub

airports on the Mainland and in particular, in the PRD.

In October 2010, AAHK entered into a sister airports

agreement with Beijing Capital International Airport

that will see the two organisations share management

expertise and cooperate on staff training and development.

In addition, 2010/11 saw the resumption of flights

between HKIA and Shanghai Hongqiao International

Airport, giving passengers more convenient choices

when travelling between Hong Kong and Shanghai.

Dr the Honourable Marvin Cheung Kin-tung DBA Hon. GBS OBE JP ChairmanAged 63. Appointed as Chairman of the Board in June 2008. First appointed as Member of the Board in June 2003 and was re-appointed in June 2005. Non-official Member of the Executive Council. Chairman of the Council of the Hong Kong University of Science and Technology. Independent Non-Executive Director of Hang Seng Bank Ltd, HKR International Ltd and HSBC Holdings plc.

Mr Stanley Hui Hon-chung JP Chief Executive Officer*Aged 60. Appointed as Chief Executive Officer in February 2007. Former Chief Executive Officer of Dragonair and Chief Operating Officer of Air Hong Kong. First Vice Chairman of Hangzhou Xiaoshan International Airport Company Limited. Chairman of Hong Kong–Zhuhai Airport Management Company Limited. Member of the Hong Kong Government’s Aviation Development Advisory Committee. Member of the Fourth Shenzhen Committee of the People’s Political Consultative Conference of China. Member of the Greater Pearl River Delta Business Council. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Member of the Vocational Training Council. Chairman of the Chinese Cuisine Training Institute Training Board. Member of the Hong Kong Tourism Board. Member of the Construction Industry Council.

Professor the Honourable K C Chan SBS JP Secretary for Financial Services and the Treasury*Aged 54. Became a Board Member in July 2007 upon his appointment as Secretary for Financial Services and the Treasury. Chairman of the Managing Board of Kowloon-Canton Railway Corporation. Member of the Board of Directors of MTR Corporation Limited.

The Honourable Chan Kam-lam SBS JPAged 62. Appointed to the Board in January 2010. Member of the Legislative Council representing the constituency of Kowloon East. Chairman of the Panel on Financial Affairs and Member of the Panel on Housing of the Legislative Council. Member of the 11th National Committee of Chinese People’s Political Consultative Conference. Member of the ICAC Advisory Committee on Corruption. Non-Executive Director of the Securities and Futures Commission.

The Honourable Eva Cheng JP Secretary for Transport and Housing*Aged 51. Became a Board Member in July 2007 upon her appointment as Secretary for Transport and Housing. Member of the Managing Board of Kowloon-Canton Railway Corporation. Member of the Board of Directors of MTR Corporation Limited.

The Honourable Vincent Fang Kang SBS JPAged 68. Appointed to the Board in June 2005 and was re-appointed in June 2008. Chief Executive Officer of Toppy International Ltd. Managing Director of Fantastic Garments Ltd. Chairman of Hospital Governing Committee, Princess Margaret Hospital. Chairman of Hospital Governing Committee, Kwai Chung Hospital. Honorary Advisor, Hong Kong Retail Management Association. Director of the Federation of


The Board

Dr the Hon Marvin Cheung Kin-tung

The Hon Eva Cheng

Mr Stanley Hui Hon-chung

The Hon Vincent Fang Kang

Professor the Hon K C Chan

Ms Anita Fung Yuen-mei

The Hon Chan Kam-lam

The Hon Albert Ho Chun-yan



Ir Dr the Hon Raymond Ho Chung-tai

Dr Lo Ka-shui

Mr Benjamin Hung Pi-cheng

Mr Norman Lo Shung-man

Ir Edmund Leung Kwong-ho

Dr Allan Wong Chi-yun

Mr Andrew Liao Cheung-sing

Mr Wilfred Wong Ying-wai

Hong Kong Garment Manufacturers. Chairman of the Garment Advisory Committee of the Hong Kong Trade Development Council. Member of the Fight Crime Committee. Member of the Hong Kong Housing Authority and Member of the Greater Pearl River Delta Business Council.

Ms Anita Fung Yuen-meiAged 50. Appointed to the Board in June 2010. Head of Global Banking and Markets, Asia-Pacific of The Hongkong and Shanghai Banking Corporation Limited. Executive Board Member of the Treasury Markets Association and the Chairperson of its Market Development Committee. Non-official Member of the Advisory Committee on Bond Market Development.

The Honourable Albert Ho Chun-yanAged 60. Appointed to the Board in January 2010. Practising Solicitor and Notary Public. Member of the Legislative Council representing the constituency of the New Territories West. Tuen Mun District Council Member. Member of the ICAC Complaints Committee. Board Member of the Society for Community Organisation.

Ir Dr The Honourable Raymond Ho Chung-tai SBS MBE S.B.St.J. JPAged 72. Appointed to the Board in June 2008. Member of the Legislative Council (Engineering Functional Constituency) and the former Provisional Legislative Council since 1996. Hong Kong Deputy to the 10th & 11th National People’s Congress of the People’s Republic of China. Chairman of Hong Kong Trade Development Council Infrastructure Development Advisory

Committee. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Chairman of Guangdong Daya Bay Nuclear Plant and Lingao Nuclear Plant Safety Consultative Committee. Former President of the Hong Kong Institution of Engineers.

Mr Benjamin Hung Pi-chengAged 46. Appointed to the Board in June 2008. Executive Director and Chief Executive Officer of Standard Chartered Bank (Hong Kong) Limited. Board Member of the Hospital Authority. Member of the Insurance Advisory Committee, the Exchange Fund Advisory Committee and the Council for Sustainable Development. Council Member of the University of Hong Kong. Chairman of Hong Kong Trade Development Council’s Financial Services Advisory Committee. Board Member of the Community Chest and the Community Business.

Ir Edmund Leung Kwong-ho SBS OBE JPAged 65. Appointed to the Board in June 2005 and was re-appointed in June 2008. A Professional Engineer. Managing Director of Hsin Chong Construction Group Ltd. Chairman of the Energy Advisory Committee. Chairman of the Process Review Panel of the Financial Reporting Council. Former President of the Hong Kong Institution of Engineers and former Chairman of the Hong Kong Branch of the Institution of Mechanical Engineers of the United Kingdom.

Mr Howard Eng Kiu-chor Executive Director, Airport OperationsAged 58. Holds Bachelor’s Degrees in Science and in Commerce. Joined the Airport Authority Hong Kong (“AAHK”)in April 1995 and was appointed Director in December 2000. Before joining AAHK, Mr Eng was Vice President of Operations, Edmonton International Airport, Canada, and has had more than 25 years of experience in the airport business involving project development, planning, retail and operation. He is a Director of Hong Kong–Zhuhai Airport Management Company Limited.

Mr Wilson Fung Wing-yip Executive Director, Corporate Development Aged 48. Holds a Bachelor Degree in Social Science (First Class Honours). Mr Fung was appointed in August 2010. Before joining AAHK, Mr Fung was the Executive Director of the Hong Kong Productivity Council between 2006 and 2010. He has had over 20 years of experience in public administration. He joined the civil service as an Administrative Officer in 1985 and has since served in various Government policy bureaux and departments. His experience stretches from air services to lands and city planning, housing policies, consumer protection and competition policies.

Mr William Lo Chi-chung Executive Director,Finance Aged 51. An MBA graduate from Warwick University in the United Kingdom. Mr Lo was appointed in July 2010. Before joining AAHK, Mr Lo was Group Senior Director (Finance and Administration) of Vitasoy International Holdings Limited and has had more than 25 years of wide-ranging experience in auditing, accounting, financial management and control, corporate finance and investor relations. He is a Fellow of the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants and a director of Hangzhou Xiaoshan International Airport Company Limited.


Mr Andrew Liao Cheung-sing GBS SC JPAged 61. Appointed to the Board in June 2005 and was re-appointed in June 2008. A Senior Counsel. Chairman of the Land and Development Advisory Committee. Chairman of the Air Transport Licensing Authority. Chairman of the Steering Committee on Review of Intellectual Property Issues in the Innovation and Technology Sector. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Member of the 11th National Committee of Chinese People’s Political Consultative Conference.

Dr Lo Ka-shui MD GBS JPAged 64. Appointed to the Board in June 2003 and was re-appointed in June 2005, June 2008 and June 2010. Chairman and Managing Director of Great Eagle Holdings Limited. Non-Executive Director and Chairman of Eagle Asset Management (CP) Limited (Manager of the publicly listed Champion Real Estate Investment Trust). Vice President of the Real Estate Developers Association of Hong Kong. Trustee of the Hong Kong Centre for Economic Research. Chairman of the Chamber of Hong Kong Listed Companies. Non-Executive Director of The Hongkong and Shanghai Banking Corporation Limited and Independent Non-Executive Director of Shanghai Industrial Holdings Limited, Phoenix Satellite Television Holdings Limited and China Mobile Limited.

Mr Norman Lo Shung-man AE JPDirector-General of Civil Aviation*Aged 54. Became a Board Member in April 2004 upon his appointment as Director-General of Civil Aviation.


Dr Allan Wong Chi-yun GBS MBE JPAged 60. Appointed to the Board in January 2010. Chairman and Group Chief Executive Officer of VTech Holdings Limited. Member of the Commission on Strategic Development of the HKSAR Government and the Greater Pearl River Delta Business Council. Deputy Chairman and Independent Non-Executive Director of The Bank of East Asia, Limited. Independent Non-Executive Director of China-Hongkong Photo Products Holdings Limited and Li & Fung Limited.

Mr Wilfred Wong Ying-wai SBS JPAged 58. Appointed to the Board in June 2005 and was re-appointed in June 2008. Executive Deputy Chairman of Hsin Chong Construction Group Limited and Synergis Holdings Limited. Chairman of Pinnacle State Group. Deputy to the 11th National People’s Congress of the People’s Republic of China. Chairman of the Court and Council of the Hong Kong Baptist University. Chairman of Hong Kong Arts Development Council. Chairman of the Hong Kong International Film Festival Society. President of the Hong Kong Business and Professionals Federation. Member of the Commission on Strategic Development of the Hong Kong SAR Government. Board Member of HKSAR Tourism Board and Hong Kong Film Development Council.

Secretary to the Board AuditorMr H Y Shu KPMG

* Member by virtue of being holder of the post

Executive Directors


Financial and Operational Highlights

2010/11 2009/10 ±% 1

Financial Results

(in HK$ million)

Turnover 10,583 9,015 +17.4%

EBITDA 7,013 5,613 +24.9%

Depreciation and amortisation 2,207 2,191 +0.7%

Interest and finance costs 195 178 +9.6%

Profit attributable to equity shareholder 4,035 2,844 +41.9%

Dividend declared 3,100 2,300 +34.8%

Special dividend declared - 2,200

Financial Position and Ratios

(in HK$ million)

Total assets 50,430 51,370 -1.8%

Total borrowings 7,086 8,193 -13.5%

Total equity 36,382 36,689 -0.8%

Return on equity 11.1% 7.8%

Total debt/capital ratio 16% 18%

Credit Ratings

Standard & Poor’s:

Long-term local currency AAA AA+

Long-term foreign currency AAA AA+

Operational Highlights2

Passenger traffic3 (millions of passengers) 51.5 46.9 +9.7%

Cargo throughput4 (millions of tonnes) 4.2 3.6 +16.5%

Air traffic movements (thousands) 316 280 +12.9%

1 Subject to rounding differences.2 “Operational Highlights” is based on the Airport Authority Hong Kong’s traffic data of Hong Kong International Airport only.3 “Passenger traffic” includes originating, terminating, transfer and transit passengers. Transfer and transit passengers are counted twice.4 “Cargo throughput” includes originating, terminating and transshipment cargo. Transshipment cargo is counted twice. Airmail is excluded.


We believe good corporate governance provides the foundation for good corporate performance and is essential to attaining long-term, sustainable growth. While recognising that corporate governance may hinge on a number of factors, we have adopted accountability, transparency, fairness and ethics as the cornerstones of our corporate governance framework.

Our Commitment We are committed to high standards of corporate governance and strive to achieve this commitment by institutionalising a clear and comprehensive governance framework and fostering an ethical and responsible culture at all levels of the organisation. Key features of our corporate governance framework are described below:

Corporate Governance Structure

The BoardThe Board has overall responsibility for the leadership, control and performance of Airport Authority Hong Kong (“AAHK”). In line with the principles set out in “A Guide on Directors’ Duties” issued by the Companies Registry, each member of the Board has a duty to act in good faith in the best interests of AAHK. Each Board Member ensures that he or she can give sufficient time and attention to the affairs of AAHK.

Board CompositionThe Airport Authority Ordinance (Cap. 483) (“the Ordinance”) provides that the Board shall comprise a Chairman, a Chief Executive Officer (ex-officio) and between eight and 15 other members, provided that the number of members who are public officers shall not exceed the number of members who are not public

officers. This requirement effectively ensures that the Board will comprise a majority of independent members, thereby promoting the fair and objective review of the performance of the executive management.

The Board has 16 members, whose details are set out on pages 12-14. With the exception of the Chief Executive Officer, all Board Members are non-executives and 12 of whom are considered independent1. Currently, three public officers including the Secretary for Financial Services and the Treasury, the Secretary for Transport and Housing, and the Director-General of Civil Aviation are serving on the Board.

1 Any member who is not a public officer or an executive of AAHK and is not related to any member of the Board or executive management is considered to be independent.



Appointment and RemunerationSection 3 of the Ordinance stipulates that persons who have wide experience in air or other forms of transport, industry, or in commercial, financial, consumer or labour matters, or in administration may be appointed as Chairman or Members of AAHK Board. Pursuant to the Ordinance, the appointment and remuneration of Board Members, including the Chairman, are determined by the Chief Executive of the Hong Kong SAR. With the exception of Dr Lo Ka-shui whose current term of appointment is for one year, and the Chief Executive Officer who is an ex-officio member, the Chairman and all other members of the Board were appointed for a term of three years. The remuneration of Board Members for the year under review is disclosed on page 80.

Training for Board MembersFull, formal and tailored induction programmes are arranged for newly appointed Board Members by the Company Secretary. The programmes consist of a series of meetings with the Chief Executive Officer, Executive Directors and Management and visits to the airport facilities to enable new Members to familiarise themselves with AAHK’s objectives, strategies, operations and internal controls.

Opportunities are provided to Board Members to update and develop their industry expertise through briefings by senior executives or visits. In the year under review, visits to the Shanghai Hongqiao Airport and Zhuhai Airport and briefings by senior Mainland officials were arranged for Members to enable them to gain a more in-depth insight on the latest developments of the Shanghai Hongqiao Airport and Zhuhai Airport and the vicinity areas. Arrangement is also being made for Board Members to attend a Risk Management session organised by an external party in May 2011.

Personal LiabilityPursuant to Section 45 of the Ordinance, Board Members are exempt from personal liability in respect of anything done, or omitted to be done, by them in good faith in relation to the performance or purported performance of any function under the Ordinance.

Board ProceedingsThe proceedings of the Board are designed to align to the extent applicable to AAHK with the Code on Corporate Governance Practices issued by the Stock Exchange of Hong Kong Limited under Appendix 14 to the Main Board Listing Rules although AAHK is not a listed entity. The modus operandi of the Board was formalised and is reviewed from time to time to keep abreast of regulatory changes and best corporate governance practices. Key elements of the current modus operandi include:

• The Board shall have four regular meetings each year;• The annual schedule for regular Board meetings shall be

made available to members before the start of each year;• Agendas of Board meetings shall be approved by the

Chairman. Members may propose matters to be included in the agendas;

• Meeting agendas and papers shall be sent to Members at least three clear days (excluding the day on which they were despatched and the day of the meeting) before a meeting;

• The Board shall receive reports from the Chairmen of Board Committees at each meeting;

• Meeting minutes shall be sent to all Members for comment and record within a reasonable time after a meeting; and

• Members shall safeguard confidential information and observe the procedures on declaration of interests.

Meetings In the year under review, a total of four Board meetings had been scheduled. However, one of the scheduled meetings was cancelled due to a lack of substantive agenda items. For the three Board meetings held, the average attendance rate was 92%. Attendance records of individual members are on page 20.

Key matters considered or resolved in the year under review :• Annual Budget• Five-year Business Plan and Financial Plan• Unaudited interim financial report and audited annual

financial statements• Appointment of external auditor• Annual dividend and special dividend• Salary review and corporate performance assessment• Performance assessment and bonus for Senior

Management• Memberships of Board Committees• HKIA Master Plan 2030• Internal Control and Risk and Business Continuity

Management• East Hall Expansion• Midfield Development • Corporate goals and performance measures for

2011/12• Quarterly management accounts and report

Board CommitteesPursuant to the Ordinance, AAHK may establish committees to consider matters relating to specialised areas upon which they advise the Board and/or, where appropriate, decide on matters within their ambits. Currently, there are six Board Committees, each of which is delegated by the Board with specific roles and responsibilities.


The structure and terms of reference of Board Committees were approved by the Board and are reviewed from time to time in light of AAHK’s evolving operational, business and development needs. The current terms of reference of the Board Committees are available on HKIA’s website at www.hongkongairport.com.

The current composition of Board Committees was reviewed and approved by the Board in early 2010. Excluding the Chief Executive Officer and public officers, each Board Member serves on about 3.2 Board Committees on average.

Under the current modus operandi of the Board Committees, agendas of committee meetings are sent to all Board Members who may choose to attend any meeting as observers, even if they are not a member of that committee. All Board Members may obtain papers of any Board Committee meetings from the Secretary to the Board. Chairmen of Board Committees are required to submit to the Board written reports on matters discussed and decisions made at Committee meetings on a regular basis. As a standing practice, full minutes of Board Committee meetings are sent to all Board Members for information.

The following sets out details of Board committees, their memberships, principal duties and key matters considered or resolved in the year.

Audit Committee and Finance Committee (“ACFC”) Membership : All non-executive members, six of them are considered to be independent

Chairman : Mr Benjamin Hung Pi-cheng Members : The Hon Vincent Fang Kang, Ms Anita Fung Yuen-mei, The Hon Albert Ho Chun-yan, Ir Dr the Hon Raymond Ho Chung-tai, Mr Wilfred Wong Ying-wai and Secretary for Financial Services and the Treasury

Meetings : The ACFC met four times during the year with an average attendance rate of 80%. Attendance records of individual members are set out on page 20.

Principal duties : • Review financial statements• Make recommendations on the appointment of external auditor and approve its remuneration and terms of engagement• Review accounting policies, annual budget, five-year financial plan and charging policies• Oversee internal controls, financial controls, risk management system and internal audit function

Key matters considered or resolved in the year under review :• Unaudited interim financial report and audited annual financial statements• Annual budget, financing plan, five-year financial plan and financial risk management policy

• Quarterly operating results in terms of revenue and recurrent expenditures, capital expenditures and treasury activities against the annual budget• Dividend policy and dividend payment• External auditor’s Audit Report and Management Letter and management’s responses thereto• Objectivity and effectiveness of audit process• Appointment of external auditor and approval of audit fee• Annual Corporate Governance and Internal Control Review Reports• Adequacy of resources, qualifications and experience of staff of the accounting and financial reporting function, and their training and budget• Annual internal audit programme and quarterly internal audit reports• Adequacy of resources and effectiveness of the internal audit function

Capital Works Committee (“CWC”)Membership :Chairman : Ir Edmund Leung Kwong-ho Members : Dr the Hon Marvin Cheung Kin-tung, Ir Dr the Hon Raymond Ho Chung-tai, Mr Andrew Liao Cheung-sing and Mr Stanley Hui Hon-chung

Meetings : The CWC met five times during the year with an average attendance rate of 84%. Attendance records of individual members are set out on page 20.

Principal duties : • Review policy and strategy on procurement of capital works• Make recommendations to the Board on annual capital works budget• Consider the award and monitor the progress of major capital projects

Key matters considered or resolved in the year under review :• East Hall Retail Expansion• Midfield Development• Resurfacing of taxiway pavements• Five-year Capital Works Plan• Progress Reports on major capital works and projects• Procurement strategies and award of works contracts

China Committee (“CC”)Membership :Chairman : Mr Wilfred Wong Ying-wai Members : Dr the Hon Marvin Cheung Kin-tung, The Hon Chan Kam-lam, The Hon Vincent Fang Kang, Ms Anita Fung Yuen-mei, The Hon Albert Ho Chun-yan, Ir Dr the Hon Raymond Ho Chung-tai, Ir Edmund Leung Kwong-ho, Mr Andrew Liao Cheung-sing, Dr Lo Ka-shui, Dr Allan Wong Chi-yun, Mr Stanley Hui Hon-chung, Secretary for Financial Services and the Treasury, Secretary for Transport and Housing and Director-General of Civil Aviation



Meetings : The CC met once during the year with an attendance rate of 93%. Attendance records of individual members are set out on page 20.

Principal duties : • Advise the Board on AAHK’s China development strategy• Monitor AAHK’s investment in Mainland airports• Advise the executive management and the Board on business and co-operation opportunities on the Mainland

Key matters considered or resolved in the year under review :• Flights to land at Shanghai Hongqiao Airport• Dividend Policy of Hangzhou Xiaoshan International Airport Company Limited• Operating results of Mainland investments

Executive Committee (“EC”)Membership :Chairman : Dr the Hon Marvin Cheung Kin-tung Members : Dr Lo Ka-shui, Dr Allan Wong Chi-yun, Mr Stanley Hui Hon-chung and Secretary for Transport and Housing

Meetings : The EC met six times during the year with an average attendance rate of 97%. Attendance records of individual members are set out on page 20.

Principal duties : • Exercise the functions and responsibilities of the Board between regular Board meetings• Serve as a sounding board for the Chairman of the Board in the leadership and oversight of the business and affairs of AAHK• Help coordinate the activities among Board committees • Oversee the rolling 5-year Business Plan and Financial Plan

Key matters considered or resolved in the year under review :• HKIA Master Plan 2030• Corporate sustainability• People development and succession planning• Landside Commercial Development in HKIA• Proposals on business developments• 3-Year Environmental Work Plan and Carbon Reduction Pledge• Monthly or bi-monthly management accounts and report• Monitoring of major accounts receivables• Reports on AAHK’s operations and business activities

Infrastructural Planning Committee (“IPC”)Membership :Chairman : Dr Lo Ka-shui Members : Dr the Hon Marvin Cheung Kin-tung, The Hon Chan Kam-lam, Ir Dr the Hon Raymond Ho Chung-tai, Ir Edmund Leung Kwong-ho, Mr Andrew Liao Cheung-sing, Dr Allan Wong Chi-yun, Mr Wilfred Wong Ying-wai,

Mr Stanley Hui Hon-chung, Secretary for Financial Services and the Treasury, Secretary for Transport and Housing and Director-General of Civil Aviation

Meetings : The IPC met four times during the year with an average attendance rate of 77%. Attendance records of individual members are set out on page 20.

Principal duties : • Review and advise the Board on major infrastructural developments at HKIA and its long term master planning and associated issues

Key matters considered or resolved in the year under review :• HKIA Master Plan 2030• Midfield Development• Western Apron Development

Remuneration Committee (“RC”)Membership : With the exception of the Chief Executive Officer, all members are non-executives, six of them are considered to be independent.

Chairman : The Hon Vincent Fang Kang Members : The Hon Chan Kam-lam, The Hon Albert Ho Chun-yan, Ir Dr The Hon Raymond Ho Chung-tai, Mr Benjamin Hung Pi-cheng, Dr Allan Wong Chi-yun, Mr Stanley Hui Hon-chung, Secretary for Transport and Housing and Director-General of Civil Aviation

Meetings : The RC met twice during the year with an average attendance rate of 78%. Attendance records of individual members are set out on page 20.

Principal duties : • Review staffing, remuneration and employment policies and strategies• Consider remuneration matters including salaries, compensation generally and terms and conditions of service of employees• Advises the Board on other staff-related issues, including annual corporate goals and performance measures, variable compensation and retirement schemes

Key matters considered or resolved in the year under review :• Annual review of staff remuneration• Terms and conditions of employment• Annual award of variable compensation for staff• Performance of the Chief Executive Officer and Executive Directors and their variable compensation• Appointment of senior management• Corporate performance targets and measurements


Balance of Responsibility AAHK’s organisational structure is designed to maintain an appropriate balance of responsibility between the Board and the executive management. The Board is primarily responsible for overseeing the strategic direction and overall performance of AAHK, while the executive management team is responsible for managing AAHK’s day-to-day operations and implementing the strategies laid down by the Board.

To enable the Board to maintain effective oversight and control, clear guidelines have been established specifying issues that are reserved for Board decisions. These include decisions relating to major corporate strategies and policies, substantial investments and capital projects, material acquisitions and disposals of assets, corporate business and financial plans and budgets, senior executives’ appointments, compensation and succession planning, as well as the review of corporate and senior management performances.

At AAHK, the posts of Chairman and Chief Executive Officer are separate. The Chairman is generally responsible for managing the Board, while the Chief Executive Officer is responsible for managing the business and operations of AAHK.

Executive ManagementThe executive management team, led by the Chief Executive Officer, is responsible for managing AAHK’s day-to-day operations and assisting the Board in formulating and implementing corporate strategies. Since 2008, AAHK has been operating with a management structure that consists of functional departments, some of them are grouped under divisions. This structure underpins a focus on corporate performance, thereby fostering closer departmental cooperation without diminishing the accountability of individual departments.

The appointment and compensation of the Chief Executive Officer and the Executive Directors are reviewed and recommended by the Remuneration Committee and approved by the Board. The appointment of the Chief Executive Officer is subject to the approval of the Chief Executive of the Hong Kong SAR. The remuneration package of the Chief Executive Officer and Executive Directors consists of basic compensation, performance-related compensation and retirement benefits. The performance-related compensation is recommended by the Remuneration Committee. A significant portion of the performance-related compensation is determined by


Meeting Attendance (1 April 2010 to 31 March 2011)

Members Board ACFC CWC CC EC IPC RC

Non-executiveSecretary for Transport and Housing 3/3 1/1 6/6 4/4 2/2Secretary for Financial Services and the Treasury 3/3 4/4 1/1 3/4 Director-General of Civil Aviation 3/3 1/1 4/4 2/2

Independent Non-executiveDr the Hon Marvin Cheung Kin-tung 3/3 3/5 1/1 6/6 1 1/4 (Chairman of the Board) The Hon Chan Kam-lam 2/3 1/1 3/4 0/2 The Hon Vincent Fang Kang 3/3 3/4 1/1 2/2 1

Mr He Guangbei2 0/1 1/1 2 1/1 Ms Anita Fung Yuen-mei3 2/2 1/3 3 0/0 3

The Hon Albert Ho Chun-yan 3/3 3/4 1/1 1/2Ir Dr the Hon Raymond Ho Chung-tai 3/3 1/1 4 4/5 1/1 2/4 1/2Mr Benjamin Hung Pi-cheng 2/3 4/4 5 2/2 Ir Edmund Leung Kwong-ho 3/3 5/5 1 1/1 4/4 Mr Andrew Liao Cheung-sing 3/3 5/5 1/1 4/4 Dr Lo Ka-shui 3/3 1/1 5/6 4/4 1 Dr Allan Wong Chi-yun 2/3 0/1 5/5 6 2/4 2/2 Mr Wilfred Wong Ying-wai 3/3 3/4 1/1 1 2/4

ExecutiveMr Stanley Hui Hon-chung (Chief Executive Officer) 3/3 4/5 1/1 6/6 4/4 2/2

Notes:1 Chairman of the committee throughout the term 2 Retired from the Board and ceased to be Chairman of the committee on 1 June 20103 Appointed to the Board and committees on 1 June 20104 Appointed to the committee on 29 November 20105 Became Chairman of the committee on 1 June 20106 Appointed to the committee on 1 June 2010

ACFC: Audit Committee and Finance Committee CWC: Capital Works Committee CC: China Committee EC: Executive Committee IPC: Infrastructural Planning Committee RC: Remuneration Committee


reference to objective indicators, including AAHK’s financial performance, safety and service quality, customer satisfaction and business developments. No Board Member or Executive Director is involved in deciding his or her own remuneration. Details of the Executive Directors and their remuneration for the year under review are set out on page 14 and page 80 respectively.

In July 2010, Mr William Lo Chi-chung was appointed as Executive Director, Finance, in place of Mr Raymond Lai Wing-chueng who retired in June 2010. In recognition of the strategic importance of corporate development in the years to come, Mr Wilson Fung Wing-yip was appointed in August 2010 to the newly created position of Executive Director, Corporate Development.

Management CommitteesApart from the six Board Committees, there are management committees composed entirely of Management staff that deal with specific management issues. The key management committees are:

Human Resources Committee The Human Resources Committee, chaired by the Chief Executive Officer with Executive Directors and General Manager, Human Resources as members, was set up in June 2008. This Committee is responsible for the review and formulation of human resources policies and procedures in meeting changing business needs. It is tasked with planning for the development of the overall manpower capability of AAHK, including people development and succession planning for senior executive positions.

Airport Planning and Development CommitteeThe Airport Planning and Development Committee was re-activated in the year under review to ensure that a more coordinated approach would be taken in reviewing and scrutinising land-use requests on the Airport Island for airport operations, airport support and airport-related developments. This management committee, which is chaired by the Chief Executive Officer with the three Executive Directors as members, is responsible for the approval of all land-use requests before such requests are taken forward by the concerned departments to the Revenue & Expenditure Committee for approval of commitments.

Revenue & Expenditure Committee (“REC”)It was established for the purpose of exercising the authority delegated to the Chief Executive Officer in the approval of commitments of HK$5 million and above. The Chief Executive Officer is the chairman of the REC, with the three Executive Directors as standing members. The Chief Executive Officer may also co-opt other senior management staff as members as he considers appropriate.

Internal Controls Internal controls forms an integral part of AAHK’s management system and are embodied in the operational procedures of functional departments. AAHK’s internal controls are designed to give reasonable assurance that its operations are safe and secure and free from serious interruptions, that its assets have been prudently safeguarded, that maximum value for money is obtained from its expenditures, that its business activities are conducted in a fair and responsible manner, that its financial reporting is accurate, transparent, timely and complete, and that the business and operations of AAHK are being conducted in a way that is in compliance with the relevant laws and regulations. The underlying principle of AAHK’s internal controls is to manage and mitigate, rather than to eliminate risks.

The Board is overall responsible for ensuring that AAHK has effective internal controls and is assisted by the ACFC in discharging this responsibility. Key components of AAHK’s internal control framework include:

ACFC Pursuant to its terms of reference, the ACFC is responsible for reviewing AAHK’s internal control and risk management systems, and ensuring that management has discharged its duty to put in place an effective internal control system. It oversees the Internal Audit function and reviews the adequacy of its resources annually. It has full and independent access to the internal auditors as well as the senior management and, in the furtherance of its duty, may obtain external legal or other professional advice at the expense of AAHK. It receives reports from both the external and internal auditors and considers any control issues arising from these reports. It reviews AAHK’s internal control system and the adequacy of AAHK’s accounting and financial reporting function, and meets at least once a year with the external auditors in the absence of the executive management.

External AuditThe main purpose of the external audit is to provide independent assurance to the Board and shareholder that the annual financial statements of AAHK are fairly stated. The appointment of AAHK’s external auditor is subject to the approval of the Chief Executive of the Hong Kong SAR, on the recommendation of the Board and the ACFC. The external auditor for the year under review was KPMG.

To ensure the independence and objectivity of the external auditor, AAHK has implemented policies which restrict the non-audit services to be provided by the external auditor and require the lead engagement partner responsible for AAHK to be rotated every seven years (the last rotation took place in 2009). The following is a breakdown of the fees paid by AAHK to the externalauditor in the past two years for audit and non-audit services:



Internal AuditThe Internal Audit is primarily responsible for reviewing the adequacy and effectiveness of internal control procedures and monitoring compliance with them. The annual internal audit programme is drawn up using a risk-based approach and is approved by the ACFC before implementation. According to AAHK’s Internal Audit Charter, internal auditors have unrestricted access to information and complete freedom to draw independent conclusions in their audits. The Chief Internal Auditor reports to the Chief Executive Officer on an administrative basis but has direct access to the ACFC and its Chairman, thereby ensuring that independence is maintained. The quarterly internal audit reports submitted by the Chief Internal Auditor include information on weaknesses identified and relevant improvement proposals, as well as results observed from special reviews or investigations undertaken.

Annual Review of Internal Control SystemAssessing risks and reviewing the effectiveness of internal controls is a continuing process at AAHK. In addition to the internal and external audits and other review and assurance processes, the executive management, assisted by a cross-departmental Internal Control Review Task Force, conducts annually a comprehensive review of AAHK’s internal control system in accordance with the Committee of Sponsoring Organisations of the Treadway Commission (COSO) framework recommended by the Hong Kong Institute of Certified Public Accountants.

The annual internal control review evaluates all major operations and processes of AAHK based upon the five main components of the COSO framework, namely: control environment, risk assessment, control activities, information and communication, and monitoring. As part of the annual review, all AAHK departments and major subsidiaries are required to assess the risks associated with their key processes and the effectiveness of the controls in place to mitigate such risks. Independent verification of the effectiveness of controls for those high-risk areas is also carried out. Based on the results of these reviews, AAHK departments and major subsidiaries would make representations to executive management as to whether internal controls are working as intended or that enhancements are to be made.

(in HK$ million) 2010/11 2009/10

Audit fee 4 4Fees for non-audit services 1 0

During the year under review, the executive management has reviewed AAHK’s internal control system and concluded that it is effective and adequate. A consolidated internal control review report was compiled and submitted to the ACFC for review. The Board then reviewed the effectiveness of AAHK’s system of internal control via this consolidated report after its consideration by the ACFC.

Entity-wide Comprehensive Internal Control ReviewTo strive for continuous improvement in all respects, a special task force led by the Executive Director, Finance has been set up to conduct a comprehensive review of the internal control policies and processes and the check and balance framework within AAHK.

Risk Assessment and ManagementAAHK’s operation encompasses a diverse range of risks. At the corporate level, risks which may hinder AAHK from achieving its long term objectives are analysed within the context of its Master Plan (conducted in five-year intervals). Risks relating to AAHK’s short and medium term objectives are identified and addressed annually during the preparation of the rolling Five-year Business Plan.

Operational RiskMaintaining Hong Kong as a centre of international and regional aviation is a statutory mandate of AAHK. Given the myriad of potential risks that may affect the operations of the airport, AAHK has introduced a process for the ACFC and the Board to review the risk and business continuity management processes pertaining to operational areas that are critical to sustaining the continuous operation of the airport.

The key elements of AAHK’s integrated and multi-layered risk and business continuity management process include the establishment of an Operational Risks Register to track and document identified risks, the development and continuous updating of preventive and responsive procedures, and the testing and drilling of action plans and procedures to ensure their effectiveness.

HKIA handled over 51.5 million passengers, 4.2 million tonnes of cargo and 316,000 flight movements in 2010/11. Of all the operational risks, the most critical one is capacity constraint. Based on the latest forecast, air traffic demand was expected to reach 97 million passengers, 8.9 million tonnes of cargo and 602,000 flight movements per year by 2030. Such a demand is well beyond the runway capacity of HKIA’s existing two-runway system. HKIA Master Plan 2030 will be set out to address the capacity issue.

Other key risks facing AAHK are as follows:


Environmental RiskCaring for the environment is an imperative for the long-term sustainable development of HKIA. AAHK has put in place vigorous measures to manage environmental issues and strives to operate and develop the airport in an environmentally responsible manner. At the strategic level, a three-year environmental action plan had been developed involving working towards benchmarked best practices in key work areas as compared to other major airports and leading Hong Kong organisations. A principal part of the strategy involves partnering with the airport community in developing and implementing airport-wide environmental programmes. In 2010, HKIA joined with 37 airport business partners in undertaking a pledge to reduce carbon emissions by 25% per workload unit by 2015 based on 2008 emission levels. Further details on our environmental initiatives are set out in the “Corporate Social Responsibility” section on pages 48 to 53.

Safety, Security and Health RisksAirport and aviation safety is fundamental to the operation of HKIA. Safe operation of HKIA is achieved through the concerted efforts of AAHK, airlines, aircraft manufacturers, air traffic control organisations and other key stakeholders. AAHK regularly reviews various standard operating procedures that cover all parts of HKIA’s operations on the airfield, on the apron, at gates and in maintenance areas.

In parallel with this, instilling an effective safety culture from the top management down has remained a priority. Reporting of safety hazards and occurrences has been encouraged and monitored at all levels. As in previous years, safety, as measured by the rate of airport staff and passenger injuries at the airport, remains a key performance indicator of AAHK and forms one of the key elements in the Variable Compensation Scheme, by which the variable compensation awarded to staff (including Executive Directors) is determined.

The construction, maintenance and operation of airport facilities involve risks in the workplace that can be reduced but not eliminated completely. Recognising that minimising occupational health and safety incidents is one of the keys to the sustainability of HKIA, AAHK has formulated a Safety Management System which is regularly reviewed and updated.

Airport security continued to see challenges arising from increasing volumes of passenger traffic and the evolving nature of the threats against civil aviation. To address the first challenge, the Departure Immigration halls have been re-configured to provide space for additional screening capacity to cope with the traffic growth. Enhanced initiatives and effective equipment and facilities have been and will continue to be employed to ensure that highest security standards are maintained.

To address health risk, AAHK has a Stepped Response Plan in place for major public health issues.

Financial RiskAAHK’s activities expose it to a variety of financial risks: credit risk, liquidity risk, interest rate risk and foreign currency risk. Details of AAHK’s exposure to financial risks and the policies and practices adopted to manage these risks are described in Note 21 to the Financial Statements on pages 95 to 100.

SustainabilitySustainable development, to AAHK, is a resilient process that balances business objectives and stakeholders’ interests within a holistic management framework. In 2010, a benchmarking exercise to compare AAHK’s practices in corporate sustainability with major international airports and major local corporations was done by an independent organisation. Improvements in some areas were identified and the Management is working towards formulating a corporate sustainability plan for AAHK.

Delegation of AuthorityAAHK has a comprehensive system of delegation of authorities under which the authorities of the Board, Board Committees and different levels of the executive management are clearly delineated. Such delegation of authority is reviewed from time to time to ensure that it meets AAHK’s evolving business and operational needs. The last review was conducted by the Board in June 2008.

Under current delegations, the Executive Committee has been given the power to exercise the functions of the Board between Board meetings, save for certain statutory restrictions. The Capital Works Committee is delegated the power to make financial commitments of up to HK$500 million. The Chief Executive Officer has been delegated the full power to make commitments of an operational nature and of up to HK$50 million for capital expenditures. To complement these delegations, a reporting mechanism has been instituted to keep the Board informed regularly when these delegated powers have been exercised.

At the operational level, the Chief Executive Officer has established an REC to assist him in the exercising of his delegated authority. Regular reports are made to the ACFC on authority exercised by the Chief Executive Officer for commitments in excess of HK$20 million. To facilitate day-to-day operation, the executive management has a structured system of sub-delegation under which staff members of different levels are given appropriate authority to enable them to effectively discharge their duties. The system of sub-delegation is subject to review and approval from time to time by the Chief Executive Officer.



Financial Planning, Control and ReportingAAHK has a three-tier corporate planning process under which a master plan with a long-term planning horizon of 20 years is compiled every five years. For medium-term planning, each year AAHK prepares a rolling five-year business plan and financial plan. For short-term planning and control purposes, annual budgets are prepared and submitted to the ACFC and the Board for approval.

Within AAHK’s financial control system, there are defined procedures for the appraisal, review and approval of different levels of capital and operating expenditures. Stringent control and approval procedures are in place to govern expenditures beyond approved budgets. A process has recently been implemented to require selected staff to undergo recurrent training on AAHK’s financial and internal control policies and procedures on at least an annual basis. This process would be extended to members of the Senior Management team if it is considered necessary. Results of operations against budget are reported to the ACFC at least on a quarterly basis and subsequently to the Board. Financial control on major capital projects is reported to and monitored by the Capital Works Committee at each meeting.

The Board is overall responsible for the preparation of financial statements that give a true and fair view of AAHK’s affairs and financial results. The Board is assisted by the ACFC in discharging this responsibility. In preparing this year’s financial statements, the Board has adopted suitable accounting policies and applied them consistently; made judgements that are prudent and reasonable; and prepared the financial statements on a going concern basis. The audited financial statements are normally submitted to the Board for review within two months from the end of the financial year. Financial statements, both for the interim and full-year periods, are despatched to the Hong Kong SAR Government and the Legislative Council and published on the HKIA website after review by the Board.

AccountabilityAAHK considers accountability one of the fundamental pillars of corporate governance and has built its corporate structure and management culture based on this notion. Under the current structure, the Board is overall accountable for the performance of AAHK. The executive management is responsible for managing AAHK’s day-to-day business and is accountable to the Board for its performance.

In order to strengthen the accountability mindset at all levels of the organisation, AAHK has adopted a cost and contribution centres’ operating model. As relevant and appropriate, operating parameters are set for individual departments for which they are accountable.

Disclosure of InterestAAHK has clear and comprehensive procedures for disclosure of interests which is an important safeguard against potential conflicts of interests. Under current procedures, members of the Board and senior management are each required to make a general declaration upon their appointment and thereafter on an annual basis. They are also required to report any change to their declaration as and when it occurs or as soon as they become aware that conflicting interests may arise. Board Members are also required to declare their direct or indirect interests, if any, in any proposals or transactions to be considered by the Board or Board Committees and to withdraw from relevant meetings as appropriate. In addition, written procedures are in place requiring staff to disclose their interests under specific circumstances, for instance, acting as a member of a tender assessment panel. Board or staff members with potential conflicts of interests will normally be excluded from the relevant deliberation and decision-making process. A register of declarations made by members of the Board is maintained by the Corporate Secretariat and is available for public inspection.

Ethical CultureEthics is a core value of AAHK. To foster an ethical culture, AAHK adopts both the “structural” and “people” approaches.

The structural approach aims to attain ethical behaviour by institutionalising policies and procedures with which staff members are required to comply. Such policies and procedures, as epitomized by the Code of Conduct, are constant reminders to staff of the minimum ethical standards AAHK expects of them. The Code provides specific guidelines to help staff make ethical decisions in the course of discharging their duties. Compliance with this Code is part of the terms of employment of all staff, who are reminded at least once a year of their responsibilities under the Code. The Code of Conduct is reviewed and updated regularly to ensure that it is consistent with current best practices. Ethical compliance is further strengthened by the presence of a high-level Ethics Panel which is convened as needed to review serious ethical issues. The Ethics Panel may take independent advice and reports to the Chief Executive Officer and/or the ACFC, as appropriate.


The people approach aims to inculcate an ethical mindset among all staff and enhance their awareness of good ethics through continuing education. In this regard, workshops and sharing sessions conducted by internal and external parties are held from time to time. At these sessions, information on desirable ethical behaviour is promulgated and often supplemented by case studies to help staff gain a better understanding of the underlying principles and how they can be applied in different situations.

To provide staff with a holistic view of the two approaches and promote a better understanding of different levels of ethical responsibility, AAHK has devised an ethics pyramid which encapsulates various ethics-related issues. Staff members are regularly reminded of their obligations under each level of the pyramid.

Quality of StaffAAHK considers staff quality as a competitive advantage and to ensure that it is sustainable, AAHK places considerable emphasis on rigorous recruitment and selection, purposeful staff development and succession planning, and a compensation and reward system that aims to motivate and retain staff of high calibre. AAHK believes that a fair and competitive reward system is a key driver of staff performance and behaviour. To this end, AAHK first implemented a variable compensation scheme in 2002 under which a part of staff remuneration is directly linked to corporate and individual performance, and is payable only when agreed corporate goals and targets are met. The scheme is subject to regular reviews and fine-tuning to keep abreast of the changing circumstances and best practices.

Whistle-blowing PolicyAAHK has a formal Whistle-blowing Policy to encourage and guide its staff to raise serious concerns internally in a responsible manner, without fear of retribution.

ComplianceSection 6(1) of the Ordinance provides, inter alia, that AAHK shall conduct its business according to prudent commercial principles. Having regard to this statutory mandate, AAHK endeavours to follow, to the extent applicable to AAHK, the compliance standards of major commercial organisations in Hong Kong.

Financial ReportingAAHK fully complies with the financial reporting requirements set out in Section 32 of the Ordinance. Our auditor confirms that the consolidated financial statements give a true and fair view of the state of affairs of the group for the year 2010/11 and of the group’s profit and cash flows for the year then ended in accordance with the Hong Kong Financial Reporting Standards and Airport Authority Ordinance. Starting 2005/06, AAHK’s financial statements are prepared in compliance to the extent applicable with the relevant disclosure provisions in the Listing Rules issued by the Stock Exchange of Hong Kong Limited. Since 2006/07, AAHK has begun voluntarily announcing its interim financial results.

Corporate Governance PracticesAlthough AAHK is not required to comply with the Code on Corporate Governance Practices (the “Code”) issued by the Stock Exchange of Hong Kong Limited under Appendix 14 to the Main Board Listing Rules, we have applied its principles and voluntarily complied with the code provisions therein except for those as set out below, most of which are not applicable to AAHK.


Code Provision Reason for Deviation

A.1.1 The modus operandi of the Board provides that the Board shall meet at least four times a year.

Although four regular meetings were scheduled for the year under review as per the modus operandi, the August Board meeting was called off due to a lack of substantive items.

A.1.8 This provision is not applicable to AAHK which has only one shareholder - the Hong Kong SAR Government. The procedure for dealing with any conflict of interest affecting a Board Member is governed by Section 13 of the Ordinance.

A.4.1 All Board Members, with the exception of the Chief Executive Officer who is an ex-officio member, are appointed for a specific term not exceeding four years. Board Members are not subject to re-election but may be re-appointed by the Chief Executive of the Hong Kong SAR pursuant to Section 3 of the Ordinance.

A.4.2 This provision is not applicable to AAHK. Pursuant to Section 3 of the Ordinance, Board Members are appointed by the Chief Executive of the Hong Kong SAR. Terms of office of members are governed by Section 11 of the Ordinance.

A.5.4 This provision is not applicable because all of AAHK’s shares are held by the Hong Kong SAR Government and are not publicly traded.

A.6.1 AAHK has self-imposed a guideline to issue papers to members at least three “clear” days (excluding the day the papers were despatched and the day of the meeting) before a meeting. But due to occasional urgent business or last minute developments, this guideline is not always met. For the year under review, about 70% of a total of 93 papers met this guideline. AAHK will continue to strive to comply with this guideline to the extent practicable.

B.1.3 The provision on the power to determine Board Members’ remuneration is not applicable because Section 11(4) of the Ordinance provides that the remuneration of Board Members shall be determined by the Chief Executive of the Hong Kong SAR.

C.3.3 To make the terms of reference of the ACFC more concise and tailored to AAHK’s needs, some of the requirements in Code Provision C.3.3 have been condensed before being incorporated into the terms of reference of the ACFC.

E.1.1, E.1.2, These provisions are not applicable because AAHK E.1.3, E.2.1 has only one shareholder and is not required to hold annual general meetings.

The board should meet regularly at least four times a year.

If a substantial shareholder or a director has a conflict of interest, the matter should be dealt with through a formal board meeting and not by way of circulation or by a committee.

Non-Executive Directors should be appointed for a specific term, subject to re-election.

Directors appointed to fill a casual vacancy should be elected by shareholders at the next annual general meeting. Directors should be subject to retirement by rotation at least once every three years.

Directors must comply with obligations under the Model Code for Securities Transactions and the board should establish guidelines for employees dealing in the securities of the company.

An agenda and board papers should be sent to all directors at least three days before a meeting.

Terms of reference of the Remuneration Committee

Terms of reference of the Audit Committee

These code provisions deal with the proceedings for annual general meetings



TransparencyAAHK considers transparency an important attribute of good corporate governance and has taken an open approach to disclosing information relating to its performance and operation, save for certain information relating to aviation security and matters of commercial sensitivity. To promote transparency and openness, AAHK has voluntarily undertaken to disclose the individual attendance records of Board and committee meetings and the full details of the remuneration of its Board Members and Executive Directors. This year’s remuneration details are set out in note 7 to the financial statements.

CommunicationAAHK adopts an open and proactive communication policy. To promote effective communication with the public at large, AAHK maintains a website where comprehensive information about AAHK, HKIA and its services is provided. In addition, AAHK keeps the public abreast of HKIA’s new service offerings, growth and development through the mass media by organising press conferences and briefings, giving interviews and issuing press releases and statements. Meetings, sharing sessions and forums are held to foster two-way communication with business partners, the aviation industry and other stakeholders. For HKIA Master Plan 2030, a Hong Kong-wide public consultation for three months will be held to seek views and comments from all stakeholders and the general public. Internally, Management conferences are held bi-annually to enhance common understanding among the Management team on work to be done in the year to achieve AAHK’s goals. It also provides a forum for Senior Management team to articulate their thoughts on future corporate direction and focus, based on which departments can formulate cohesive plans for the coming year and beyond.

A newsletter, hkia News, is published to share news with AAHK staff, the airport community at large and other pertinent stakeholders. The Legislative Council and neighbouring District Councils are also kept updated on major developments at HKIA. Moreover, AAHK values customer feedback. A wide array of channels such as the website, quantitative and qualitative opinion surveys, emails, feedback forms, hotline and more are used to solicit views from passengers, customers and other stakeholders. AAHK’s annual and interim financial reports are published on its website.

Corporate CitizenshipAAHK is committed to being a caring and responsible corporate citizen. Throughout the year under review, AAHK participated in and provided support for a number of initiatives that promoted environmentally friendly practices, people development and community well-being. Major programmes and events undertaken during the year are set out on pages 48 to 53 of the annual report in the ”Corporate Social Responsibility” section. AAHK has established a Corporate Environmental Policy that focuses on adopting and encouraging practices at the airport that prevent or minimise pollution and maximise energy and natural resource use efficiency. As well as following such policy as far as practicable in our own activities and operations, we encourage our business partners to adopt the same responsible approach in conducting their business at HKIA.

RecognitionAAHK’s 2009/10 annual report received a Platinum Award in the public sector/not-for-profit category of the 2010 Best Corporate Governance Disclosure Awards organised by the Hong Kong Institute of Certified Public Accountants.


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Event Highlights

2010

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April A miniature Hong Kong Pavilion is displayed at Hong Kong International Airport (“HKIA”), showing Airport Authority Hong Kong (“AAHK”)‘s support for the Hong Kong SAR Government’s participation in Expo 2010 Shanghai China.

MAyHKIA wins the bronze award in the public sector category of the Hong Kong Awards for Environmental Excellence.

JuneAAHK declares an ordinary dividend of HK$2,300 million and a special dividend of HK$2,200 million to its shareholder, the Hong Kong SAR Government.

JulyHKIA wins the Air Transport Research Society’s Asia-Pacific Airport Efficiency Excellence Award for the fourth consecutive year.

AugustCathay Pacific resumes construction of its HK$5.5 billion cargo terminal at HKIA, which is scheduled to open in 2013.

septeMberService between Hong Kong and Shanghai Hongqiao International Airport resumes with 28 weekly flights.

OctOberHKIA enters into a sister airports arrangement with Beijing Capital International Airport.

HKIA is named best airport for the eighth consecutive year in the TTG Travel Awards.

Emirates becomes the second carrier — after Singapore Airlines — to use the Airbus superjumbo A380 on its Hong Kong passenger routes.

nOveMberFor the fourth time in six years, HKIA is voted the best airport in China by readers of Business Traveller China.

“River of Wisdom”, an animated version of the world famous painting “Riverside Scene at Qingming Festival” and a very popular display in the China Pavilion during the Shanghai Expo, is displayed at AsiaWorld-Expo.

AAHK establishes community liaison groups in Tuen Mun and Tung Chung to collect and exchange views on airport operation and development.

Over 1,000 people take part in the 2010 HKIA Feet of Fire 10-kilometre run.

DeceMberHKIA sets new records by handling over 50 million passengers and 4 million tonnes of cargo in 2010.

The HK$4.5 billion enhancement programme, which began in 2005/06, is completed on time and within budget. The programme includes a new passenger concourse, added capacity for the baggage handling system and reconfiguration of the Departures Immigration and Arrivals Immigration halls.

AAHK leads an airport-wide pledge to reduce carbon emissions at HKIA by 25% per workload unit by 2015. The programme is the first of its kind in Hong Kong and among airports worldwide.

AAHK wins the silver prize for environmentally responsible purchasing practices in the Green Council’s Hong Kong Green Awards 2010.

AAHK’s 2009/10 annual report wins the platinum prize in the public sector/not-for-profit organisations category of the Hong Kong Institute of Certified Public Accountants’ Best Corporate Governance Disclosure Awards 2010.

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2011

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JAnuAry AAHK unveils Phase 1 of the midfield development plan.

AAHK is the first runner-up in an energy saving contest organised by Friends of the Earth (HK).

In partnership with Hong Kong Neighbourhood Advice-Action Council – Tung Chung Integrated Services, AAHK concludes a drive to collect toys and books for underprivileged children in Tung Chung.

FebruAryA photo exhibition commemorating the 100th anniversary of aviation development in Hong Kong opens at HKIA. The exhibition kicks off a series of events celebrating the centenary.

For the fifth consecutive year, Airports Council International names HKIA the world’s best airport among facilities serving over 40 million passengers annually.

HKIA sets a new daily record by serving more than 170,000 passengers on 7 February.

MArchRepresentatives of HKIA and four other Greater Pearl River Delta airports meet at the annual chairman’s meeting to promote coordination and cooperation between the airports. Secretary for Transport and Housing Ms Eva Cheng and Vice Minister of CAAC Mr Xia Xinghua spoke at the meeting.

AAHK volunteers host a spring dinner for 400 elderly residents of Tung Chung.

HKIA is named the world’s best airport in the annual Skytrax survey, which is based on over 11 million questionnaires covering more than 240 airports. This is the eighth time that HKIA has won the award since 2001.

HKIA and Chicago’s O’Hare International Airport become sister airports.


Award-winning Passenger ServicesIn 2010/11, Hong Kong International Airport (“HKIA”) completed several facility and service upgrades.

This commitment to continuous improvement was recognised by Airports Council International, which

— for the fifth consecutive year — named HKIA the world’s best airport serving more than 40 million

passengers annually.

SecurityDuring the year, we adjusted our security systems to increase the efficiency of the passenger

screening process. We increased the number of staff on duty during the morning, when passenger

volumes peaked, and established a roving team to respond to spikes in demand at transfer screening

channels. Extra benches were installed near security channels to make it easier for passengers to repack

their luggage after X-ray and security check.

Passenger Services


In 2011/12, we will install additional X-ray machines to

further enhance the speed and effectiveness of our

screening processes.

SafetyMaintaining a safe environment is a top priority for the

entire airport community. We continually improve our

safety performance through incident analysis

programmes, management and safety audits, safety

awareness campaigns and collaboration with our

business partners.

In 2010/11, the Airport Composite Safety Index, which

measures the injury rate among passengers and staff,

declined from 7.6 to 6.7 injuries per million passengers

— a record low for HKIA. The passenger injury rate

dropped 56.5% during the year, from 0.23 to 0.10 per

million passengers.

Baggage hall and ramp safety was enhanced with a

four-month campaign that included presentations, and

poster design and role model competitions. These efforts

were recognised with a safety performance award from

Hong Kong’s Occupational Safety and Health Council.

It was the fourth consecutive year that we received an

award from the council.

Passenger Services

The reconfigured Departures Immigration halls enhance the speed and efficiency of security screening.


EfficiencyHKIA uses seminars, drills and exercises to prepare for a

variety of business interruptions. In November 2010, we

held our annual crash and rescue exercise, which for the

first time simulated a runway accident between an aircraft

and a ground vehicle. More than 1,000 staff from Airport

Authority Hong Kong (“AAHK”), business partners,

government departments and other organisations took

part in this year’s simulation.

In June 2010, we worked with the Department of Health

to simulate an infectious disease outbreak on an

outbound aircraft, which returned to HKIA and was held

at a remote bay. The sick traveller was assessed and

transferred to hospital, nearby passengers and staff were

isolated and contact-tracing measures were instituted.

Some 20 organisations and 400 people participated in this

exercise, including public health authorities from Macao

and the Mainland as observers.

Typhoons are common in Hong Kong and can cause

cancellation of flights as well as passenger and baggage

backlogs. More than 500 participants from 20

organisations and government departments helped us

hone our coordination, communication and crowd

management skills in our annual typhoon exercise, which

was held in April 2010.

Facility UpgradesIn fiscal 2010/2011, we completed a HK$4.5 billion facility

and capacity enhancement programme that started in

2005/06. This project combined the two Arrivals

Immigration halls of Terminal 1 (“T1”), reconfigured the

Departures Immigration halls that led to flip-over of

immigration and security check areas, increase in security

channels in the departure hall, upgraded the baggage

handling and sorting system and increased the number

of airline transfer desks and immigration counters in

Arrivals Hall. The enhancement programme was

completed on time and on budget.

Completion of HK$4.5 billion facility and

capacity enhancement programme

HK$4.5 Billion


Service EnhancementsFrom emails to social networks, travellers rely on the

Internet for business and pleasure. In October 2010,

we installed 56 computer terminals in 28 locations near

boarding gates in T1. The computers are connected to

the Internet, allowing travellers to use Internet services

free of charge.

During the year, we completed a project that increased

the signal strength of the airport’s free public WiFi service.

In 2011/12, we will expand the coverage area of the

WiFi service, enhancing customer satisfaction and the

operational efficiency of our business partners.

For the convenience of arriving passengers, we installed

six new sets of displays in the Baggage Reclaim Hall which

list baggage reclaim carousel number of each arrival flight

to facilitate baggage retrieval by passengers. The displays

that list departure times in the Terminal 2 (“T2”) Coach

Station were also upgraded during the year.

We also introduced a pilot programme that puts flight

information displays into standby mode when they are

not in use. Further deployment of this programme, which

can reduce each display’s electricity consumption by

about 20%, is scheduled for fiscal 2011/12.

In October 2010, the newly reconfigured Central Arrivals

Immigration Hall opened. Eight new immigration counters

and six new e-Channels – which allow Hong Kong

residents and frequent visitors to clear themselves through

immigration – were installed in the hall, shortening

waiting times for arriving passengers.

Four new money exchange counters also opened during

the year. Located in T2, the arrivals level of the North

Satellite Concourse, and the Pre-Immigration and

Baggage Reclaim halls of T1, the additions bring the total

number of currency exchange counters to 17.

In 2010/11, five automated teller machines (“ATMs”)

were installed in the transfer area, the Integrated

Mainland Transport Centre and the Meeters and

Greeters Hall. HKIA now has a total of 13 ATMs.

During the year, the number of self check-in kiosks was

increased to 71. Passengers on Air Canada, Air China, Air

France, All Nippon Airways, Cathay Pacific Airways, China

Airlines, China Eastern Airlines, Delta Air Lines, Dragonair,

New displays in the Baggage Reclaim Hall make it easier for passengers to collect their luggage.

Passenger Services

The Integrated Mainland Transportation Centre strengthens HKIA’s links to the Pearl River Delta.


Finnair, KLM Royal Dutch Airlines, Shanghai Airlines and

United Airlines can now use this convenient service.

To provide additional check-in capacity, 36 counters were

added to aisles A and K in T1 for passengers and baggage

check-in. During the year, baggage scales and roller beds

were installed and in fiscal 2011/12, conveyor belts will be

added to each counter. These check-in counters will become

operational in the middle of 2011. In June 2010, two

check-in stations were installed in the airport’s government

VIP lounge to provide added convenience to VIP passengers

for their departure.

We are now making preparations for replacing the airport’s

telephone system, which is approaching obsolescence. A

tender for the new system was awarded in March 2011, with

installation scheduled for completion at the end of 2012.

In February 2011, we began a pilot programme that issued

tablet computers to our customer service staff. The wireless

devices, which are connected to the Internet and HKIA’s

Intranet, give customer service staff access to a variety of

information about flight schedules, transfers, hotels and

transportation. Passengers welcomed the programme, and

we will deploy more tablet computers in the coming year.

As passenger volumes at HKIA have grown, several new

airlines have begun providing check-in services in T2.

During the year, Spring Airlines, Jeju Air, JuneYao Airlines,

Indonesia AirAsia, Sky King and South East Asian Airlines

commenced services from T2, bringing the number of

carriers operating from that terminal to 21.

Enhancing Our Links to the PRDSince it opened in January 2010, SkyPier’s fast, efficient

ferry services have made it easy for residents of the Pearl

River Delta (“PRD”) including Macao to travel abroad and

for arriving passengers to reach the PRD and Macao.

To accommodate growing demand and seasonal peaks,

in 2010/11 four new check-in counters and a conveyor belt

linking the seawall to the sea-to-air check-in hall were

installed. SkyPier’s pontoon was also reinforced, making it

safer and reducing turnaround times during typhoons.

To make HKIA a convenient gateway to and from the PRD

including Macao, AAHK offers upstream check-in services

at designated ferry terminals and land transport sites. At

these locations, passengers can complete their check-in

formalities, take their boarding passes and check their

baggage in on participating airlines before taking a ferry,

coach or limousine to HKIA.

In 2010/11, the number of passengers using the upstream

check-in service grew 40%. Currently, this service is

available at four PRD ports – Dongguan Humen, Shenzhen

Shekou, Shenzhen Fuyong and the Macao Maritime Ferry

Terminal – and at Shenzhen International Airport and

Shenzhen Yujingdongfang. We plan to increase the

number of locations offering this convenient service to

the passengers.

In 2010/11, Eva Airways began offering upstream check-in

service in Dongguan Humen and the Macao Maritime Ferry

Terminal, and Hong Kong Airlines began offering this

service in Shenzhen Shekou and Dongguan Humen.

HKIA’s 71 units of self-service kiosks let passengers check in and print boarding passes.


HKIA also offers extensive connectivity to the PRD through

the Integrated Mainland Transport Centre in T2. In July

2010, we added 15 new coach and limousine licensees

to the operators providing cross-boundary transportation

services. This helped raise the number of coach trips

each day to 460, from 360 in 2009/10, and increase

the number of destinations in the PRD served from 90 to

115. The number of cross-boundary limousines serving

cities and towns in the PRD rose from 160 to 290.

In 2010/11, we also introduced a cross-boundary shuttle

service to Lok Ma Chau/Huanggang and Shenzhen Bay.

With departures every 15 – 20 minutes, the service makes

it fast and easy to travel between HKIA and these cross-

boundary points where connecting coach or limousine

services to various cities in the PRD are available.

Customer ServiceThe Airport Ambassador Programme, which recruits young

people, students and retirees to welcome and provide

assistance to travellers, continues to be popular with

passengers. In September 2010, more than 80 young

people became Airport Ambassadors. Since it was

launched in 2002, nearly 700 ambassadors have joined this

programme, which provides work experience for young

people and gives retirees an opportunity to continue

contributing to society.

During the year, HKIA continued to promote awareness of

Hong Kong’s rich cultural heritage. In conjunction with the

Leisure and Cultural Services Department, in June 2010 we

launched a series of exhibitions under the banner “Glimpses

of Hong Kong” that showcased Cantonese Opera and life

in our city over the past 100 years. In February 2011,

we opened an exhibition of over 100 vintage photos

that document a century of aviation in Hong Kong. The

following month, we inaugurated an exhibition highlighting

traditional Chinese medicine and remedies.

AwardsHKIA won several awards in 2010/11. In addition to

winning the world’s best airport title from Skytrax for the

eighth time, we were recognised as the world’s best airport

by Airports Council International. We were also named best

airport in the TTG Travel Awards for the eighth time.

During the year, HKIA was also voted best airport in China

by Business Traveller China and received the Asia-Pacific

Airport Efficiency Excellence Award from the Air Transport

Research Society.


The World’s Busiest Cargo Airport



The rebound in the global economy during fiscal 2010/11 created strong demand for air cargo services.

Throughput at Hong Kong International Airport (“HKIA”) reached a record 4.2 million tonnes, a 16.5%

increase from 2009/10. This growth helped HKIA surpass Memphis International Airport to become the

world’s busiest cargo airport for the first time.


HKIA became the world’s busiest cargo airport in 2010/11.

Fiscal 2010/11 saw continued progress on the

construction of the Cathay Pacific Cargo Terminal at

HKIA. Scheduled to open in early 2013, this HK$5.5

billion facility will feature a state-of-the-art, HK$1.4 billion

cargo handling system. The terminal will add 2.6 million

tonnes to HKIA’s cargo capacity, increasing the airport’s

total annual capacity by 50%, to 7.4 million tonnes.

In November 2010, Airport Authority Hong Kong (“AAHK”)

worked with the Hong Kong Logistics Development

Council, InvestHK and the Hong Kong Trade Development

Council to promote HKIA as a preferred gateway of China

at the International Air Cargo Forum & Exposition in

Amsterdam. We also exhibited at Air Freight Asia 2011,

which was held in Hong Kong in March 2011.

HKIA Cargo throughput reached a record

of 4.2 million tonnes

4.2 Million Tonnes

Permanent Aviation Fuel FacilityIn November 2010, we opened Phase 1B of the

Permanent Aviation Fuel Facility (“PAFF”), adding four

new tanks with 124,000 cubic metres of storage capacity

to the facility. With the four existing tanks, the PAFF now

has a total capacity of 264,000 cubic metres. Ultimately,

the PAFF can provide an aggregate storage capacity



of up to 388,000 cubic metres. Since the PAFF opened,

the barging operation at the Aviation Fuel Receiving

Facility at Sha Chau has ceased in early December 2010

and the facility has turned into an emergency backup for

the airport. Fuel supply to the airport is now being off

loaded at PAFF without the need of double-handling

through the barges at Sha Chau. This has greatly

enhanced the operational efficiency and fuel supply

logistics for the airport.

In March and November 2010, we hosted the 11th

and 12th meetings of the PAFF Community Liaison

Group, a forum for communication between AAHK

and residents of Tuen Mun, where the PAFF is situated.

At the meetings, we provided residents with updates

on the PAFF’s operations.

Aviation ServicesTo accommodate robust growth in business aviation,

in June 2010 AAHK signed an agreement with

Hong Kong Business Aviation Centre, Limited, for the

development of a third hangar at HKIA. With an area

of approximately 5,000 square metres, the new hangar

is expected to become operational when it opens in

the first half of 2012.

New AirlinesDuring the year, one new cargo airline, Etihad Airways,

began serving HKIA.

The Permanent Aviation Fuel Facility’s eight fuel tanks have a total capacity of 264,000 cubic metres.


Delivering Safety, Security and Efficiency

Airfield andSystems

An efficient, modern airfield underpins Hong Kong International Airport (“HKIA”)’s reputation for

safety, security and reliability. During the year, we completed two key upgrades and launched a new

initiative to transform the midfield, the last undeveloped airside area on the Airport Island.


Airfield and Systems

HKIA is adding parking stands to accommodate Airbus A380.

Baggage Handling Capacity doubled from

8,000 bags to 16,000 bags per hour

16,000 Bags Per Hour


and built to achieve a high standard of energy efficiency

and environmental acceptability in compliance with

the BEAM Plus standard, a comprehensive building

environmental assessment scheme that is recognised by

the Hong Kong Green Building Council. Environmental

features of the building include the use of high-

performance glazing for the building’s façade that

control the solar heat gain thereby reducing electrical

consumption for air-conditioning; innovative skylights

that maximise natural daylight within the building

coupled with high-efficiency lighting with daylight and

occupancy sensors that reduce electricity consumption;

the use of rainwater and treated grey water in the

air-conditioning system and recycled asphalt used in

the midfield apron pavement.

Airfield EnhancementsSingapore Airlines began a daily scheduled passenger

services to HKIA using Airbus A380 in July 2009. Emirates

became the second carrier to use the superjumbo on its

Hong Kong routes in October 2010, and more airlines are

expected to deploy the A380 in future.

To meet this demand, HKIA operates three parking stands

that can accommodate the superjumbo. In July 2010, our

first stand with three air bridges entered service. Located

at Gate E15, the stand allows the passengers on a fully

loaded A380 to disembark within 12 minutes, three

minutes faster than a stand with two air bridges.

The baggage handling system can now process 16,000 bags per hour.

Midfield DevelopmentIn January 2011, Airport Authority Hong Kong (“AAHK”)

announced the Phase 1 of the midfield development plan.

Scheduled for completion in 2015, the programme

includes construction of a new passenger concourse,

a cross-field taxiway and an extension to the existing

automated people mover in Terminal 1, which will link

the Midfield Concourse to Terminal 1.

The development plan also includes the construction of

20 aircraft parking stands, two of which will be able to

accommodate Code F aircraft, such as the Airbus A380.

Ultimately, 10 million passengers will embark and

disembark through the Midfield Concourse each year.

In keeping with AAHK’s commitment to environmental

responsibility, the Midfield Concourse will be designed


Baggage Handling SystemDuring the year, we completed an upgrade of the baggage

handling and sorting system that increased its capacity

from 8,000 to 16,000 bags per hour. Undertaken as part

of a HK$4.5 billion capacity enhancement project, the

upgrade included the installation of 42 new vertical sorter

and merge units and 20 new scanners that read radio

frequency identification (“RFID”) baggage tags. Twenty-

seven single-view X-ray machines were replaced with

multi-view models. And in July 2011, we will complete the

installation of an enhanced contingency system for the

computer that runs the baggage sorting system.

Bird Strike ManagementBecause they can cause damage to aircraft and potential

accidents with loss of human life, bird strikes pose a

significant safety threat. HKIA’s bird control unit uses

habitat management, environmental hygiene and

recordkeeping and analysis to mitigate this threat.

In 2010/11, we continued to use bird distress calls and

ultrasonic repellers, which minimise the potential for

bird strikes when aircraft are taking off and landing.

We maintain a bird hazard reduction committee, which

includes an ornithologist as well as representatives from

a variety of AAHK’s departments. Vegetation on both

the airside and landside portions of the Airport Island is

monitored and groomed to minimise its attractiveness

to birds.

Control programmes on the airside and landside of the airport help AAHK minimise bird strikes.

New Destination Incentive ArrangementOn 1 January 2011, the New Destination Incentive

Arrangement was extended for another year. In calendar

2010, 21 airlines took advantage of this programme —

which offers a 75% rebate on landing charges for flights

between Hong Kong and a new destination for the first

six months and a 25% rebate for the following six months

— adding 14 new destinations to the network resulting

in a total of about 160 destinations being served from/

to HKIA.

Mainland Projects


Enhancing Our Links With the Mainland

The Mainland is a key source of passengers and cargo for Hong Kong International Airport (“HKIA”). In

fiscal 2010/11, we strengthened our ties with the Mainland and saw solid growth in our investments in

Hangzhou and Zhuhai.


Mainland Projects

A new 96,000-square-metre international

passenger terminal put into use at HXIA in July

New Terminal Building


Beijing Capital International AirportIn October 2010, Airport Authority Hong Kong (“AAHK”)

signed an agreement with Beijing Capital International

Airport Co., Ltd., that established a sister airports

relationship between HKIA and Beijing Capital International

Airport. The agreement will facilitate cooperation between

the two airports, which have exchanged management

expertise and jointly trained staff since 2002.

Hangzhou Xiaoshan International AirportAAHK acquired a 35% interest in Hangzhou Xiaoshan

International Airport (“HXIA”) in December 2006.

In calendar 2010, passenger volume at HXIA grew 14.2%,

to 17.1 millions, while cargo throughput increased

25.2%, to 283,000 tonnes. Air traffic movements rose

9.1% from 2009, to 146,000.

In July 2010, a new 96,000-square-metre international

passenger terminal with 20 parking bays entered service

at HXIA. Works to expand the domestic terminal and

build a second runway and related airfield facilities are

expected to be completed in 2012. Feasibility studies for

new supporting infrastructure, including a multi-storey car

park, cargo terminal and transportation centre, are under

way. Construction of a cargo hub for S.F. Express will

begin in 2011.

Shanghai Hongqiao International AirportIn 2009, AAHK formed a joint venture with Shanghai

Airport (Group) Co. Ltd. The new company – Shanghai

Hong Kong Airport Management Co., Ltd. – manages

Terminal 1, Terminal 2 and the East Ground Transportation

Centre at Shanghai Hongqiao International Airport, as

well as other passenger-related operations, including retail

services in the two terminals.

Hangzhou Xiaoshan International Airport opened a new international passenger terminal in July 2010.


At Zhuhai Airport, air traffic movements and passenger and cargo volumes continued to grow in 2010.

In March 2010, Terminal 2 at Hongqiao Airport opened.

The new terminal provided additional capacity for

handling the influx of travellers visiting Expo 2010

Shanghai China beginning in May 2010.

In September 2010, flights resumed between Hong Kong

and Hongqiao Airport. China Eastern Airlines, Shanghai

Airlines, Dragonair and Hong Kong Airlines now offer a

total of 28 flights per week between HKIA and Hongqiao

Airport, adding further convenience to travel between

Hong Kong and Shanghai.

Zhuhai AirportSince October 2006, Zhuhai Airport has been managed

by a joint venture between the Zhuhai Municipal

Government and AAHK.

Zhuhai Airport posted a robust performance in calendar 2010. Passenger volume grew 31.3% from 2009, to 1.8 million.

Cargo throughput increased 27.8%, to 17,600 tonnes, while air traffic movements rose 61.3%, to 37,700.

In addition to a stronger global economy, Zhuhai Airport benefited from the 8th China International Aviation & Aerospace

Exhibition, which was held in November 2010 at Zhuhai Airport. During the year, three new airlines began serving Zhuhai and

three additional carriers began using Zhuhai Airport for pilot training. The airport also benefited from activities at the Zhuhai

Aviation Industry Zone, which promotes private jet manufacturing, aircraft maintenance and repairs, and logistics services.

Terminal 2 at Shanghai Hongqiao International Airport opened in March 2010.



An organisation-wide commitment to corporate social responsibility shapes our day-to-day operations, long-term

plans and interactions with the community. Our goal is to make Hong Kong International Airport (“HKIA”) the

greenest airport in the world and to be among the top three environmental performers in Hong Kong.

Our Environmental CommitmentAirport Authority Hong Kong (“AAHK”) signed the Hong Kong General Chamber of Commerce’s Clean Air Charter

in 2007. Today – out of 619 signatories – we are one of 33 that have obtained third-party certification for honouring

our charter commitments.

In 2008, we endorsed the Aviation Industry Commitment to Action on Climate Change, a global initiative to mitigate

our industry’s environmental impact. We also signed the Environmental Protection Department’s Carbon Reduction

Charter and established a carbon footprint for the entire airport. Using this footprint as a baseline, in December 2010

we led an airport-wide pledge to cut carbon emissions by 25% per workload unit (defined as one passenger or 100

kilogrammes of cargo) by 2015. To achieve this goal, we developed over 300 carbon reduction initiatives covering all

major buildings and facilities at HKIA.

A Good Corporate Citizen


We also share our environmental know-how with the airport community. In August 2010 we organised a visit to CLP

Hong Kong Limited’s Energy Efficiency Exhibition Centre, where companies and government departments operating at

the airport were introduced to the latest energy saving appliances and lighting technology. In June 2010, we hosted 40

participants from over 20 organisations at a carbon action plan workshop, where they learned how to formulate effective

carbon reduction programmes. The workshop is part of a campaign that helped 37 businesses operating at HKIA

complete their own carbon audits. In September 2010, we supplemented this effort with a carbon audit refresher course

for our business partners.


HKIA pledges to reduce 25% carbon

emissions by 2015

25% Carbon Reduction

A tonne of CO2 (carbon dioxide) is the measuring unit commonly used by the environmental community to express carbon emissions.


service provider to deploy LPG-fuelled vehicles at HKIA.

In January 2011, we installed three-phase, 380-volt,

50-hertz power at Gate 66 to facilitate the trial of a

hybrid cargo loader.

Efficient public transportation networks help to minimise

HKIA’s environmental impact. More than 60% of

passengers and over 90% of airport staff take the Airport

Express train, buses or coaches to and from HKIA.

Since 2004, AAHK has operated air-quality monitoring

stations on the north and south sides of the airport and

on Lung Kwu Chau, an island north of HKIA. Data from

the stations, which are tracked and analysed by scientists

at the Hong Kong University of Science and Technology,

help us understand the airport’s contribution to local air

quality and focus our emissions reduction efforts.

Emissions ReductionTo reduce greenhouse gases and air pollution, we promote

the use of electric, hybrid and liquefied petroleum gas–

powered vehicles at HKIA. The airport has one of Hong

Kong’s largest fleets of electric vehicles and ground service

equipment, which now comprises 236 electric, 22 liquefied

petroleum gas (“LPG”), nine hybrid and 114 biodiesel

units. To facilitate the use of environmentally friendly

vehicles, we installed electric-vehicle (“EV”) charging

stations and opened an LPG filling station on the airside

last year. And in June 2010, we added our first public EV

charging station, in Car Park 4.

In June 2008, we banned idling engines on the airside. All

of AAHK’s diesel vehicles now use B5 biodiesel, a mixture

of 95% conventional diesel and 5% biodiesel made from

used cooking oil. Since 2008, we have facilitated the

collection of used cooking oil at the airport, more than

150,000 litres of which has been recycled into biodiesel.

AAHK also reduces emissions by providing fixed ground

power (“FGP”) and pre-conditioned air (“PCA”) systems,

which eliminate the need for aircraft to use their

emission-intensive auxiliary power units while parked.

Currently, about 75% of the passenger flights departing

from the airport use FGP, which is available at over

100 parking stands, and PCA, which is available at all

bridge-served stands. By 2014, FGP and PCA will be

available to over 90% of the flights departing from HKIA.

The efficiency of the FGP system will also be improved

by 2014, reducing local air pollution and saving over

1,000 tonnes of carbon emissions annually. A new,

low global-warming potential refrigerant will be

adopted in the PCA system, further reducing HKIA’s

environmental footprint.

We also encourage our customers and business partners

to make their fleets greener. In September 2010, Jardine

Air Terminal Services Limited became the first ground


Energy SavingsAAHK uses advanced computer technology to track and

manage the airport’s electricity consumption. By carefully

analysing the data from these systems, we minimise

energy use while maintaining high levels of service, safety

and efficiency.

Lighting, which represents about 10% of HKIA’s

electricity use, is an area where new technologies can

yield significant energy savings. We are now replacing

conventional lights with energy efficient light-emitting

diode (“LED”) models. By 2013, we plan to install about

81,000 LED lights, representing about 60% of the total

in the passenger terminals, for an annual saving of

approximately 13.8 million kilowatt hours (kWh) or 7,730

tonnes of carbon emissions. We also changed more than

1,000 T8 fluorescent tubes in the car parks to T5 lamps,

and use timers and photo sensors to maintain

appropriate lighting levels.

During the year, we began reconfiguring the air-conditioning

systems in Terminal 1 (“T1”) and the Ground Transportation

Centre, and in Terminal 2 (“T2”), HKIA Tower and the

Airport World Trade Centre, so chillers of various sizes can

be operated more effectively. In addition to enhancing

operational flexibility and reliability, this change will save 5

million kWh or 2,800 tonnes of carbon emissions annually.

This year, we also replaced 20 travelators in T1 with energy

efficient, dual-speed models and installed the airport’s first

green roof. In 2011/12, we will begin trials of street lights

powered by photovoltaic cells and conduct a feasibility

study on the use of wind turbines at the airport.

Recycling Water and WasteSince 2006/07, we have recycled more than 5,400 tonnes

of waste, including cardboard, paper, plastic, metal, glass,

food waste, waste cooking oil, tyres, lubricating oil,

fluorescent tubes, wooden pallets and other materials.

This year, we recycled 1,668 tonnes of waste, an increase

of approximately 50% from 2009/10.

We installed a second food composter in December 2010,

increasing our processing capacity to about 12 tonnes of

food waste each month. Food scraps are collected from

restaurants at HKIA, treated in the composters and used

as soil conditioner for airport landscaping. In March 2011,

we started a programme to send food waste from the

airport’s catering outlets to an off-site plant, where it is

converted into fish food and animal feed.

In 2011/12, we plan to eliminate the use of disposable

crockery and cutlery in airport food and beverage outlets,

further reducing our solid waste output.

Since December 2010, the Marine Cargo Terminal has

reused all of the wooden pallets collected at HKIA. This

year, we began using asphalt waste in road resurfacing

projects on a trial basis. The trial was successful and we

plan to use asphalt waste in the base and sub-base

courses of the airfield pavement in the midfield.

During the year, AAHK joined the Conscientious Recycling

Charter organised by Friends of the Earth (HK). We used

this scheme, which reuses or recycles electronic

equipment through Caritas Hong Kong and other

environmentally sound channels, to dispose of more than

250 pieces of computer equipment.

In addition to internal programmes, we work with

stakeholders to increase the amount of waste that is

recycled at the airport. In September 2010, AAHK hosted

a day-long waste management and green purchasing

seminar for businesses operating at HKIA. In February

2011, we launched a pilot programme to boost the


The airport’s first green roof was installed in 2010/11.


amount of waste that is recycled from arriving passenger

aircraft. We also raised the number of recycling bins in T1

and T2 from about 60 last year to 70 in 2010/11.

AAHK strives to make HKIA a water-neutral airport.

Rainwater and seawater are used in HKIA’s air-

conditioning system and seawater is used to flush toilets.

We recover and treat waste water from restaurants, aircraft

catering and cleaning operations, as well as bathroom

sinks. In 2010/11, our treatment plant processed 1.4 million

cubic metres of grey water, which meets all of the airport’s

landscape irrigation needs. In 2011/12, we will install a new

membrane biological reactor in the plant to enhance the

quality of the treated water.

Local Ecology and GreeningIn 2010/11, we completed our fourth, year-long

programme to monitor the airport’s impact on the marine

environment. The results indicate that cooling water and

storm drain discharges from HKIA are not having an

adverse impact on water quality near the airport.

HKIA is a very green place. The airside has 2.6 million

square metres, or about 320 football fields, of grass and

trees, while the landside has 796,000 square metres of

vegetation. There are over 700,000 shrubs and trees on

the Airport Island and we are now studying the feasibility

of expanding the airport’s landscaped area by 130,000

square metres.

Environmental AwardsDuring the year, our efforts were recognised at the Hong

Kong Awards for Environmental Excellence. In May 2010,

we received the bronze award in the public sector category

and were awarded a “Class of Good” IAQwi$e label for

the air quality in T1 and T2. In September 2010, we

received a “Class of Excellence” Energywi$e label for

conservation efforts in T1 and a “Carbon ‘Less’ Certificate”

for achieving a verifiable, absolute cut in the carbon

emissions in the passenger terminals and HKIA Tower.

In December 2010, we were awarded a silver Purchaswi$e

award by the Green Council in the Hong Kong Green

Awards. In January 2011, we were the first runner-up in

electricity conservation and energy-efficient driving

competitions organised by Friends of the Earth (HK).

Donation boxes in the passenger terminals collect money for charity.

AAHK supports a variety of environmental events, including the charity walk.

Outreach programmes, such as this spring dinner for elderly residents of Tung Chung, underpin AAHK’s corporate social responsibility activities.


Community OutreachCommunity involvement is central to our corporate

social responsibility activities. During the year, our

volunteers shared their expertise and participated in

events that raised awareness and funds for several

environmental causes.

In 2010/11, we continued our support for the Business

Environment Council’s Corporate Sustainability For

Schools programme, which teaches secondary school

students about best environmental practices. And we

co-organised the Hong Chi Association’s organic farming

competition for primary and secondary schools.

AAHK staff took part in a variety of environmental events

during the year, including Greenpeace’s Car Free Day;

the Conservancy Association’s Walk for the Environment

2010; the Community Chest Green Day 2010; the Green

Power Hike; WWF Hong Kong’s Walk for Nature 2010;

International Coastal Cleanup 2010; and Hong Kong No

Air-con Night.

In addition, AAHK volunteers supported non-

environmental fund-raising events, like Love Teeth Day,

which promotes oral hygiene, and the Community Chest’s

Skip Lunch Day, a benefit for homeless people.

During the year, we also cooperated with the

Neighbourhood Advice-Action Council – Tung Chung

Integrated Services Centre to collect toys and books for

children of disadvantaged families. With the Labour

Department, we co-organised the Hong Kong

International Airport Job Fair at Tung Chung, which

highlighted 800 job openings at the airport. And we gave

airport tours to 150 disabled children and young people.

To care for our neighbours, AAHK staff and the Hong

Kong Sheng Kung Hui Tung Chung Integrated Services

developed a programme to reach out to the elderly in

Tung Chung with regular visits.

Our staff raised HK$174,000 for victims of the earthquake

that struck Yushu County in Qinghai, China, in April

2010. AAHK matched these funds, bringing the total

donation to HK$348,000.

In 2010/11, our efforts were recognised with a Caring

Organisation award from the Hong Kong Council of

Social Service. This was the sixth consecutive year that

AAHK has received this honour.

Looking Forward


Planning for the FutureBy delivering safe, efficient and reliable aviation services, Hong Kong International Airport (“HKIA”) directly and

indirectly supports the four pillars of Hong Kong’s economy: financial services; trading and logistics; tourism; and

producer and professional services. HKIA also provides about 65,000 jobs on the Airport Island, contributes to

Hong Kong’s economy and underpins our city’s status as an international and regional aviation hub.

HKIA Master Plan 2030 To ensure that HKIA will have adequate facilities to meet forecast air traffic demand, Airport Authority Hong Kong

(“AAHK”) prepares a 20-year master plan that is updated every five years. The latest version, HKIA Master Plan 2030,

will be released in June 2011.


Looking Forward

HKIA Master Plan 2030 will ensure we have the facilities needed to meet long-term demand.


According to HKIA Master Plan 2030, the rapidly growing

demand in both passengers and cargo services will exceed

the capacity of HKIA’s two runways and associated

terminal and apron facilities, including Phase 1 of the new

midfield development that is to be completed in 2015.

We believe that critical decisions about HKIA’s strategic

direction and development must be made now because

considerable time will be needed to complete studies and

planning, and obtain regulatory approvals before works

on new facilities can begin.

Considering the long-term importance of HKIA to Hong

Kong, we will roll out a three-month public consultation

exercise on HKIA Master Plan 2030. Using multimedia,

roving exhibitions, open forums and a variety of

communications channels, AAHK hopes to reach all

sectors of the community to collect the public’s and

stakeholders’ views on this important subject.

Midfield DevelopmentIn January 2011, we announced Phase 1 of a development

plan for the midfield. The plan includes a new passenger

concourse designed with environmentally friendly features

and energy saving and 20 aircraft parking stands, which

will ultimately enable about 10 million passengers a year to

embark and disembark aircraft using air bridges at this

concourse, a new cross-field taxiway and an extension to

the automated people mover that will connect the new

concourse to Terminal 1 (“T1”). Construction will begin in

the third quarter of 2011 and the project is expected to

generate 2,000 job opportunities. Phase 1 development is

targeted for completion in 2015.

Rejuvenation ProgrammeWhile we are planning for the future, we are also

investing in the existing facilities to ensure that the airport

continues to operate efficiently and reliably. In fiscal

2011/12, we will embark on a three-year, HK$495 million

rejuvenation programme to overhaul some of our utilities,

airfield ground lighting, electrical and mechanical, loading

bridge and baggage handling systems. In addition, HKIA’s

public bathrooms will be renovated and the automated

people mover and apron bus facilities will be refurbished.

We are sure that with these rejuvenation initiatives, we

will be able to increase our service level and hence

customer satisfaction.

HKIA Master Plan 2030 will be released

in June 2011 to consult the general public

MP2030

Both e-learning and classroom-based development programmes nurture our talents.


New InfrastructureAAHK is preparing to connect HKIA to the new

infrastructure that is being built nearby, including the

Tuen Mun–Chek Lap Kok Link, the Hong Kong–Zhuhai–

Macao Bridge and the Hong Kong Boundary Crossing

Facilities. We also support a government-led study on a

proposed rail link connecting the airport to Shenzhen

International Airport. With these new facilities on or near

the Airport Island, HKIA will play an even more important

role for Hong Kong and also for the Pearl River Delta.

Airlines and DestinationsAs of 31 March 2011, more than 95 airlines operated

from HKIA. These carriers serve about 160 destinations,

including more than 45 cities on the Mainland.

Six new passenger airlines – Indonesia AirAsia, Jeju Air,

JuneYao Airlines, Sichuan Airlines, Spring Airlines and

South East Asian Airlines – and one cargo airline, Etihad

Airways, began serving HKIA in 2010/11.

Developing Our PeoplePeople are one of the important assets of AAHK.

We use a planned and integrated approach to learning

for the continuous development of the capabilities of

all employees. To ensure that they have the skills and

competencies to meet business needs, we have

developed and implemented a core competence model

and performance management system as part of our

human resource strategy. During the year, the second

phase of a succession planning framework, with

integrated assessment and personal development plans,

was completed, providing important and holistic data on

organisational growth capacity.

Development programmes for management trainees

and graduate trainees continue to nurture our home-

grown capabilities. Eighty in-house training and

development classes were provided throughout the

year to ensure that our 1,100 employees understand our

business goals and values and have the skills and

knowledge to meet changing business and operational

requirements. This was supplemented by over 70

e-learning courses, covering a range of technical skills

and airport management competencies.

Financial Summary (For the year ended 31 March)

(in HK$ million) 2010/11 2009/10 ±% 1

Turnover 10,583 9,015 +17.4%Operating expenses before depreciation and amortisation 3,570 3,402 +4.9%EBITDA 7,013 5,613 +24.9%Depreciation and amortisation 2,207 2,191 +0.7%Interest and finance costs 195 178 +9.6%Share of profits less losses of jointly controlled entities 239 177 +35.0%Profit before taxation 4,850 3,421 +41.8%Income tax 812 580 +40.0%Profit for the year 4,038 2,841 +42.1%Profit attributable to equity shareholder 4,035 2,844 +41.9%Dividend declared 3,100 2,300 +34.8%Special dividend declared - 2,200

Key Financial Ratios Return on equity 11.1% 7.8% Total debt/capital ratio 16% 18%

Key Traffic Summary2 Passenger traffic3 (millions of passengers) 51.5 46.9 +9.7%Cargo throughput4 (millions of tonnes) 4.2 3.6 +16.5%Air traffic movements (thousands) 316 280 +12.9%

1 Subject to rounding differences.

2 “Key Traffic Summary” is based on the Airport Authority Hong Kong’s traffic data of Hong Kong International Airport only.

3 “Passenger traffic” includes originating, terminating, transfer and transit passengers. Transfer and transit passengers are counted twice.

4 “Cargo throughput” includes originating, terminating and transshipment cargo. Transshipment cargo is counted twice. Airmail is excluded.

OverviewIn fiscal 2010/11, ended 31 March 2011, Hong Kong

International Airport (“HKIA”) set three new records.

Passenger volume increased 9.7%, to 51.5 million, cargo

throughput rose 16.5%, to 4.2 million tonnes, while air

traffic movements grew 12.9%, to 316,000. This solid

growth, coupled with continued financial discipline,

helped Airport Authority Hong Kong (“AAHK”) deliver

an outstanding financial performance in 2010/11. Profit

attributable to equity shareholder was HK$4,035 million

(2009/10: HK$2,844 million), a 41.9% increase from last

year and more than double the figure for 2006/07.

The surge in profit was driven by record revenues and

complemented by a well-managed operating cost base.

While turnover rose 17.4%, operating expenses grew

just 4.9%. As a result, the AAHK’s earnings before

interest, taxes, depreciation and amortisation (“EBITDA”)

rose 24.9% to a record HK$7,013 million (2009/10:

HK$5,613 million). Operating margin increased to

66.3%, from 62.3% last year.


Financial Review

Return on equity increased to 11.1%, from 7.8% last

year. Part of the increase was due to a more efficient

capital structure after the payment of regular and

special dividends to the Hong Kong SAR Government

in July 2010.

TurnoverTurnover rose 17.4%, to HK$10,583 million (2009/10:

HK$9,015 million), primarily due to a rise in air traffic,

increased revenue from retail licences and advertising

and the full-year operation of new facilities, including

the North Satellite Concourse (“NSC”) and SkyPier.

Airport and security charges increased 18.8%, to

HK$4,072 million (2009/10: HK$3,429 million),

representing 38.5% of total turnover – about the same

proportion as in 2009/10. Growth in this category was

fuelled by higher passenger numbers and cargo

throughput as well as the end of a relief package for

airlines, which included a 10% discount on aircraft

landing and parking charges allowed until 31 March

2010. Excluding the impact of the relief package,

revenue from airport and security charges grew 11.0%,

in 2010/11.

AAHK continues to encourage and support airlines

launching new air services. The New Destination

Incentive Arrangement, which offers temporary rebates

on landing charges associated with new routes, has

been extended until the end of 2011. During the year,

the total reduction in landing charges given to airlines

under this arrangement amounted to about HK$50

million (2009/10: HK$36 million).

Revenue from airside support services franchises rose

18.4%, to HK$1,695 million (2009/10: HK$1,432

million), benefiting from higher cargo and aviation fuel

throughput. Franchise revenues from other airside

support activities, including aircraft catering and

maintenance services, grew in line with higher traffic

levels. Part of the revenue growth arose from the

increase in facility payments of our aviation fuel system,

which also benefited from the increase in traffic.


Operating ExpensesAAHK contains the growth of operating expenses

through careful scrutiny in the annual budgeting

process; vigorous reviews before funds are committed;

repackaging service contracts; balanced use of internal

resources and outsourced services and continuous

process improvements. These measures helped us

minimise costs during the global financial crisis and

contain the growth of expenses while we expanded our

operations. The completion of the NSC and SkyPier,

which officially opened in January 2010, brought extra

capacity but also increased operating costs. In 2010/11,

operating expenses before depreciation and amortisation

increased 4.9%, to HK$3,570 million (2009/10:

HK$3,402 million).

Group staff costs and related expenses increased 2.6%,

to HK$1,188 million (2009/10: HK$1,158 million),

mainly due to salary adjustments for existing employees,

in line with the current labour market and inflation,

along with increased headcount to handle higher

traffic levels.

Retail licences and advertising revenue grew 22.8%, to

HK$3,583 million (2009/10: HK$2,918 million), mainly

attributable to higher passenger volumes and the rising

spending power of Mainland visitors. This category

represented 33.8% of total turnover and contributed the

largest increase in revenue this year. Retail businesses

performed well, driven by sales of duty free merchandise,

perfumes and cosmetics, luxury branded items, airside

general merchandise and commercial catering. A strong

recovery of the advertising business also contributed to

the revenue increase in 2010/11.

Other terminal commercial revenue fell 4.3%, to

HK$794 million (2009/10: HK$830 million), mainly

attributable to lower rental rates in the terminal leasing

business, in line with the adjustment mechanism, which

was largely based on the movement of rental prices of

preceding years. This decrease was partially offset by

higher revenue from SkyPier, which experienced strong

growth in cross-boundary traffic in 2010/11.


Financial Review

Repairs and maintenance expenses rose 16.5%, to

HK$515 million (2009/10: HK$442 million), as

refurbishment works were carried out on the airfield and

terminals to ensure safe and reliable operation amidst

increased traffic. The inclusion of maintenance costs for

the NSC and SkyPier also contributed to the increase.

Operational contracted services expenses grew 6.5%, to

HK$362 million (2009/10: HK$340 million). This mainly

reflected increased activities to handle higher traffic levels

and the NSC and SkyPier’s first full year of operation.

Government services increased 2.0%, to HK$750 million

(2009/10: HK$735 million), reflecting higher costs

for air traffic control services following the increase in

aircraft movements.

Occupancy expenses were HK$209 million (2009/10:

HK$195 million), an increase of 7.2%. This was mainly

attributable to higher electricity tariffs and increased

power consumption due to the opening of the new

facilities.

Depreciation and amortisation slightly increased 0.7%, to HK$2,207 million (2009/10: HK$2,191 million).

Mainland Airports Buoyed by the Mainland’s continued economic

expansion and Expo 2010 Shanghai China, AAHK’s

share of profits from Mainland airports showed steady

improvement in 2010/11.

In calendar 2010, Hangzhou Xiaoshan International

Airport (HXIA) recorded solid growth in passenger

traffic and cargo throughput, which increased 14.2%

and 25.2%, respectively. Our 35.0% share of HXIA’s

profits was HK$240 million (2009/10: HK$177 million),

an increase of 35.6%, largely due to profit growth and

higher airport construction fee subsidies that HXIA

received from the Central Government.

At Zhuhai Airport, which is managed by a joint venture

between AAHK and the Zhuhai Municipal People’s

Government, all traffic categories including passenger

traffic, cargo throughput and air traffic movements

recorded remarkable double-digit growth. Zhuhai

Airport broke even and achieved a HK$0.6 million

profit in this financial year. AAHK’s share of the profit

was HK$0.3 million, versus a loss of HK$6.1 million

in 2009/10.

AAHK’s joint venture with Shanghai Airport (Group)

Company Limited, which runs several businesses at

Shanghai Hongqiao International Airport, reported

a small loss in its first year of operation.

Balance Sheet AAHK’s balance sheet remains strong and well

capitalised. As at 31 March 2011, AAHK’s net assets

decreased 0.8%, to HK$36,382 million (2009/10:

HK$36,689 million), mainly attributable to a 1.8%

decrease in total assets, to HK$50,430 million

(2009/10: HK$51,370 million), and a 4.3% decrease

in total liabilities, to HK$14,048 million (2009/10:

HK$14,681 million).


Cash FlowIn line with the strong growth in profit, net cash generated

from operating activities increased from HK$5,477 million

in 2009/10 to HK$6,776 million this year.

FinancingAAHK’s total borrowings amounted to HK$7,086 million

at 31 March 2011 (2009/10: HK$8,193 million). Total

borrowings comprised unsecured bank loans and

medium- to long-term fixed-rate notes and bonds.

AAHK’s major financing activity during the year was

the arrangement of a five-year, HK$5.0 billion revolving

credit facility, which was signed in June 2010 with a

group of 14 local and international banks. The loan

was used to refinance maturing debt and meet working

capital requirements. The favourable terms of the loan

reflect AAHK’s sound capital position and strong

credit standing.

Fixed assets decreased 3.2%, to HK$44,609 million

(2009/10: HK$46,079 million), as a result of lower capital

expenditure following the completion of the HK$4.5

billion enhancement programme during the year. Capital

expenditure was HK$739 million, (2009/10: HK$1,300

million), the majority of which relates to the enhancement

of the baggage handling system, design work for the

midfield development and expansion and improvement of

other facilities and systems. Intangible assets were at

HK$254 million (2009/10: HK$259 million), representing

the amortised cost of the management rights to Zhuhai

Airport and its operating assets for a period of 20 years,

starting in 2006. Interests in jointly controlled entities of

HK$3,181 million (2009/10: HK$2,808 million) included

AAHK’s effective interest in the net assets of HXIA and

the joint venture with Shanghai Airport (Group) Company

Limited, plus associated goodwill. Other investments of

HK$52 million (2009/10: HK$136 million) represented

AAHK’s effective interest in the AsiaWorld-Expo exhibition

centre. Trade and other receivables increased 9.3%, to

HK$1,290 million (2009/10: HK$1,180 million), arising

mainly from higher revenue receivables at year-end.

On the liability side, total borrowings outstanding

decreased 13.5%, to HK$7,086 million (2009/10:

HK$8,193 million), as surplus cash was used to repay

debts. This reduction was partially offset by an 18.5%

increase in current and deferred tax liabilities, to

HK$3,729 million (2009/10: HK$3,147 million), of which

HK$498 million related to current tax.

DividendA dividend of HK$3,100 million (2009/10: HK$2,300

million plus a special dividend of HK$2,200 million),

payable to the Hong Kong SAR Government, was

declared by the Board subsequent to the financial

year-end. Our eighth such payment, the dividend

represents about 82% of AAHK’s distributable profit for

the year and reflects management’s confidence in

HKIA’s profit growth.


Financial Review

In July 2010, AAHK established a US$1.0 billion

medium-term note programme, which allows AAHK to

access capital markets when needed.

AAHK continues to be one of the highest-rated

corporations in Hong Kong. In December 2010,

Standard & Poor’s Corp. upgraded AAHK’s long-term

local and foreign currency debt ratings to AAA. The

credit rating is the same as that assigned to the Hong

Kong SAR Government.

Financial Risk ManagementAAHK manages its financial risks with a variety of

instruments and techniques, including natural hedges

achieved by spreading its loan portfolio over different

rollover and maturity dates. Financial instruments such

as interest rate swaps and forward contracts are also

used to hedge AAHK’s risks. In accordance with

approved policy, we have adopted measures to fix

the interest rate of a portion of total borrowings in

order to minimise the impact of interest rate

fluctuations on earnings.

Following the 2003 acquisition of the aviation fuel

supply system, which generates revenue in United States

dollars, AAHK hedged its currency exposure with the

appropriate amount of US dollar borrowings, thereby

neutralising the risk of exchange rate fluctuations on the

revenue stream. In addition, we have executed forward

contracts to fix the exchange rate for the conversion of

Hong Kong dollars into US dollars to control the risk of

exchange rate fluctuations on a portion of the US dollar

borrowings. Since the latter part of 2006, AAHK has also

been exposed to Chinese renminbi movements as a

result of its investment in Mainland airports. This

exposure has resulted in significant exchange gains on

the balance sheet owing to the strengthening renminbi.

Apart from the above, AAHK has minimal currency

exposure because revenue and costs at HKIA are largely

denominated in Hong Kong dollars.


OutlookTraffic is expected to continue to grow, albeit at a

slower pace, driven by the continued economic

expansion of the Mainland and global economies.

With the faster than expected recovery in 2010/11, our

principal facilities, such as aircraft parking stands, are

approaching capacity. Following the completion of the

HK$4.5 billion enhancement programme that began in

2005/06, our main focus in the next phase of airport

development will be to plan and provide new facilities

and services to meet growing demand, while upholding

our core values and maintaining financial discipline.

Construction of the Phase 1 of the midfield development

will start in the third quarter of 2011. This project, which

will be completed in 2015, includes a new Midfield

Concourse with 20 parking stands, a new cross-field

taxiway and the extension of the existing automated

people mover to the Midfield Concourse.

In the meantime, we will undertake smaller projects to

optimise the use of existing space and facilitate the

smooth movement of passengers, cargo and aircraft. We

will also continue to refurbish and maintain the airport,

to handle traffic increases and ageing facilities. In the

near term, earnings growth will moderate, due to slower

traffic growth, the return of inflation and a higher base

in 2010/11.

In the medium term, we will increase commercial

revenues by enlarging the airport’s retail space, building

new facilities and supporting our business partners as

they expand and add new services.

Meanwhile, the public consultation for HKIA Master

Plan 2030, a comprehensive road map for the airport’s

development over the next two decades, will be launched

in June 2011. Through continuous cooperation with the

Hong Kong SAR Government on key infrastructure

projects, such as the Hong Kong – Zhuhai – Macao Bridge,

we believe the accessibility of HKIA will be greatly improved

and its role as a premier international and regional aviation

centre will be enhanced.

With financial discipline, innovation and timely

development, HKIA will continue to bring value to its

stakeholders and generate economic benefits for Hong

Kong and the entire Pearl River Delta.


Financial Review

Table of Contents

Report of the Members of the Board 66

Independent Auditor’s Report 69

Consolidated Income Statement 70

Consolidated Statement of Comprehensive Income 71

Consolidated Balance Sheet 72

Consolidated Statement of Changes in Equity 73

Consolidated Cash Flow Statement 74

Notes to the Financial Statements

1. Principal Activities of the Authority 76

2. Statement of Compliance and Basis of Preparation of the Financial Statements 76

3. Operating Profit before Interest and Finance Costs 77

4. Staff Costs and Related Expenses 77

5. Finance Costs 78

6. Taxation 78

7. Remuneration of the Members of the Board and Executive Directors and

Individuals with the Highest Emoluments 80

8. Segmental Information 82

9. Fixed Assets 83

10. Intangible Asset 85

11. Investments in Subsidiaries 85

12. Interests in Jointly Controlled Entities 86

13. Other Investments 88

14. Trade and Other Receivables 88

15. Employee Retirement Benefits 90

16. Cash and Bank Balances 92

17. Trade and Other Payables 92

18. Interest-bearing Borrowings 92

19. Deferred Income 93

20. Capital, Reserves and Dividends 94

21. Financial Risk Management and Fair Values 95

22. Outstanding Commitments 100

23. Contingent Liabilities 100

24. Material Related Party Transactions 101

25. Immediate and Ultimate Controlling Party 102

26. Accounting Judgements and Estimates 102

27. Non-Adjusting Post Balance Sheet Events 103

28. Summary of Significant Accounting Policies 104

29. Possible Impact of Amendments, New Standards and Interpretations Issued but

Not Yet Effective for the Year Ended 31 March 2011 114

Five-year Financial and Operational Summary 115


Report of the Members of the BoardFinancial year ended 31 March 2011

The Members of the Board have pleasure in submitting the annual report of the Airport Authority (“AA”) together with the audited

consolidated financial statements for the year ended 31 March 2011.

Principal ActivitiesPursuant to the Airport Authority Ordinance (Cap. 483) (“the Ordinance”) and the objective of maintaining Hong Kong’s status as

a centre of international and regional aviation, the AA is responsible for the provision, operation, development and maintenance

of the Hong Kong International Airport (“HKIA”) situated at Chek Lap Kok, Lantau, Hong Kong and the provision of facilities,

amenities and services at, as regards or in relation to the HKIA. The AA may also engage in airport-related activities in trade,

commerce and industry at or from any places in the Airport Island, and the airport-related activities as permitted by the Airport

Authority (Permitted Airport-related Activities) Order (Cap. 483E). The AA is required under the Ordinance to conduct its business

according to prudent commercial principles.

The principal activities and other particulars of the AA’s subsidiaries are set out in note 11 to the financial statements.

Financial StatementsThe profit of the group for the year ended 31 March 2011 and the state of the group’s affairs as at that date are set out in the

financial statements on pages 70 to 114.

DividendThe Ordinance provides that the AA may pay dividends on its shares and that the Financial Secretary may, after taking into account

the financial position of the AA and its subsidiaries, direct the AA to pay dividends out of the distributable profits of the AA. A final

dividend of HK$2,300 million or HK$7,504.57 per share and a special dividend of HK$2,200 million or HK$7,178.28 per share

was declared and paid for the year 2009/10. The Board now recommends the payment of a final dividend of HK$3,100 million or

HK$10,114.85 per share for the year ended 31 March 2011.

Transfer to ReservesThe group’s profit attributable to equity shareholder of HK$4,035 million (2009/10: HK$2,844 million) has been transferred to

reserves. Other movements in reserves are set out in the Consolidated Statement of Changes in Equity.

Fixed AssetsMovements in fixed assets during the year are set out in note 9 to the financial statements.

Capitalised InterestInterest amounting to HK$17 million (2009/10: HK$59 million) was capitalised by the group during the year as set out in note 5 to

the financial statements.

Bank Loans and Other BorrowingsParticulars of bank loans and other borrowings of the group as at 31 March 2011 are set out in note 18 to the financial statements.

Financial SummaryA summary of the financial results and the assets and liabilities of the group for the last five financial years is set out on page 115

of the annual report.


Share CapitalUnder the terms of the Ordinance, the AA may only issue shares to the Government of the Hong Kong Special Administrative

Region of the People’s Republic of China (“the Hong Kong SAR Government”) on behalf of which all shares are held by the

Financial Secretary Incorporated. No shares were issued or cancelled during the year ended 31 March 2011.

DonationsDonations made during the year amounted to HK$918,000 (2009/10: HK$820,000) which were funded partly from the sales of

“lost & found” items at the airport.

Major Customers and SuppliersThe information in respect of the group’s sales and purchases attributable to the major customers and suppliers respectively during

the financial year is as follows:

Percentage of the group’s total

Sales Purchases

The largest customer 25%

Top five customers 48%

The largest supplier 44%

Top five suppliers 55%

The largest supplier is the Hong Kong SAR Government which is the sole shareholder of the AA.

Purchases are exclusive of supplies of capital nature.

Going ConcernThe financial statements on pages 70 to 114 have been prepared on a going concern basis. The Board has approved the AA’s

budget for 2011/12 and the business plan and financial plan for 2011/12 to 2015/16 and is satisfied that the AA has sufficient

resources to continue as a going concern for the foreseeable future.

Retirement SchemesDetails with regard to the AA’s retirement schemes are set out in note 15 to the financial statements. The administration of the

retirement schemes and the AA’s contributions thereto are reviewed periodically with reference to reports of the investment

manager of the schemes and independent actuaries.

Corporate GovernancePrincipal corporate governance practices adopted by the AA are set out in the Corporate Governance section on pages 16 to 27 of

the annual report.

EmployeesAs of 31 March 2011, the AA, excluding its subsidiaries, had a staff force of 1,083 (31 March 2010: 1,088). The AA has developed

human resources policies to ensure that the pay level of its employees are competitive and that employees are rewarded according

to their performance within the framework of the AA’s salary and performance awards system. To further strengthen the

underlying principle of pay-for-performance, a Variable Compensation Scheme was introduced in April 2002. The Scheme was

fine-tuned in 2008.


Report of the Members of the Board

Members of the Board and Executive DirectorsMembers of the Board and Executive Directors at the date of this report are set out on pages 12 to 14 of the annual report.

Mr He Guangbei, who had been a Board Member since 27 June 2003, retired on 1 June 2010. Dr Lo Ka-shui, who has been on the

Board since 27 June 2003, and The Hon Vincent Fang Kang, Ir Edmund Leung Kwong-ho, Mr Andrew Liao Cheung-sing and

Mr Wilfred Wong Ying-wai, who have been Board Members since 1 June 2005, will retire on 1 June 2011.

Ms Anita Fung Yuen-mei was appointed to the Board on 1 June 2010 for a term of three years to 31 May 2013. Mr Edward Cheng

Wai-sun, The Hon Jeffrey Lam Kin-fung, The Hon Miriam Lau Kin-yee, Mr Lee Shing-see, Ms Caroline Mak Sui-king and Mr Albert

Wong Kwai-huen have been appointed to the Board for a term of three years from 1 June 2011 to 31 May 2014.

Dr the Hon Marvin Cheung Kin-tung, who has been the Chairman of the AA since 1 June 2008, has been re-appointed for a term

of three years from 1 June 2011 to 31 May 2014. Ir Dr The Hon Raymond Ho Chung-tai, Mr Benjamin Hung Pi-cheng, the Secretary

for Transport and Housing, the Secretary for Financial Services and the Treasury and Director-General of Civil Aviation have been

re-appointed as Members for a term of three years from 1 June 2011 to 31 May 2014.

Mr Raymond Lai Wing-chueng, former Executive Director, Finance and Investment, retired on 1 June 2010. Mr William Lo Chi-chung

was appointed as Executive Director, Finance on 9 July 2010. Mr Wilson Fung Wing-yip was appointed as Executive Director,

Corporate Development on 2 August 2010.

Interest of Members of the Board and Executive Directors in ContractsNo contracts of significance to which the AA or any of its subsidiaries was a party and in which a Member of the Board or an

Executive Director had a material interest subsisted at the end of the year or at any time during the year. At no time during the

year was the AA or any of its subsidiaries a party to any arrangements to enable any Member of the Board or Executive Director to

acquire benefits by means of acquisition of shares of the AA or of any body corporate.

Related Party TransactionsDetails of material related party transactions entered into or were ongoing during the year are set out in note 24 to the financial

statements.

Members’ Responsibilities for the Financial StatementsThe Members of the Board are responsible for the preparation of financial statements for each financial year which give a true and

fair view of the state of affairs of the group and of the results and cash flows for the period. In preparing the financial statements

for the year ended 31 March 2011, the Members of the Board have selected suitable accounting policies and applied them

consistently; made judgements and estimates that are prudent and reasonable; and have prepared the financial statements on a

going-concern basis. The Members are responsible for keeping proper accounting records which disclose with reasonable accuracy

at any time the financial position of the group.

AuditorIn accordance with Section 32 of the Ordinance, the Chief Executive of the HKSAR approved the appointment of KPMG as auditor

and they remain in office.

By order of the Board

H Y Shu

Secretary to the Board



Independent Auditor’s Report

To The Airport Authority(Incorporated in Hong Kong under the Airport Authority Ordinance)We have audited the consolidated financial statements of the Airport Authority (“the Authority”) and its subsidiaries (together

“the group”) set out on pages 70 to 114, which comprise the consolidated balance sheet as at 31 March 2011, the consolidated

income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the

consolidated cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory

information.

Board members’ responsibility for the consolidated financial statementsThe Board members of the Authority are responsible for the preparation of consolidated financial statements that give a true

and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public

Accountants and the Airport Authority Ordinance and for such internal control as the Board members determine is necessary to

enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or

error.

Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely

to you, as a body, in accordance with section 32 of the Airport Authority Ordinance and for no other purpose. We do not assume

responsibility towards or accept liability to any other person for the contents of this report.

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified

Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial

statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material

misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view

in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used

and the reasonableness of accounting estimates made by the Board members, as well as evaluating the overall presentation of the

consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the group as at 31 March

2011 and of the group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting

Standards and have been properly prepared in accordance with the Airport Authority Ordinance.

KPMG

Certified Public Accountants

8th Floor, Prince’s Building

10 Chater Road

Central, Hong Kong

23 May 2011


Consolidated Income StatementFor the year ended 31 March 2011 (Expressed in Hong Kong dollars)

$ million Note 2011 2010

Airport charges 3,239 2,671

Security charges 833 758

Aviation security services 158 149

Airside support services franchises 1,695 1,432

Retail licences and advertising revenue 3,583 2,918

Other terminal commercial revenue 794 830

Real estate revenue 183 182

Other income 98 75

Turnover 10,583 9,015

Staff costs and related expenses 4 (1,188) (1,158)

Repairs and maintenance 24(b) (515) (442)

Operational contracted services (362) (340)

Government services 24(a) (750) (735)

Government rent and rates (159) (154)

Occupancy expenses (209) (195)

Other operating expenses (387) (378)

Operating Expenses before Depreciation and Amortisation (3,570) (3,402)

Operating Profit before Depreciation and Amortisation 7,013 5,613

Depreciation and amortisation (2,207) (2,191)

Operating Profit before Interest and Finance Costs 3 4,806 3,422

Interest and finance costs:

Finance costs 5 (209) (196)

Interest income 14 18

(195) (178)

Share of profits less losses of jointly controlled entities 12 239 177

Profit before Taxation 4,850 3,421

Income tax 6(a) (812) (580)

Profit for the Year 4,038 2,841

Attributable to:

Equity shareholder of the Authority 4,035 2,844

Non-controlling interests 3 (3)


The notes on pages 76 to 114 form part of these financial statements. Details of dividends payable to equity shareholder of the

Authority attributable to the profit for the year are set out in note 20(b).


Consolidated Statement of Comprehensive IncomeFor the year ended 31 March 2011 (Expressed in Hong Kong dollars)

$ million 2011 2010


Other Comprehensive Income for the Year

Exchange differences on translation of financial statements of:

– a subsidiary in the People’s Republic of China (“the PRC”) 15 1

– jointly controlled entities in the PRC 134 8

149 9

Cash flow hedge: effective portion of changes in fair value 14 11

Less: Deferred tax – 2

14 13

Cash flow hedge: transfer from equity to profit or loss (7) (10)

Less: Deferred tax (1) (2)

(8) (12)

155 10

Total Comprehensive Income for the Year 4,193 2,851

Attributable to:

Equity shareholder of the Authority 4,183 2,854

Non-controlling interests 10 (3)

Total Comprehensive Income for the Year 4,193 2,851

The notes on pages 76 to 114 form part of these financial statements.


Consolidated Balance SheetAt 31 March 2011 (Expressed in Hong Kong dollars)


Non-current AssetsFixed assets

– Investment properties 9 257 268– Interest in leasehold land 9 8,406 8,638– Other property, plant and equipment 9 35,946 37,173

44,609 46,079Intangible asset 10 254 259Interests in jointly controlled entities 12 3,181 2,808Other investments 13 52 136Net defined benefit retirement plan asset 15 70 73Derivative financial assets 21(e) 79 76

48,245 49,431

Current AssetsStores and spares 54 48Trade and other receivables 14 1,290 1,180Derivative financial assets 21(e) 47 53Cash and bank balances 16 794 658

2,185 1,939

Current LiabilitiesTrade and other payables 17 (1,534) (1,533)Interest-bearing borrowings 18 (503) (2,480)Current taxation 6(c) (498) (1)Deferred income 19 (129) (121)Derivative financial liabilities 21(e) (2) (3)

(2,666) (4,138)

Net Current Liabilities (481) (2,199)

Total Assets Less Current Liabilities 47,764 47,232

Non-current LiabilitiesTrade and other payables 17 (265) (257)Interest-bearing borrowings 18 (6,583) (5,713)Deferred income 19 (1,300) (1,422)Derivative financial liabilities 21(e) (3) (5)Deferred tax liabilities 6(d) (3,231) (3,146)

(11,382) (10,543)

Net Assets 36,382 36,689

Capital and Reserves 20Share capital 30,648 30,648Reserves 5,522 5,839

Total equity attributable to equity shareholder of the Authority 36,170 36,487Non-controlling interests 212 202

Total Equity 36,382 36,689

Approved and authorised for issue on behalf of the Members of the Board on 23 May 2011.

Dr the Hon Marvin Cheung Kin-tung Mr Stanley Hui Hon-chung Mr William Lo Chi-chung

Chairman Chief Executive Officer Executive Director, Finance



Consolidated Statement of Changes in EquityFor the year ended 31 March 2011 (Expressed in Hong Kong dollars)

Attributable to Equity Shareholder of the Authority

$ million Note

Share

capital

Exchange

reserve

Capital

reserve

Hedging

reserve

Retained

profits Total

Non-

controlling

interests

Total

equity

At 1 April 2009 30,648 331 150 (4) 4,708 35,833 205 36,038

Changes in equity for the year:

Profit for the year – – – – 2,844 2,844 (3) 2,841

Other comprehensive income – 9 – 1 – 10 – 10

Total comprehensive income – 9 – 1 2,844 2,854 (3) 2,851

Dividend approved in respect of

the previous year 20(b) – – – – (2,200) (2,200) – (2,200)

Transfer from retained profits

to capital reserve 20(d)(ii) – – 83 – (83) – – –

At 31 March 2010 and 1 April 2010 30,648 340 233 (3) 5,269 36,487 202 36,689

Changes in equity for the year:

Profit for the year – – – – 4,035 4,035 3 4,038

Other comprehensive income – 142 – 6 – 148 7 155

Total comprehensive income – 142 – 6 4,035 4,183 10 4,193

Dividend approved in respect of

the previous year 20(b) – – – – (4,500) (4,500) – (4,500)

Transfer from retained profits

to capital reserve 20(d)(ii) – – 134 – (134) – – –

At 31 March 2011 30,648 482 367 3 4,670 36,170 212 36,382



Consolidated Cash Flow StatementFor the year ended 31 March 2011 (Expressed in Hong Kong dollars)


Operating Activities

Profit before taxation 4,850 3,421

Adjustments for:

Depreciation 1,959 1,943

Amortisation of interest in leasehold land 232 232

Amortisation of intangible asset 16 16

Interest on notes and bank loans 252 243

Other borrowing costs and interest expense 22 19

Interest income (14) (18)

Fair value gain on derivative financial instruments

– cash flow hedges (7) (10)

– fair value hedges (48) (42)

Net gain on underlying hedged interest-bearing borrowings

in fair value hedges (15) (19)

Share of profits less losses of jointly controlled entities (239) (177)

(Reversal of impairment losses)/impairment losses

on trade and other receivables (26) 4

Impairment loss on other investments 84 55

Impairment loss on other property, plant and equipment 12 –

Net loss on disposal of other property, plant and equipment 7 9

Net foreign exchange loss 5 5

Amortisation of deferred income (121) (114)

Expenses recognised in respect of defined benefit retirement plan 34 37

Operating Profit before Changes in Working Capital 7,003 5,604

(Increase)/decrease in stores and spares (6) 3

Increase in trade and other receivables (85) (168)

Increase in trade and other payables 88 41

Increase in deferred income 7 –

Cash Generated from Operations 7,007 5,480

Hong Kong Profits tax paid (230) (3)

Overseas Profits tax paid (1) –

Net Cash Generated from Operating Activities 6,776 5,477

Investing Activities

Net (placement of)/receipts on maturity of term deposits (3) 40

Interest received 14 18

Payments for the purchase of other property, plant and equipment (813) (1,572)

Receipts from disposal of other property, plant and equipment – 3

Payment of annual franchise fee for a PRC subsidiary (3) (3)

Payment to acquire interest in a jointly controlled entity – (17)

Net Cash Used in Investing Activities (805) (1,531)


Consolidated Cash Flow Statement (continued)For the year ended 31 March 2011 (Expressed in Hong Kong dollars)



Financing Activities

Interest paid on notes and bank loans (273) (314)

Other borrowing costs and interest expense paid (22) (25)

Payment of loan arrangement fee (24) –

Receipts from new bank loans 1,400 80

Repayment of bank loans (2,280) (1,500)

Receipts from issue of notes – 900

Repayment of notes (200) (653)

Net interest income received on interest rate swaps 59 54

Dividend paid (4,500) (2,200)

Net Cash Used in Financing Activities (5,840) (3,658)

Net Increase in Cash and Cash Equivalents 131 288

Cash and Cash Equivalents at Beginning of Year 631 343

Effect of foreign exchange rate changes 2 –

Cash and Cash Equivalents at End of Year 16 764 631


Notes to the Financial Statements(Expressed in Hong Kong dollars)

1. Principal Activities of the AuthorityThe Airport Authority (“the Authority”) is a statutory corporation wholly owned by the Hong Kong SAR Government (“the

Government”). It was formally established on 1 December 1995 when the Airport Authority Ordinance (“the Ordinance”) was

brought into effect as a continuation of the Provisional Airport Authority which had been set up in 1990.

The Authority’s statutory purpose is to provide, operate, develop and maintain Hong Kong’s airport at Chek Lap Kok, in order

to maintain Hong Kong’s status as a centre of international and regional aviation. Pursuant to these purposes, the Authority

may also engage in airport-related activities in trade, commerce or industry at Chek Lap Kok and is permitted to engage in

or carry out airport-related activities at any place in or outside Hong Kong. The Authority is required under the Ordinance to

conduct its business according to prudent commercial principles.

The Authority’s principal subsidiaries and their principal activities are set out in note 11.

The Authority and its subsidiaries are collectively referred to as the group.

2. Statement of Compliance and Basis of Preparation of the Financial Statements(a) Statement of compliance

These financial statements have been prepared in accordance with applicable Hong Kong Financial Reporting Standards

(“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong

Kong Accounting Standards (“HKASs”) and Interpretations issued by the Hong Kong Institute of Certified Public

Accountants (“HKICPA”), and accounting principles generally accepted in Hong Kong. These financial statements also

comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange

of Hong Kong Limited with the exception of disclosure on Earnings Per Share which is not relevant to the Authority as

the Authority’s shares are not publicly traded. A summary of the significant accounting policies adopted by the group is

set out in note 28.

With effect from the current year, the financial statements of the group present the consolidated financial information

and disclosures only. Prior disclosures in respect of the Authority level financial information and disclosures have not

been included. Management considers this change is in compliance with the Ordinance, HKFRSs and the applicable

disclosure provisions of the Rules Governing the Listing of Securities of The Stock Exchange of Hong Kong Limited.

The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the

current account period of the group and the company. Note 28(a) provides information on any changes in accounting

policies resulting from initial application of these developments to the extent that they are relevant to the group for the

current and prior accounting periods reflected in these financial statements. The group has not applied any new standard

or interpretation that is not yet effective for the current accounting period (note 29).

(b) Basis of preparation of the financial statements

The consolidated financial statements include the financial statements of the group as well as the group’s interests in

jointly controlled entities.

The measurement basis used in the preparation of the financial statements is the historical cost basis except for certain

financial instruments which are stated at their fair values as explained in the accounting policies set out in notes 28(f), (g)

and (n). Non-current assets and disposal groups held for sale are stated at the lower of carrying amount and fair value

less costs to sell.

The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates

and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.

The estimates and associated assumptions are based on historical experience and various other factors that are believed

to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying

values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these

estimates.


2. Statement of Compliance and Basis of Preparation of the Financial Statements (continued)

(b) Basis of preparation of the financial statements (continued)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the

revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements

and major sources of estimation uncertainty are discussed in note 26.

3. Operating Profit before Interest and Finance CostsOperating profit before interest and finance costs of the group is arrived at after charging/(crediting):

$ million 2011 2010

Auditors’ remuneration:

– audit services 4 4

– tax services 1 –

Stores and spares expensed 69 70

Net loss on disposal of other property, plant and equipment 7 9

(Reversal of impairment losses)/impairment losses on:

– trade and other receivables (note 14(b)) (26) 4

– other investments (note 13) 84 55

– other property, plant and equipment (note 9) 12 –

Depreciation:

– assets held for use under operating leases (note 9(d)) 119 109

– other assets 1,840 1,834

Amortisation:

– interest in leasehold land

– leased out under operating leases (note 9(d)) 14 14

– others 218 218

– intangible asset (note 10) 16 16

Operating lease charges: minimum lease payments

– hire of plant and machinery 4 4

– hire of other assets (including property rentals) 8 7

Rentals from investment properties less direct outgoings of

$11 million (2010: $8 million) (23) (37)

4. Staff Costs and Related Expenses

$ million 2011 2010

Contributions to defined contribution retirement plan 43 42

Expenses recognised in respect of defined benefit retirement plan (note 15) 34 37

Total retirement costs 77 79

Salaries, wages and other benefits 1,111 1,079

1,188 1,158



5. Finance Costs

$ million 2011 2010

Interest on bank loans 19 21

Interest on notes 177 206

Other borrowing costs 12 8

Other interest expense 10 11

Total interest expense on financial liabilities not stated at

fair value through profit or loss 218 246

Interest on notes stated at fair value through profit or loss 73 75

Less: Borrowing costs capitalised into assets under construction (17) (59)

274 262

Net foreign exchange loss 5 5

Fair value gain on derivative financial instruments

– cash flow hedges (7) (10)

– fair value hedges1 (48) (42)

Net gain on underlying hedged interest-bearing borrowings

in fair value hedges (15) (19)

209 196

1. Includes interest receivable of $64 million (2010: $59 million) in respect of interest rate swaps under fair value hedging arrangements.

The borrowing costs have been capitalised at the average cost of funds to the group calculated on a monthly basis. The

average interest rate used for capitalisation for the year was 2.6% (2010: 2.8%) per annum.

6. Taxation(a) Taxation in the consolidated income statement represents:

$ million 2011 2010

Current tax – Hong Kong Profits tax

– Provision for the year 725 3

– Under-provision in respect of prior years 2 –

Current tax – Overseas

– Provision for the year 1 –

– Over-provision in respect of prior years – (1)

Deferred tax (note 6(d))

– Origination and reversal of temporary differences 84 578

812 580

The provision for Hong Kong Profits tax for the year ended 31 March 2011 is calculated at 16.5% (2010: 16.5%) of the

estimated assessable profits for the year. No provision was made in respect of the Authority during the previous year as

the estimated assessable profit was offset against carried forward tax losses. The tax losses brought forward have been

fully utilised during the current year.

The provision for PRC Corporate Income Tax (“CIT”) for the year ended 31 March 2011 is calculated at 25% (2010: nil).


6. Taxation (continued)

(b) Reconciliation between tax expense and accounting profit at applicable tax rates:

$ million 2011 2010

Profit before taxation 4,850 3,421

Notional tax on profit before taxation, calculated at

the rates applicable to profits in the countries concerned 802 565

Tax effect of non-deductible expenses 53 46

Tax effect of non-taxable income (48) (33)

The effect of tax losses and other temporary differences not recognised 3 3

Under/(over)-provision in respect of prior years 2 (1)

Actual tax expense 812 580

(c) Current taxation in the consolidated balance sheet represents:

$ million 2011 2010

Provision for the year (note 6(a))

– Hong Kong Profits tax 725 3

– Overseas Profits tax 1 –

Provisional Hong Kong Profits tax paid (229) (2)

Overseas Profits tax paid (1) –

Balance of Profits tax provision relating to prior years 2 –

Current taxation 498 1

(d) Deferred tax assets and liabilities recognised:

The components of deferred tax (assets)/liabilities of the group recognised in the consolidated balance sheet and the

movements during the year are as follows:

$ million

Deferred tax arising from:

Depreciation

allowances

in excess of

the related

depreciation

Cash flow

hedges

Deferred

income and

provisions

Estimated

tax losses

Undistributed

profits of

a PRC jointly

controlled

entity Total

At 1 April 2009 3,272 (1) (252) (451) – 2,568

Charged to profit or loss 145 – 19 414 – 578

At 31 March 2010 3,417 (1) (233) (37) – 3,146

At 1 April 2010 3,417 (1) (233) (37) – 3,146

Charged to profit or loss 27 – 14 37 6 84

Charged to reserve – 1 – – – 1

At 31 March 2011 3,444 – (219) – 6 3,231

(e) Deferred tax assets not recognised:

The group has not recognised deferred tax assets in respect of subsidiaries’ cumulative tax losses and other temporary

differences of $120 million (2010: $109 million) and $7 million (2010: $nil) respectively as it is not probable that

sufficient future taxable profits against which the cumulative tax losses and other temporary differences can be utilised

will be available. The estimated tax losses of RMB56 million ($68 million) (2010: RMB59 million ($68 million)) for the

subsidiary in the PRC will expire within five years under the current PRC CIT legislation. The remaining portion of the tax

losses mainly relating to subsidiaries in Hong Kong do not expire under the current tax legislation.



7. Remuneration of the Members of the Board and Executive Directors and Individuals with the Highest Emoluments

(a) Remuneration of the Members of the Board and Executive Directors

Members of the Board, the Chief Executive Officer and Executive Directors are considered as key management personnel

of the Authority. There are three components of remuneration paid to the Chief Executive Officer and Executive

Directors.

Basic compensation

Basic compensation consists of base salary, housing and other allowances and benefits in kind.

Performance-related compensation

This represents discretionary payments depending on individual performance and the performance of the group.

Retirement benefits

Retirement benefits relate to the group’s contribution to retirement funds or gratuities in lieu of retirement scheme

contributions accrued.

The emoluments of the Members of the Board and Executive Directors of the Authority are as follows:

2011$’000

Board Member’s

feeBasic

compensation

Performance-related

compensationRetirement

benefits Total

Members of the BoardNon-executive membersMarvin Cheung Kin-tung 220 – – – 220He Guangbei (retired in June 2010) 18 – – – 18Vincent Fang Kang 110 – – – 110Edmund Leung Kwong-ho 110 – – – 110Andrew Liao Cheung-sing 110 – – – 110Lo Ka-shui (reappointed in June 2010) 110 – – – 110Wilfred Wong Ying-wai 110 – – – 110Raymond Ho Chung-tai 110 – – – 110Benjamin Hung Pi-cheng 110 – – – 110Chan Kam-lam 110 – – – 110Albert Ho Chun-yan 110 – – – 110Allan Wong Chi-yun 110 – – – 110Anita Fung Yuen-mei

(appointed in June 2010) 92 – – – 92Director-General of Civil Aviation1 110 – – – 110Secretary for Financial Services and

the Treasury1 110 – – – 110Secretary for Transport and Housing1 110 – – – 110

Executive memberStanley Hui Hon-chung

(Chief Executive Officer) – 4,002 2,000 491 6,493

Executive DirectorsHoward Eng Kiu-chor – 3,037 1,421 365 4,823Raymond W C Lai (retired in June 2010) – 551 – 60 611Wilson Fung Wing-yip

(appointed in August 2010) – 1,833 821 179 2,833William Lo Chi-chung

(appointed in July 2010) – 2,011 862 197 3,070

1,760 11,434 5,104 1,292 19,590

1. Members who are public officers. Fees payable to the Members who are public officers are received by the Government rather than by the individuals concerned.


7. Remuneration of the Members of the Board and Executive Directors and Individuals with the Highest Emoluments (continued)

(a) Remuneration of the Members of the Board and Executive Directors (continued)

2010

$’000

Board

Member’s

fee

Basic

compensation

Performance-

related

compensation

Retirement

benefits Total

Members of the Board

Non-executive members

Marvin Cheung Kin-tung 220 – – – 220

He Guangbei 110 – – – 110

Vincent Fang Kang 110 – – – 110

Edmund Leung Kwong-ho 110 – – – 110

Andrew Liao Cheung-sing 110 – – – 110

Lo Ka-shui 110 – – – 110

Wilfred Wong Ying-wai 110 – – – 110

Raymond Ho Chung-tai 110 – – – 110

Benjamin Hung Pi-cheng 110 – – – 110

Chan Kam-lam

(appointed in January 2010) 28 – – – 28

Albert Ho Chun-yan


Allan Wong Chi-yun


Director-General of Civil Aviation1 110 – – – 110

Secretary for Financial Services and

the Treasury1 110 – – – 110

Secretary for Transport and Housing1 110 – – – 110

Executive member

Stanley Hui Hon-chung

(Chief Executive Officer) – 4,033 2,000 492 6,525

Executive Directors

Howard Eng Kiu-chor – 3,073 1,350 586 5,009

Raymond W C Lai – 3,063 1,350 586 4,999

1,514 10,169 4,700 1,664 18,047

1. Members who are public officers. Fees payable to the Members who are public officers are received by the Government rather than by the individuals concerned.

(b) Individuals with the Highest Emoluments

Of the five individuals with the highest emoluments, two comprise the Chief Executive Officer and an Executive Director

(2010: three comprise the Chief Executive Officer and two Executive Directors) whose emoluments are disclosed under

note 7(a). The aggregate of the emoluments in respect of the other three (2010: two) individuals are as follows:

$’000 2011 2010

Basic compensation1 9,110 7,167

Performance-related compensation2 1,859 1,126

Retirement benefits 690 853

11,659 9,146



7. Remuneration of the Members of the Board and Executive Directors and Individuals with the Highest Emoluments (continued)

(b) Individuals with the Highest Emoluments (continued)

The emoluments of the three (2010: two) individuals with the highest emoluments are within the following bands:

2011 2010

$

Number of

individuals

Number of

individuals

3,000,001 – 3,500,000 2 1

5,000,001 – 5,500,000 1 –

5,500,001 – 6,000,000 – 1

3 2

1. The basic compensation includes net payment of PRC Individual Income Tax of $2.2 million (2010: $1.7 million) for two (2010: one) of the individuals on secondment to the PRC according to the terms of the secondment contract. The emoluments for the two individuals after including PRC Individual Income Tax fall within the $3.0 million to $3.5 million band and the $5.0 million to $5.5 million band respectively (2010: one individual within the $5.5 million to $6.0 million band).

2. The performance-related compensation relates to 2009/10 which was paid during the year. The performance-related compensation for 2010/11 was not allocated to the individuals as at the date of the approval of the financial statements and hence is not disclosed.

8. Segmental InformationServices from which reportable segments derive their revenue

Information reported to the group’s chief operating decision maker for the purposes of resource allocation and assessment

of performance is focused on the group as a whole, as all of the group’s activities are considered to be primarily dependent

on the airport traffic and are highly integrated and interdependent on each other. Resources are allocated based on what

is beneficial for the group in enhancing the airport experience as a whole rather than any specific department. Performance

assessment is based on the results of the group as a whole with operating parameters set out for each department.

Consequently, management considers there to be only one operating segment under the requirements of HKFRS 8,

“Operating segments”, and believes that this presentation provides more relevant information.

Reconciliation of segmental information to the information presented in the financial statements has not been presented, as

the reconciling items net of consolidation adjustments are considered to be immaterial to the group.

Information provided to management in respect of the group’s revenues and expenses and assets and liabilities is materially

similar to that reported in these financial statements.

Revenues from major services

The group’s revenues from its major services are set out in the consolidated income statement.

Geographical Information

No geographical information is shown as the turnover and operating profit of the group is substantially derived from activities

in Hong Kong, other than its interests in jointly controlled entities in the PRC, details of which are disclosed under note 12 to

the financial statements.

Information about major customers

The group’s customer base is diversified and includes only one customer with whom transactions have exceeded 10% of the

group’s revenues.

Included in the turnover of $10,583 million for the year (2010: $9,015 million) are revenues of approximately $2,367 million

(2010: $2,117 million) which arose from this customer. This includes only revenues arising from those entities which are

known to the group to be under common control of this customer.


9. Fixed Assets(a)

Other property, plant and equipment

$ million Airfields

Terminal complexes & ground

transportation centre

Access, utilities,

other buildings

& support facilities

Systems, installations,

plant & equipment

Furniture, fixtures &

equipmentConstruction

in progress Sub-totalInvestment properties

Interest in leasehold

land Total

CostAt 1 April 2009 7,866 22,262 12,960 7,726 1,493 2,740 55,047 302 11,522 66,871Additions (15) 84 13 118 51 1,049 1,300 – – 1,300Reclassifications 85 592 990 837 92 (2,596) – – – –Disposals (29) (150) (27) (173) (16) – (395) – (162) (557)

At 31 March 2010 7,907 22,788 13,936 8,508 1,620 1,193 55,952 302 11,360 67,614

At 1 April 2010 7,907 22,788 13,936 8,508 1,620 1,193 55,952 302 11,360 67,614Exchange adjustments – 1 – 1 – – 2 – – 2Additions 5 25 – 52 40 617 739 – – 739Reclassifications 152 650 17 263 (40) (1,042) – – – –Disposals (84) (26) (5) (353) (26) (2) (496) – – (496)

At 31 March 2011 7,980 23,438 13,948 8,471 1,594 766 56,197 302 11,360 67,859

Accumulated depreciation and amortisation

At 1 April 2009 2,042 6,074 3,429 4,574 1,111 – 17,230 23 2,490 19,743Charge for the year 301 646 436 411 138 – 1,932 11 232 2,175Written back on

disposals (26) (144) (26) (171) (16) – (383) – – (383)

At 31 March 2010 2,317 6,576 3,839 4,814 1,233 – 18,779 34 2,722 21,535

At 1 April 2010 2,317 6,576 3,839 4,814 1,233 – 18,779 34 2,722 21,535Exchange adjustments – 1 – – – – 1 – – 1Charge for the year 285 719 417 422 105 – 1,948 11 232 2,191Impairment loss – – 9 1 2 – 12 – – 12Written back on

disposals (83) (24) (4) (352) (26) – (489) – – (489)

At 31 March 2011 2,519 7,272 4,261 4,885 1,314 – 20,251 45 2,954 23,250

Net book valueAt 31 March 2011 5,461 16,166 9,687 3,586 280 766 35,946 257 8,406 44,609

At 31 March 2010 5,590 16,212 10,097 3,694 387 1,193 37,173 268 8,638 46,079

(b) Under the Private Treaty Land Grant issued by the Government for the period from 1 December 1995 to 30 June 2047

(“the Land Grant”), the Government has granted to the Authority up to the year 2047 the legal rights to the entire

airport site at Chek Lap Kok together with the rights necessary to develop such site for the purposes of its business. The

net land formation cost of $11,360 million and the land premium of $2,000 have been classified as interest in leasehold

land under fixed assets.

(c) The group engaged an independent firm of surveyors, Knight Frank Petty Limited (“the valuer”), who have among

their staff Fellow members of the Hong Kong Institute of Surveyors with recent experience in the location and category

of properties being valued, to value its investment properties for disclosure purposes. The valuer has considered

the assignment restrictions on the investment properties in the valuations. The fair value of the group’s investment

properties as at 31 March 2011 calculated by reference to net rental income allowing for reversionary income potential

amounted to $788 million (2010: $679 million).



9. Fixed Assets (continued)

(d) The group has granted sub-leases of its interest in leasehold land for airport related development and the provision

of airside support services under franchise agreements for periods ranging from 5 to 49 years. Under the franchise

agreements, the franchisees are granted sub-leases of interest in leasehold land for the periods of the respective

franchises. The group also leases out part of the terminal complexes and related assets under operating leases for periods

generally ranging from two to five years. All terms are renegotiated on renewal.

Where the sub-leases are for substantially the full period of the Land Grant, they are considered to be in the nature of

finance leases and accordingly the carrying value of the related interest in leasehold land is derecognised.

Payments receivable under these operating leases and franchise agreements in some instances are adjusted periodically

to reflect prevailing market indices and in some cases contain contingent rentals based on passenger flow and turnover

of tenants and franchisees.

The total future minimum payments (excluding contingent rentals) under non-cancellable operating leases and franchise

agreements receivable by the group are as follows:

$ million 2011 2010

Within one year 1,442 1,389

After one but within five years 3,677 3,171

After five years 4,175 4,540

9,294 9,100

During the year, $5,537 million (2010: $4,760 million) was recognised as income in profit or loss in respect of the

operating leases and franchise agreements, which included contingent rentals of $4,176 million (2010: $3,371 million).

The cost less accumulated amortisation of the interest in leasehold land for airport related development and the

provision of airside support services under franchise agreements sub-leased to third parties under non-cancellable sub-

lease agreements for the group as at 31 March 2011 was $511 million (2010: $525 million) and amortisation for the year

amounted to $14 million (2010: $14 million).

The cost less accumulated depreciation of the fixed assets leased to third parties under non-cancellable operating leases

for the group as at 31 March 2011 were $2,886 million (2010: $2,827 million) and depreciation for the year amounted

to $119 million (2010: $109 million).

(e) A review of the useful life of fixed assets is undertaken by the Authority periodically and during the year the estimated

useful lives of certain fixed assets were revised with effect from 1 April 2010, resulting in a net increase in the group’s

annual depreciation charge of $59 million. A similar review undertaken during the previous year resulted in a net

increase in the group’s annual depreciation charge of $93 million for the previous year.


10. Intangible Asset

$ million 2011 2010

Cost

At 1 April 314 312

Exchange adjustments 13 2

At 31 March 327 314

Accumulated amortisation

At 1 April 55 39

Exchange adjustments 2 –

Charge for the year 16 16

At 31 March 73 55

Net book value

At 31 March 254 259

Intangible asset represents the right to operate and manage Zhuhai Airport and is being amortised over 20 years on a straight

line basis.

11. Investments in Subsidiaries

The Authority

$ million 2011 2010

Unlisted shares, at cost 5 5

Details of principal subsidiaries are as set out below. The class of shares held is ordinary unless otherwise stated.

Proportion of ownership interest

Name of company

Place of incorporationand operation

Particulars ofissued andpaid up capital

Group’seffectiveinterest

Held bythe

AuthorityHeld by

a subsidiary Principal activity

Aviation Security Company Limited (“AVSECO”)

Hong Kong 10,000,000 shares of $1 each

51% 51% – Provision of aviation security services

HKIA Precious Metals Depository Limited

Hong Kong 2 shares of$1 each

100% 100% – Provision of storage space and related services

SkyLink Passenger Services Company Limited

Hong Kong 100,000 sharesof $1 each

51% 51% – Provision of passenger check-in services at various ports in the Pearl River Delta

HKIA (China) Limited Hong Kong 2 shares of$1 each

100% 100% – Investment holding company

Hong Kong – Zhuhai Airport ManagementCo., Ltd. (“HKZAM”)*

PRC RMB360,000,000 55% – 55% Airport management and provision of transportation and ground services relating to aviation

* A sino-foreign equity joint venture



12. Interests in Jointly Controlled Entities

$ million 2011 2010

Share of net assets 2,953 2,590

Goodwill 228 218

3,181 2,808

Details of the group’s interests in the jointly controlled entities are as follows:

Proportion of

ownership interest

Name of joint venture

Form of

business

structure

Place of

incorporation

and operation

Particulars of

issued and

paid up capital

Group’s

effective

interest

Held by the

Authority Principal activity

Hangzhou Xiaoshan

International Airport

Co., Ltd. (“HXIA”)

Incorporated PRC RMB5,686 million 35% 35% Management, operation

and development of

Hangzhou Xiaoshan

International Airport

and provision of related

services

Shanghai Hong Kong

Airport Management

Co., Ltd. (“SHKAM”)

Incorporated PRC RMB30 million 49% 49% Management and

operation of the existing

and new terminals at

Hongqiao International

Airport, Shanghai

(“HIA”)

The above entities have 31 December as the financial accounting year end date, which is not coterminous with that of the

group. The Authority has determined that it is more practicable to incorporate its share of the results and net assets based on

the statutory financial year ending 31 December as adjusted to comply with the Authority’s accounting policies.

(a) HXIA

HXIA is a sino-foreign equity joint venture with a period of operations of 30 years.

Summary of financial information of the HXIA – group’s effective interest is as follows:

$ million 2011 2010

Non-current assets 4,119 3,560

Current assets 553 481

Non-current liabilities (620) (801)

Current liabilities (1,115) (667)

Net assets 2,937 2,573

$ million 2011 2010

Income 526 434

Government subsidies 132 81

Expenses (402) (326)

Profit before taxation 256 189

Income tax (16) (12)

Profit after taxation 240 177


12. Interests in Jointly Controlled Entities (continued)

(a) HXIA (continued)

The movements in retained profits during the year are as follows:

$ million 2011 2010

Share of profit after taxation 240 177

Dividend received in respect of share of profit – –

Share of profit after taxation and dividend 240 177

Less: Transfer to capital reserve (132) (81)

Share of profit to be retained 108 96

Share of retained profits brought forward from previous years 319 223

Share of retained profits carried forward to next year 427 319

The movements in capital reserve during the year are as follows:

$ million 2011 2010

At 1 April 187 106

Transfer from retained profits 132 81

At 31 March 319 187

The outstanding commitments of HXIA in respect of capital expenditure not provided for in the financial statements are

as follows:

$ million 2011 2010

Contracted for 1,926 316

Authorised but not contracted for 5,600 7,098

7,526 7,414

The capital commitments of the jointly controlled entity are to be financed independently by the jointly controlled entity

through its internal resources or borrowings and no commitment has been made by the group to contribute by way of

equity, loans or guarantees thereof for this purpose.

(b) SHKAM

SHKAM, a sino-foreign equity joint venture, manages and operates the existing and new terminals at HIA, under a

management contract signed for 20 years in return for a management fee to be paid by Shanghai Airport (Group) Co.

Ltd. Hongqiao International Airport Company. As at 31 March 2011 and 2010, the Authority’s outstanding commitment

in respect of capital contribution to SHKAM not provided for in the financial statements amounts to RMB34.3 million

($41 million) and RMB34.3 million ($39 million) respectively, which is set out in note 22.

Summary of financial information of the SHKAM – group’s effective interest is as follows:

$ million 2011 2010

Current assets 21 17

Current liabilities (5) –

Net assets 16 17

$ million 2011 2010

Income 4 –

Expenses (5) –

Net loss (1) –



13. Other Investments

$ million 2011 2010

Unlisted shares 261 261

Less: impairment loss (209) (125)

52 136

Other investments represent the Authority’s 11.8% (2010: 11.8%) equity interest in IEC Holdings Limited, a company set up

by the Authority and the Government, which holds an equity interest of 84.9% (2010: 84.9%) in a joint venture company

set up to procure the development of the AsiaWorld-Expo exhibition centre. As consideration for the shares in IEC Holdings

Limited, the Authority has granted a sub-lease of land on which the AsiaWorld-Expo exhibition centre is situated, to IEC

Holdings Limited to 2047.

IEC Holdings Limited has granted an under-lease of the land on which the AsiaWorld-Expo exhibition centre is situated until

2031 to the joint venture company which has constructed and operates the exhibition centre and will continue to operate the

exhibition centre over the period of the lease, at the end of which the land and the exhibition centre and the related facilities

will revert to IEC Holdings Limited at nil consideration.

The investment is stated at cost less impairment loss because the shares do not have a quoted market price in an active market

and the fair value cannot be measured reliably due to inherent uncertainty in the estimation process and the underlying

assumptions relating to the cash flow projection as discussed in note 26(b)(ii).

During the year, an impairment loss of $84 million (2010: $55 million) was recognised in profit or loss on the basis of a

material decline in its estimated future cash flows, discounted to present value using a discount rate of 10.50% (2010:

10.25%) per annum, below the carrying value. Adverse changes in the market in which the investee operates indicate that

the cost of the group’s investment may not be fully recovered.

14. Trade and Other Receivables

$ million 2011 2010

Trade debtors 1,269 1,175

Less: allowance for doubtful debts (note 14(b)) (30) (56)

1,239 1,119

Other debtors 12 21

1,251 1,140

Prepayments 28 25

Deposits and debentures 11 15

1,290 1,180

As at 31 March 2011, all of the trade and other receivables are expected to be recovered or recognised as an expense within

one year except for $8 million (2010: $12 million) included in deposits and debentures, which is expected to be recovered

after more than one year.


14. Trade and Other Receivables (continued)

(a) The ageing analysis of trade debtors (net of allowance for doubtful debts) included above is as follows:

$ million 2011 2010

Amounts not yet due 1,137 1,061

Less than one month past due 81 36

One to three months past due 8 9

More than three months past due 13 13

1,239 1,119

Trade debtors are generally due within 14 to 30 days from the date of billing. The group’s credit policy is set out in note

21(a).

(b) Impairment of trade debtors

Impairment losses in respect of trade debtors are recorded using an allowance account unless the group considers that

recovery of the amount is remote, in which case the impairment loss is written off against trade debtors directly (note

28(m)).

The movements in the allowance for doubtful debts during the year are as follows:

$ million 2011 2010

At 1 April 56 57

Impairment loss (reversed)/recognised (26) 4

Uncollectible amounts written off – (5)

At 31 March 30 56

As at 31 March 2011, the group’s trade debtors of $24 million (2010: $43 million) were individually determined to be

impaired. The individually impaired trade debtors related to customers that were in financial difficulties and management

consequently recognised specific allowances for doubtful debts of $21 million (2010: $38 million) for the group. The

group does not hold any collateral (2010: $nil) over individually impaired trade debtors of $3 million (2010: $5 million)

for which no provision has been made.

(c) Trade debtors that are not impaired

The ageing analysis of trade debtors that are neither individually nor collectively considered to be impaired are as follows:

$ million 2011 2010

Neither past due nor impaired 1,137 808

Less than one month past due 70 21

One to three months past due 5 4

More than three months past due 10 4

85 29

1,222 837

Trade debtors that were neither past due nor impaired relate to a wide range of customers for whom there was no

recent history of default.

Trade debtors that were past due but not impaired relate to a number of independent customers that have a good track

record with the group. Based on past experience, management believes that no impairment allowance is necessary in

respect of these balances as there has not been a significant change in credit quality and the balances are still considered

fully recoverable. The group holds cash deposits and bank guarantees of $5 million (2010: $3 million) as collateral over

certain past due but not impaired trade debtors totalling $85 million (2010: $29 million).



15. Employee Retirement Benefits(a) Defined benefit retirement plan

The Authority makes contributions to a defined benefit retirement plan which covers 11% (2010: 12%) of the group’s employees. The plan is administered by independent trustees with its assets held separately from those of the Authority.

The plan is funded by contributions from the Authority in accordance with an independent actuary’s recommendation based on an annual actuarial valuation. The Authority expects to pay $29 million (2010: $31 million) in contributions to the defined benefit retirement plan in 2012. Based on an independent actuarial valuation of the plan as at 31 March 2011 prepared by qualified staff of Towers Watson Hong Kong Limited (2010: HSBC Insurance (Asia-Pacific) Holdings Limited) using the projected unit credit method, the Authority’s obligation under the plan is 100% (2010: 92%) covered by the plan assets held by the trustees. The signing actuary is a Fellow member of the Society of Actuaries of the United States.

(i) The amounts recognised in the consolidated balance sheet are as follows:

$ million 2011 2010

Present value of wholly funded obligations (561) (588)Fair value of plan assets 568 539Net unrecognised actuarial losses 63 122

Net assets 70 73

A portion of the above asset is expected to be utilised after more than one year. However, it is not practicable to segregate this amount from the amounts recoverable in the next twelve months, as future contributions will also relate to future services rendered and future changes in actuarial assumptions and market conditions.

(ii) Plan assets consist of the following:

$ million 2011 2010

Equity securities 293 278Corporate bonds 218 221Cash 57 40

568 539

(iii) Movements in the present value of the defined benefit obligations:

$ million 2011 2010

At 1 April 588 549Benefits paid by the plan (49) (20)Current service cost 46 45Interest cost 15 12Actuarial (gains)/losses (39) 2

– losses/(gains) due to change in actuarial assumptions 5 (27)– experience (gains)/losses (44) 29

At 31 March 561 588

(iv) Movements in plan assets are as follows:

$ million 2011 2010

At 1 April 539 391Contributions paid to the plan 31 47Benefits paid by the plan (49) (20)Actual return on plan assets 47 121

– changes in actuarial expected return on plan assets 33 28– actuarial gains 14 93

At 31 March 568 539


15. Employee Retirement Benefits (continued)

(a) Defined benefit retirement plan (continued)

(v) Expense recognised in the consolidated income statement is as follows:

$ million 2011 2010

Current service cost 46 45

Interest cost 15 12

Actuarial expected return on plan assets (33) (28)

Net actuarial losses recognised 6 8

34 37

The expense is recognised in the staff costs and related expenses in the consolidated income statement (note

4). The actual return on plan assets, taking into account all changes in the fair value of the plan assets excluding

benefits paid and contributions received, for the year was a net income of $47 million (2010: $121 million).

(vi) The principal actuarial assumptions used at the balance sheet dates (expressed as weighted averages) are as

follows:

2011 2010

Discount rate 2.85% 2.80%

Expected rate of return on plan assets 6.00% 6.00%

Future long term salary increases 3.50% 3.50%

The expected long-term rate of return on plan assets for the year ended 31 March 2011 is based on the portfolio

as a whole and market expectations as at 1 April 2010 for returns over the entire life of the obligation based on

historical returns, without adjustments.

(vii) Historical information

$ million 2011 2010 2009 2008 2007

Present value of the defined

benefit obligations (561) (588) (549) (539) (400)

Fair value of plan assets 568 539 391 497 477

Surplus/(deficit) in the plan 7 (49) (158) (42) 77

Experience gains/(losses) arising

on plan liabilities 44 (29) 5 2 (5)

Experience gains/(losses) arising

on plan assets 14 93 (139) (14) 27

(b) Defined contribution retirement plans

(i) The group also operates Mandatory Provident Fund Schemes (“MPF”) under the Hong Kong Mandatory Provident

Fund Schemes Ordinance for employees not covered by the defined benefit retirement plan. The MPF scheme is a

defined contribution retirement plan administered by independent trustees. Contributions by the group range from

5% to 15% of employees’ salary and have been charged to profit or loss. Contributions by employees range from

5% to 9%. Voluntary contributions to the plan vest over a period of two to ten years.

(ii) As stipulated by the regulations of the PRC, the subsidiary in the PRC participates in a basic defined contribution

pension plan administered by the Municipal Government under which it is governed. The group has no other

material obligation for payment of basic retirement benefits beyond the annual contributions which are calculated

at a rate based on the salaries, bonuses and certain allowances of its employees.



16. Cash and Bank Balances

$ million 2011 2010

Deposits with banks within three months of maturity 574 370

Cash at bank and in hand 190 261

Cash and cash equivalents 764 631

Deposits with banks with over three months of maturity 30 27

794 658

As at 31 March 2011, effective interest rate ranges for deposits with banks which are within and over three months of maturity are 0.05% to 1.15% (2010: 0.0001% to 0.45%) and 0.93% to 1% (2010: 0.63% to 1.0925%) respectively.

As at 31 March 2011, cash and cash equivalents include deposits with banks of $69 million (2010: $52 million) held by a subsidiary that are subject to currency exchange restrictions in the PRC.

17. Trade and Other Payables

$ million 2011 2010

Creditors and accrued charges 1,278 1,235

Deposits received 455 435

Contract retentions 66 120

1,799 1,790

Classified in the consolidated balance sheet as:

Current liabilities 1,534 1,533

Non-current liabilities 265 257

1,799 1,790

As at 31 March 2011, all of the trade and other payables are expected to be settled or recognised as income within one year except for $265 million (2010: $257 million), which is expected to be settled after more than one year and mainly relate to licence deposits received from retail licencees and contract retentions.

The ageing analysis of creditors and accrued charges included above by due dates is as follows:

$ million 2011 2010

Due within 30 days or on demand 336 337

Due after 30 days but within 60 days 164 145

Due after 60 days but within 90 days 115 122

Due after 90 days 663 631

Total 1,278 1,235

18. Interest-bearing Borrowings

$ million 2011 2010

Notes payable

US dollar Eurobond due 2013 (a) 2,791 2,790

HK dollar Fixed rate notes due 2011 to 2021 (b) 2,926 3,139

5,717 5,929

Bank loans (c) to (f) 1,400 2,280

7,117 8,209

Less: Unamortised finance costs (31) (16)

7,086 8,193


18. Interest-bearing Borrowings (continued)

(a) The Authority issued notes due 2013 with a principal amount of US$350 million at an issue price of 99.078 per cent and

at annual coupon rate of 5% in September 2003. The notes are unsecured and repayable in full on the due date. The

notes are listed on the Luxembourg Stock Exchange.

(b) The Authority has issued various HK dollar fixed rate notes with principal amount of $3,100 million through private

placement. These fixed rate notes were issued at par with annual coupon rates ranging from 2.00% to 5.1% per annum.

The notes are unsecured and repayable in full upon maturity. A note of $200 million with maturity of two years was

repaid in full in July 2010.

(c) In September 2007, the Authority signed a three-year unsecured HK dollar revolving credit facility of $6,000 million.

Interest is payable on amounts drawn down at a rate relating to HIBOR. As at 31 March 2010, $2,200 million of the

revolving credit facility was drawn down. The revolving credit facility was repaid in full in September 2010.

(d) In June 2010, the Authority signed a five-year unsecured HK dollar revolving credit facility of $5,000 million. Interest is

payable on amounts drawn down at a rate relating to HIBOR. As at 31 March 2011, $1,400 million (2010: $nil) of the

revolving credit facility was drawn down.

(e) The Authority has uncommitted money market line facilities of $2,689 million (2010: $2,688 million). Interest is payable

on amounts drawn down at a rate relating to HIBOR. An amount of $nil (2010: $80 million) was outstanding as at 31

March 2011.

(f) In July 2010, the Authority established a US$1 billion Medium Term Note programme, under which unsecured notes may

be issued in various currencies and maturities with fixed or floating rates. During the year, no unsecured note has been

issued under the programme.

(g) As at 31 March 2011, the unsecured interest-bearing borrowings were repayable as follows:

2011 2010

$ million Notes payable Bank loans Total Total

Within one year or on demand 503 – 503 2,480

After one year but within two years 460 – 460 512

After two years but within five years 3,643 1,380 5,023 4,103

After five years 1,100 – 1,100 1,098

5,203 1,380 6,583 5,713

5,706 1,380 7,086 8,193

(h) None of the interest-bearing borrowings is subject to any financial covenants imposed by the lenders. All of the non-

current interest-bearing borrowings are carried at amortised cost except for HK dollar fixed rate notes and the US dollar

Eurobond with total principal amounts of $1,000 million and US$100 million (2010: $1,200 million and US$100 million)

respectively, which are designated as fair value hedged items and carried at fair value of $1,871 million (2010: $2,083

million). None of the non-current interest-bearing borrowings is expected to be settled within one year. Further details

of the group’s management of liquidity risk are set out in note 21(b).

19. Deferred IncomeDeferred income mainly represents consideration received for the sale of a portion of the income from the aviation fuel system

for a period up to 2018 and amounts received in respect of sub-leases of interest in leasehold land of the airport site. They are

accounted for in accordance with the accounting policies detailed in notes 28(t)(v) and 28(t)(vi) respectively.

The amount expected to be recognised as income more than one year after the balance sheet date is included in non-current

liabilities.



20. Capital, Reserves and Dividends(a) Movements in components of equity

The reconciliation between the opening and closing balances of each component of the group’s consolidated equity is set out in the consolidated statement of changes in equity on page 73.

(b) Dividends

$ million 2011 2010

Final dividend payable to the equity shareholder of the Authority in

respect of the previous financial year, approved and paid during

the year of $7,504.57 per ordinary share (2010: $7,178.28 per

ordinary share) 2,300 2,200

Special dividend payable to the equity shareholder of the Authority in

respect of the previous financial year, approved and paid during the

year of $7,178.28 per ordinary share (2010: $nil per ordinary share) 2,200 –

Final dividend proposed by the Authority after the balance sheet date of

$10,114.85 per ordinary share (2010: $7,504.57 per ordinary share) 3,100 2,300

Special dividend proposed by the Authority after the balance sheet date

of $nil per ordinary share (2010: $7,178.28 per ordinary share) – 2,200

The final and special dividends declared after the balance sheet dates have not been recognised as liabilities at the balance sheet dates.

(c) Share Capital

The Authority

$ million 2011 2010

Authorised, issued, allotted and fully paid:

306,480 ordinary shares of $100,000 each (2010: 306,480 shares) 30,648 30,648

30,648 30,648

(d) Nature and purpose of reserves(i) Exchange reserve

The exchange reserve comprises foreign exchange differences arising from the translation of the financial statements of foreign operations. The reserve is dealt with in accordance with the accounting policy set out in note 28(u).

(ii) Capital reserveThe capital reserve primarily comprises the share of profits of a jointly controlled entity in the PRC which are not distributable as required by the relevant PRC government regulations and the retained profits of AVSECO which according to its memorandum of association and the shareholders’ agreement cannot be distributed.

(iii) Hedging reserveThe hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges pending subsequent recognition of the hedged cash flow dealt with in accordance with the accounting policy adopted for cash flow hedges set out in note 28(g).

(iv) Distributability of reservesAs at 31 March 2011, the aggregate amount of reserves available for distribution to the equity shareholder of the Authority was $4,279 million (2010: $4,998 million). After the balance sheet date, the Board proposed a final dividend of $10,114.85 per ordinary share (2010: a final dividend and a special dividend of $7,504.57 and $7,178.28 per ordinary share respectively). The final dividend and special dividend amounted to $3,100 million (2010: $2,300 million) and $nil million (2010: $2,200 million) respectively. These dividends have not been recognised as liabilities at the balance sheet date.


20. Capital, Reserves and Dividends (continued)

(d) Nature and purpose of reserves (continued)

(v) Capital management

The primary objectives of the group when managing capital are to safeguard the group’s ability to continue as a

going concern, maintain a strong credit rating and a healthy capital ratio to support the business and to enhance

shareholder value.

The group manages its capital structure by taking into consideration its future capital requirements, capital

efficiency and projected cash flow. To adjust its capital structure, the group may raise or reduce its outstanding

debt. The group is also empowered by the Ordinance to either increase or reduce its share capital under the

direction of the Financial Secretary and the Legislative Council. The Ordinance provides that these directions be

made following consultation with the Authority.

The group monitors its capital structure on the basis of a total debt/capital ratio. The total debt/capital ratios of the

group at the balance sheet dates are as follows:


Total debt1 18 7,086 8,193

Total equity 36,382 36,689

Total capital2 43,468 44,882

Total debt/capital ratio 16% 18%

1. Total debt represents interest-bearing borrowings.

2. Total capital represents total debt plus total equity.

Neither the Authority nor any of its subsidiaries are subject to externally imposed capital requirements.

21. Financial Risk Management and Fair ValuesThe group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, interest rate risk and foreign currency

risk. The group conducts its financial risk management activities in accordance with the policies and practices recommended

by the Audit Committee and Finance Committee of the Authority. The group’s exposure to these risks and the financial risk

management policies and practices used by the group to manage these risks are described below.

(a) Credit risk

The group’s credit risk is primarily attributable to trade and other receivables, over-the-counter derivative financial

instruments entered into primarily for hedging purposes and cash and bank balances. Management has credit policies in

place and the exposures to these credit risks are monitored on an ongoing basis.

In respect of trade and other receivables, there are procedures in place to closely monitor the payment performance.

Individual credit evaluations are performed on customers requiring credit over a certain amount or customers with long

overdue history, which focus on their payment history, ability to pay, as well as information specific to the customers

and the economic environment in which they operate. Trade receivables are generally due within 14 to 30 days from the

date of billing. In respect of the group’s rental and franchise income from operating leases and franchise arrangements

respectively, sufficient deposits are held to cover potential exposure to credit risk.

Cash and bank balances are placed with financial institutions with sound credit ratings to minimise credit exposure.

Transactions involving derivative financial instruments are with counterparties with sound credit ratings and with whom

the group has signed netting agreements. Given their high credit ratings, management does not expect any investment

counterparty to fail to meet its obligations.



21. Financial Risk Management and Fair Values (continued)

(a) Credit risk (continued)

The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer rather than the

industry or country in which the customers operate and therefore significant concentrations of credit risk primarily arise

when the group has significant exposure to individual customers. At the balance sheet date, the group has a certain

concentration of credit risk as 28% (2010: 19%) and 57% (2010: 45%) of the total trade and other receivables was due

from the group’s largest customer and the five largest customers respectively.

The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative

financial instruments, in the consolidated balance sheet after deducting any impairment allowance. The group does not

provide any guarantees which would expose the group to credit risk.

Further quantitative disclosures in respect of the group’s exposure to credit risk arising from trade and other receivables

are set out in note 14.

(b) Liquidity risk

All cash management of the group, including the short term investment of cash surpluses and raising of loans and other

borrowings to cover expected cash demands, are managed centrally by the Authority except AVSECO and HKZAM

which handle their own cash management. The Authority’s policy is to regularly monitor current and expected liquidity

requirements, to ensure that it maintains sufficient reserves of cash and adequate credit facilities from major financial

institutions to meet its liquidity requirements in the short and longer term.

The following table details the remaining contractual maturities at the balance sheet dates of the group’s non-derivative

financial liabilities and derivative financial liabilities, which are based on contractual undiscounted cash flows (including

interest payments computed using contractual rates or, if floating, based on rates current at the balance sheet date) and

the earliest date the group can be required to pay:

Contractual undiscounted cash flow

$million

Balancesheet

carryingamount Total

Within1 year or

on demand 1-2 years 3-5 yearsMore than

5 years

2011Interest-bearing borrowings 7,086 7,920 748 678 5,238 1,256Trade and other payables 1,799 1,856 1,542 80 171 63Interest rate swaps (net settled) (95) (126) (53) (42) (21) (10)

8,790 9,650 2,237 716 5,388 1,309

Derivatives settled gross:Forward foreign exchange contracts held

as cash flow hedging instruments– outflow 1,909 – – 1,909 –– inflow (1,950) (2) (2) (1,946) –

(41) (2) (2) (37) –

2010Interest-bearing borrowings 8,193 9,316 2,735 740 4,507 1,334Trade and other payables 1,790 1,845 1,539 60 194 52Interest rate swaps (net settled) (105) (233) (63) (56) (97) (17)

9,878 10,928 4,211 744 4,604 1,369

Derivatives settled gross:Forward foreign exchange contracts held

as cash flow hedging instruments– outflow 1,909 – – 1,909 –– inflow (1,950) (2) (2) (1,946) –

(41) (2) (2) (37) –



(b) Liquidity risk (continued)

As shown above, interest-bearing borrowings (including interest) of the group amounting to $748 million are due to be

repaid in the upcoming 12 months after 31 March 2011 (2010: $2,735 million). The short term liquidity risk inherent in

this contractual maturity will be addressed by internal sources of funds and new external borrowings.

(c) Interest rate risk

The group’s interest rate risk arises primarily from long term interest-bearing borrowings. Borrowings issued at variable

rates and at fixed rates expose the group to cash flow interest rate risk and fair value interest rate risk respectively. The

group adopts a policy of ensuring that between 40% and 60% of its borrowings are effectively on a fixed rate basis,

either through the contractual terms of the interest-bearing financial assets and liabilities or through the use of interest

rate swaps. The group’s interest rate profile as monitored by management is set out in (ii) below.

(i) Hedging

Interest rate swaps, denominated in Hong Kong and United States (”US”) dollars, have been entered into to

achieve an appropriate mix of fixed and floating interest rate exposure within the group’s policy.

The group classifies interest rate swaps into either fair value or cash flow hedges and states them at their fair values

in accordance with the policy set out in note 28(g).

Details of the notional amounts, maturity period and fair values of swaps entered into by the group at the balance

sheet dates are set out in note 21(e). These amounts are recognised as derivative financial instruments in the

consolidated balance sheet.

(ii) Interest rate profile

The following table details the interest rate profile of the group’s debt borrowings at the balance sheet dates, after

taking into account the effect of interest rate swaps designated as cash flow hedging instruments and fair value

hedging instruments ((i) above).

$ million 2011 2010

Fixed rate borrowings

Bank loans* 197 600

Fixed rate notes 3,837 3,830

4,034 4,430

Variable rate borrowings

Bank loans 1,183 1,680

Fixed rate notes** 1,869 2,083

3,052 3,763

Total borrowings 7,086 8,193

Fixed rate borrowings as a percentage of total borrowings 57% 54%

* Swapped to fixed rate

** Swapped to floating rate




(c) Interest rate risk (continued)

(iii) Sensitivity analysis

As at 31 March 2011, it is estimated that a general increase/decrease of 50 basis points in interest rates, with all

other variables held constant, would have decreased/increased the group’s profit after taxation and retained profits

by approximately $9 million (2010: $11 million). Other components of consolidated equity would have increased/

decreased by approximately $3 million (2010: $1 million) in response to the general increase/decrease in interest

rates. The effect of interest-bearing bank deposits is expected to be not significant and is not taken into account in

the analysis.

The sensitivity analysis above indicates the instantaneous change in the group’s profit after taxation (and retained

profits) and other components of consolidated equity that would arise assuming that the change in interest rates

had occurred at the balance sheet dates and had been applied to re-measure those financial instruments held

by the group which expose the group to fair value interest rate risk at the balance sheet dates. In respect of the

exposure to cash flow interest rate risk arising from floating interest rate non-derivative instruments held by the

group at the balance sheet date, the impact on the group’s profit after taxation (and retained profits) and other

components of consolidated equity is estimated as an annualised impact on interest expense or income of such a

change in interest rates. The analysis has been performed on the same basis for 2010.

(d) Foreign currency risk

The group is exposed to foreign currency risk primarily through the issue of notes that are denominated in a currency

other than the functional currency of the operations to which they relate. The currency giving rise to this risk is primarily

US dollars.

It is the Authority’s policy to require all major operational contracts to be in Hong Kong dollars. The few exceptions to

this have involved small value contracts or contracts that were hedged at the outset.

As at 31 March 2011, the group is mainly exposed to US dollar currency risk in respect of the US dollar Eurobond issued

at US$350 million (2010: US$350 million), of which US$250 million (2010: US$250 million) has been hedged through

the use of forward exchange contracts, and exposure in respect of trade and other receivables of US$7 million (2010:

US$6 million).

As at 31 March 2011, the group’s forward exchange contracts with notional amount of US$250 million (2010: US$250

million) to hedge US dollar denominated notes and net fair value of $26 million are recognised as derivative financial

assets (2010: $16 million). The group designates these forward exchange contracts as cash flow hedges. All of the

forward exchange contracts have remaining maturities of less than three years (2010: less than four years) after the

balance sheet date.

The group has not hedged the foreign currency risk in respect of its investments in the PRC incorporated entities.

As the Hong Kong dollar is pegged to US dollar at a range between 7.75 to 7.85, management considers that the foreign

currency risk associated with the unhedged US dollar exposure is not material to the group. Accordingly, no sensitivity

analysis in respect of these unhedged exposures is considered necessary.



(e) Fair valuesFinancial instruments carried at fair valueThe following table presents the carrying value of financial instruments measured at fair value at the balance sheet dates across the three levels of the fair value hierarchy defined in HKFRS 7, “Financial instruments: Disclosures”, with the fair value of each financial instrument categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:

• Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments

• Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which all significant inputs are directly or indirectly based on observable market data

• Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data

As at 31 March 2011, the group’s derivative financial instruments are carried at fair value. These instruments fall under Level 2 of the fair value hierarchy described above. During the year there were no significant transfers of instruments in or out of Level 2.

Fair values and notional amounts of derivative financial instruments outstanding at the balance sheet dates are summarised as follows:

2011 2010

$ million

Notional

amount Assets Liabilities

Notional

amount Assets Liabilities

Cash flow hedgesForward foreign exchange contracts US$250 29 (3) US$250 21 (5)Interest rate swaps $200 5 (2) $600 – (3)

Fair value hedgesInterest rate swaps US$100 63 – US$100 66 –Interest rate swaps $1,000 29 – $1,200 42 –

Total 126 (5) 129 (8)

Less: Portion to be recovered/ (settled) within one year

Cash flow hedgesForward foreign exchange contracts US$250 2 – US$250 2 –Interest rate swaps $200 – (2) $600 – (3)

Fair value hedgesInterest rate swaps US$100 29 – US$100 28 –Interest rate swaps $1,000 16 – $1,200 23 –

47 (2) 53 (3)

Portion to be recovered/(settled) after one year 79 (3) 76 (5)

Derivative financial instruments qualifying as cash flow hedges as at 31 March 2011 have a maturity of 2.5 to 4 years (2010: 0.5 to 3.5 years) from the balance sheet date.

Derivative financial instruments qualifying as fair value hedges as at 31 March 2011 have a maturity of 0.5 to 8 years (2010: 0.5 to 9 years) from the balance sheet date.

As at 31 March 2011, the carrying value and fair value of fixed rate notes of notional amount of $5,623 million (2010: $5,818 million), amounted to $5,706 million and $6,011 million (2010: $5,913 million and $6,198 million) respectively.

All other financial instruments are carried at amounts not materially different from their fair values at the balance sheet dates.




(f) Estimation of fair values

The following summarises the major methods and assumptions used in estimating the fair values of financial

instruments.

(i) Derivatives

Forward exchange contracts are either marked to market using quoted market prices or by discounting the

contractual forward price and deducting the current spot rate. The fair value of interest rate swaps is the estimated

amount that the Authority would receive or pay to terminate the swap at the balance sheet date, taking into

account current interest rates and the current creditworthiness of the swap counterparties.

Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best

estimates and the discount rate is a market related rate for a similar instrument at the balance sheet date. Where

other pricing models are used, inputs are based on market related data at the balance sheet date.

(ii) Interest-bearing borrowings

The fair value is estimated as the present value of future cash flows, discounted at current market interest rates for

similar financial instruments.

(iii) Interest rates used for determining fair value

The group uses the market yield curve as at balance sheet dates to discount financial instruments. The interest rates

used for discounting borrowings and derivatives are as follows:

2011 2010

Hong Kong dollars 0.21% – 2.94% 0.10% – 3.26%

US dollars 0.44% – 1.29% 0.42% – 2.09%

22. Outstanding Commitments

$ million 2011 2010

Commitments outstanding not provided for in the financial statements

are as follows:

Capital expenditure

Contracted for 286 214

Authorised but not contracted for 10,866 1,849

11,152 2,063

Capital contribution in respect of a jointly controlled entity

in the PRC, SHKAM (note 12(b)) 41 39

11,193 2,102

The outstanding commitments of the group’s jointly controlled entity, HXIA, which are not included in the above, are

disclosed in note 12(a).

23. Contingent LiabilitiesThe Inland Revenue Department (“IRD”) has challenged in prior years the validity of tax allowances in an amount of $2,447

million claimed by the Authority in respect of certain fixed assets. The corresponding tax impact would be approximately

$426 million computed at applicable tax rates. The Authority is engaged in correspondence with the IRD and is awaiting its

assessment. The Authority remains confident that its claims are valid and supportable. Accordingly, no provision for additional

taxation has been made in respect of this contingent liability as at 31 March 2010 and 2011.


24. Material Related Party TransactionsThe Authority is wholly owned by the Government. Transactions between the group and Government departments, agencies

or Government controlled entities, other than those transactions such as the payment of fees, taxes, leases and rates, etc. that

arise in the normal dealings between the Government and the group, are considered to be related party transactions pursuant

to HKAS 24, “Related party disclosures” and are identified separately in these financial statements.

Members of the Board and the Executive Directors, and parties related to them, are also considered to be related parties of

the Authority. Material transactions with these parties, if any, are separately disclosed. Remuneration paid to Members of the

Board and the Executive Directors is disclosed in note 7.

During the year, the Authority has had the following material related party transactions:

(a) The Authority has entered into service agreements with the Government under which the Government is to provide

aviation meteorological and air traffic control services and aircraft rescue and fire fighting services at the airport. The

amounts incurred for the year amounted to $750 million (2010: $735 million) and the amounts due to the Government

as at 31 March 2011 with respect to the above services amounted to $2 million (2010: $nil).

(b) The Authority has also entered into agreements with the Government under which the Government provides electrical

and mechanical maintenance services at the airport. The amounts incurred for these services for the year amounted to

$120 million (2010: $123 million). As at 31 March 2011, the amounts due to the Government with respect to the above

services amounted to $67 million (2010: $60 million).

(c) Pursuant to a shareholders’ agreement dated 21 August 2003, the Authority and the Government have formed a

company, IEC Holdings Limited, in which the Authority holds an 11.8% (2010: 11.8%) equity interest, to participate and

co-operate with a third party consortium in the development, funding and operation of the AsiaWorld-Expo exhibition

centre. The Authority has sub-leased to IEC Holdings Limited to 2047 the leasehold land on which the exhibition centre

has been built (note 13).

(d) The Authority has entered into an agreement with MTR Corporation Limited (“MTRC”), in which the Government is

the majority shareholder, under which MTRC provides maintenance services to the Automated People Mover System

and Cars in both Terminals 1 and 2, and SkyPier. The amount incurred by the Authority for these services for the year

amounted to $47 million (2010: $45 million). As at 31 March 2011, the amounts due to MTRC with respect to the

maintenance service amounted to $23 million (2010: $16 million).

(e) The Authority has provided property rental and management services at the airport to MTRC. The aggregate amounts

received for the year amounted to $7 million (2010: $8 million). As at 31 March 2011, the aggregate amounts due from

MTRC amounted to $nil (2010: $0.4 million).

(f) The Authority has provided property management services, fitting-out works and other services at the airport to

various Government departments, agencies and Government controlled entities. The aggregate amounts received for

the year amounted to $18 million (2010: $18 million). As at 31 March 2011, the aggregate amounts due from these

departments, agencies or entities amounted to $4 million (2010: $1 million).

(g) The Authority has provided property rental at the airport to Hongkong International Theme Parks Ltd (“HKITP”), in which

the Government is the majority shareholder. The aggregate amounts received for the year amounted to $29 million

(2010: $37 million). As at 31 March 2011, there was no outstanding amount due from HKITP (2010: $nil).

(h) The Authority has received various administrative, building plan submission and other services from various Government

departments, agencies and Government controlled entities. The aggregate amounts paid for the above services, and

aerodrome licence and other fees for the year amounted to $11 million (2010: $12 million). As at 31 March 2011, there

was no outstanding amount due to these departments, agencies or entities (2010: $nil).

(i) AVSECO, a subsidiary of the Authority, has provided security-related services to various Government departments,

agencies and Government controlled entities other than the Authority. The aggregate amounts received for the

year amounted to $29 million (2010: $40 million). As at 31 March 2011, the aggregate amounts due from these

departments, agencies or entities amounted to $3 million (2010: $3 million).



25. Immediate and Ultimate Controlling PartyAs at 31 March 2011, the immediate parent and ultimate controlling party of the group is the Hong Kong SAR Government.

26. Accounting Judgements and Estimates(a) Critical accounting judgements in applying the group’s accounting policies

In applying the group’s accounting policies, management has made the following accounting judgements:

(i) Interest in leasehold land

On 1 December 1995, the Authority was granted the rights to the airport site at Chek Lap Kok for a nominal land

premium of $2,000. The Authority was responsible for all of the costs for the formation of the airport site, with

respect to which $11,571 million was initially incurred. The land formed is considered to have all the characteristics

of land in Hong Kong and will revert to the lessor at the end of the Land Grant. Such cost is considered to have been

incurred to obtain the benefits of a leasehold land held under an operating lease. Accordingly, the land premium

and the land formation costs have been classified as interest in leasehold land under fixed assets. Upon the granting

of finance leases of portions of the land concerned, the cost of leasehold land excluded from the balance sheet is

based on an apportionment of the overall land cost.

(ii) Sub-lease of leasehold land

The Authority sub-leases part of its interest in leasehold land to various Government departments, agencies or

Government controlled entities at ‘nil’ rental for substantially the full period of the Land Grant, to provide services

for the sole benefit of the airport and its users. It is considered that as these sub-leases are for the sole benefit of

the Authority for enhancing services at the airport, it is in substance held for the full and exclusive benefit of the

Authority and accordingly such sub-leases continue to be treated as interest in leasehold land under fixed assets in

the financial statements of the Authority and are not derecognised.

(iii) Interests in jointly controlled entities

HXIA receives airport construction fee subsidies (“ACF”) and certain other subsidies for airport development

purposes from the PRC government which are required to be treated as a capital contribution in HXIA’s PRC

statutory financial statements. The group has equity accounted for such items according to its shareholding

percentage in the consolidated income statement on the basis that all shareholders of HXIA can enjoy the economic

benefits arising from the ACF and other subsidies received. This accounting treatment is consistent with those for

publicly listed airports in the PRC. As the ACF and other subsidies may only be used for restricted purposes and are

not distributable, the group transfers such amounts from retained profits to the capital reserve. As at 31 March

2011, the group’s share of net assets of HXIA includes $360 million (2010: $228 million) in respect of such non-

distributable ACF and other subsidies.

(b) Major sources of estimation uncertainty

Notes 15 and 21(f) contain information about the assumptions and their risk factors relating to defined benefit

retirement obligations and the fair value of financial instruments respectively. Other major areas of estimation

uncertainty are as follows:

(i) Estimated useful lives and depreciation of property, plant and equipment

In assessing the estimated useful lives of property, plant and equipment, management takes into account factors

such as the expected usage of the asset by the group based on past experience, the expected physical wear and

tear (which depends on operational factors), technical obsolescence arising from changes or improvements in

production or from a change in the market demand for the product or service output of the asset. The estimation

of the useful life is a matter of judgement based on the experience of the group.

Management reviews the useful lives of property, plant and equipment annually and if expectations are significantly

different from previous estimates of useful lives, the useful lives and, therefore, the depreciation rate for the future

periods is adjusted accordingly.


26. Accounting Judgements and Estimates (continued)

(b) Major sources of estimation uncertainty (continued)

(ii) Impairment of other investments

In assessing whether there is any impairment in the carrying value of the group’s “other investments”,

management takes into consideration the projected volume and activity level and cash flows of the underlying

business of the investments, discounted to present value. These projections are based on assumptions that take into

consideration management’s knowledge of the business environment and their judgement of future performance.

There is inherent uncertainty in the estimation process and the underlying assumptions relating to the future and,

accordingly actual performance may differ significantly from that projected.

(iii) Project provisions

The group establishes project provisions for the settlement of estimated claims that may arise due to time delays,

additional costs or other unforeseen circumstances common to major construction contracts. The claims provisions

which are estimated based on a best assessment of the group’s liabilities under each contract by professionally

qualified personnel may differ from the actual claims settlement.

(iv) Income tax and deferred tax assets

Certain treatments adopted by the Authority in the tax returns in the past years are yet to be finalised with the

IRD. In assessing the Authority’s income tax and deferred taxation in the current year’s financial statements, the

Authority has followed the tax treatments it has adopted in those tax returns, which may be different from the final

outcome in due course.

The group reviews the carrying amount of deferred taxes at each balance sheet date and reduces deferred tax

assets to the extent it is no longer probable that sufficient taxable income will be available to allow all or part of the

deferred tax to be utilised. However, there is no assurance that the group will generate sufficient taxable income to

allow all or part of its deferred tax assets to be utilised.

(v) Valuation of investment properties

The valuation of investment properties requires management’s input of various assumptions and factors relevant to

the valuation. The group appoints independent professionally qualified valuers to conduct annual revaluations of its

investment properties which take into consideration the net income allowing for reversionary potential and other

assumptions which are based on market conditions existing at the balance sheet date, current market sales prices

and the appropriate capitalisation rate.

27. Non-Adjusting Post Balance Sheet EventsAfter the balance sheet date, the Board declared a final dividend for the year ended 31 March 2011, the details of which are

disclosed in note 20(b).



28. Summary of Significant Accounting Policies(a) Changes in accounting policies

The HKICPA has issued two revised HKFRS, a number of amendments to HKFRSs and one new Interpretation that are first

effective for the current accounting period of the group. The group has not applied any new standard or interpretation

that is not yet effective for the current accounting period (note 29). Of these, the following developments are relevant

to the consolidated financial statements:

• HKFRS 3 (revised 2008), “Business combinations”

• Amendments to HKAS 27, “Consolidated and separate financial statements”

• Amendments to HKFRS 5, “Non-current assets held for sale and discontinued operations – plan to sell the

controlling interest in a subsidiary”

• Amendments to HKAS 31, “Interest in joint ventures”

• HK(IFRIC) 17, “Distributions of non-cash assets to owners”

• Improvements to HKFRSs (2009)

• Amendments to HKAS 39, “Financial instruments: Recognition and measurement – Eligible hedged items”

• HK (Int) 5, “Presentation of financial statements – Classification by the borrower of a term loan that contains a

repayment on demand clause”

The amendments to HKAS 39 and the issuance of HK (Int) 5 have had no material impact on the consolidated financial

statements, as the amendments were consistent with the policies already adopted by the group. The other developments

above have resulted in changes in accounting policies but none of these changes in policies have a material impact on

the current or comparative periods for the following reasons:

• The impact of the majority of the revisions to HKFRS 3, HKAS 27, HKFRS 5, HK(IFRIC) 17 and HKAS 31 has not yet

had a material effect on the consolidated financial statements as these changes will first be effective as and when

the group enters into a relevant transaction and there is no requirement to restate the amounts recorded in respect

of such previous transactions.

• The impact of the amendments to HKFRS 3 (in respect of recognition of acquiree’s deferred tax assets) and HKAS 27

(in respect of allocation of losses to non-controlling interests – previously known as minority interests – in excess of

their equity interest) has had no material impact as there is no requirement to restate amounts recorded in previous

periods and no such deferred tax assets or losses arose in the current period.

• The amendment introduced by the Improvements to HKFRSs (2009) omnibus standard in respect of HKAS 17,

“Leases”, has had no material impact on the classification of the group’s leasehold land interests located in the

Hong Kong Special Administrative Region as the land is for a fixed duration of the lease and the lease premiums in

respect of all such leases are fully paid and are being amortised over the remaining length of the lease term.

(b) Subsidiaries and non-controlling interests

Subsidiaries are entities controlled by the group. Control exists when the group has the power to govern the financial

and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights

that presently are exercisable are taken into account.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control

commences until the date that control ceases. Intra-group balances and transactions and any unrealised profits arising

from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses

resulting from intra-group transactions are eliminated in the same way as unrealised gains, but only to the extent that

there is no evidence of impairment.

Non-controlling interests (previously known as “minority interests”) represent the equity in a subsidiary not attributable

directly or indirectly to the Authority and in respect of which the group has not agreed any additional terms with the

holders of those interests which would result in the group as a whole having a contractual obligation in respect of those

interests that meets the definition of a financial liability. For each business combination, the group can elect to measure

any non-controlling interests either at fair value or at their proportionate share of the subsidiary’s net identifiable assets.


28. Summary of Significant Accounting Policies (continued)

(b) Subsidiaries and non-controlling interests (continued)

Non-controlling interests are presented in the consolidated balance sheet within equity, separately from equity

attributable to the equity shareholder of the Authority. Non-controlling interests in the results of the group are presented

on the face of the consolidated income statement and the consolidated statement of comprehensive income as an

allocation of the total profit or loss and total comprehensive income for the year between non-controlling interests

and the equity shareholder of the Authority. Loans from holders of non-controlling interests and other contractual

obligations towards these holders are presented as financial liabilities in the consolidated balance sheet in accordance

with note 28(n) or (o) depending on the nature of the liability.

Changes in the group’s interests in a subsidiary that do not result in a loss of control are accounted for as equity

transactions, whereby adjustments are made to the amounts of controlling and non-controlling interests within

consolidated equity to reflect the change in relative interests, but no adjustments are made to goodwill and no gain or

loss is recognised.

When the group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with

a resulting gain or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when

control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial

asset or, when appropriate, the cost on initial recognition of an investment in an associate or jointly controlled entity.

(c) Jointly controlled entities

A jointly controlled entity is an entity which operates under a contractual arrangement between the group or the

Authority and other parties, where the contractual arrangement establishes that the group or the Authority and one or

more of the other parties share joint control over the economic activity of the entity.

An investment in a jointly controlled entity is accounted for in the consolidated financial statements under the equity

method, unless it is classified as held for sale (or included in a disposal group that is classified as held for sale). Under

the equity method, the investment is initially recorded at cost, adjusted for any excess of the group’s share of the

acquisition-date fair values of the investee’s identifiable net assets over the cost of the investment (if any). Thereafter,

the investment is adjusted for the post acquisition change in the group’s share of the investee’s net assets and any

impairment loss relating to the investment (notes 28(d) and (k)). Any acquisition-date excess over cost, the group’s share

of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the

consolidated income statement, whereas the group’s share of the post-acquisition post-tax items of the investees’ other

comprehensive income is recognised in the consolidated statement of comprehensive income.

When the group’s share of losses exceeds its interest in the jointly controlled entity, the group’s interest is reduced to nil

and recognition of further losses is discontinued except to the extent that the group has incurred legal or constructive

obligations or made payments on behalf of the jointly controlled entity. For this purpose, the group’s interest is the

carrying amount of the investment under the equity method together with the group’s long-term interests that in

substance form part of the group’s net investment in the jointly controlled entity.

Unrealised profits and losses resulting from transactions between the group and its jointly controlled entity are

eliminated to the extent of the group’s interests in the jointly controlled entity, except where the unrealised losses

provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in profit or

loss.

When the group ceases to have joint control over a jointly controlled entity, it is accounted for as a disposal of the

entire interest in that jointly controlled entity, with a resulting gain or loss being recognised in profit or loss. Any interest

retained in that former jointly controlled entity at the date when joint control is lost is recognised at fair value and this

amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial

recognition of an investment in a jointly controlled entity.




(d) Goodwill

Goodwill represents the excess of the cost of an investment in a jointly controlled entity over the group’s interest in the

net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities as at the acquisition date. In respect

of an investment in a jointly controlled entity, the carrying amount of goodwill is included in the carrying amount of the

interest in the joint controlled entity and the investment as a whole is tested for impairment whenever there is objective

evidence of impairment (note 28(k)).

Any excess of the group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent

liabilities over the cost of an investment in a jointly controlled entity is recognised immediately in profit or loss.

On disposal of a jointly controlled entity, any attributable amount of goodwill is included in the calculation of the profit

or loss on disposal.

(e) Other investments

Investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot

be reliably measured are classified as other investments and recognised in the balance sheet at cost (which includes the

transaction price and attributable transaction costs) less impairment losses at each balance sheet date.

Impairment losses are measured as the difference between the carrying amount of the financial asset and the estimated

future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of

discounting is material. Impairment losses for equity securities carried at cost are not reversed.

(f) Derivative financial instruments

Derivative financial instruments are recognised initially at fair value. At each balance sheet date the fair value is

remeasured. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss, except where

the derivatives qualify for cash flow hedge accounting (note 28(g)).

(g) Accounting for derivative financial instruments and hedging activities

The group designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm

commitment (fair value hedges) or (2) hedges of the variability in cash flows of a recognised asset or liability or a highly

probable forecast transaction or the foreign currency risk of a committed future transaction (cash flow hedges).

(i) Fair value hedges

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or

loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged

risk.

(ii) Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges

is recognised directly in other comprehensive income and accumulated separately in equity in the hedging reserve.

Amounts accumulated in equity are reclassified from equity to profit or loss in the periods when the hedged

transaction affects profit or loss. The gain or loss relating to the ineffective portion is recognised immediately in

profit or loss.

When a hedging instrument expires or is sold, terminated or exercised, or no longer meets the criteria for hedge

accounting; or the group revokes designation of the hedge relationship but the hedged forecast transaction is still

expected to occur, the cumulative gain or loss at that point remains in equity until the transactions occurs and it is

recognised in accordance with the above policy. If the hedged transaction is no longer expected to take place, the

cumulative unrealised gain or loss is reclassified from equity to profit or loss immediately.

(iii) Derivatives that do not qualify for hedge accounting

Changes in the fair value of any derivative financial instruments that do not qualify for hedge accounting are

recognised immediately in profit or loss.



(h) Fixed assets(i) The Authority was responsible for all of the costs of the formation of the airport site. The land formation cost and

the land premium have been classified as interest in leasehold land under fixed assets. Interest in leasehold land is stated in the balance sheet at cost less accumulated amortisation and impairment losses (note 28(k)).

(ii) Investment propertiesInvestment properties include leasehold land and its related improvements and/or buildings held to earn rental income. These include land held for a currently undetermined future use and property that is being constructed or developed for future use as investment property.

Investment properties are stated in the balance sheet at cost net of accumulated depreciation and impairment losses (note 28(k)). Investment properties are depreciated over their estimated useful lives or unexpired term of the lease, whichever is shorter. Rental income from investment properties is accounted for as described in note 28(t).

(iii) Other property, plant and equipment are stated in the balance sheet at cost less accumulated depreciation and impairment losses (note 28(k)).

(iv) Repairs and maintenance expenditure in respect of fixed assets is charged to profit or loss as and when incurred.

(v) Gains or losses arising from the retirement or disposal of an item of other property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

(vi) Construction in progressAssets under construction and capital works are stated at cost. Costs comprise direct costs of construction, such as materials, direct staff costs, an appropriate proportion of production overheads, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and net borrowing costs (note 28(n)) capitalised during the period of construction or installation and testing. Capitalisation of these costs ceases and the asset concerned is transferred to fixed assets when substantially all the activities necessary to prepare the asset for its intended use are completed, at which time it commences to be depreciated in accordance with the policy detailed in note 28(i).

(vii) Leased assetsLeases of assets under which the group assumes substantially all the risks and rewards of ownership are classified as being held under finance leases and treated as if the group owned the assets outright. Leases of assets under which the group has not been transferred substantially all the risks and rewards of ownership are classified as operating leases.

Where the group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

When the group leases out assets under operating leases, the assets are included in the balance sheet according to their nature and are depreciated in accordance with the group’s depreciation policies set out in note 28(i) below. Revenue arising from operating leases is recognised in accordance with the group’s revenue recognition policies set out in note 28(t) below.

When the group leases out its interest in leasehold land up to substantially the full period of the underlying Land Grant and the related risks and rewards are substantially transferred to the lessees, such leases are accounted for as finance leases. The interest in leasehold land is derecognised and the differences between the carrying amount of the interest in leasehold land and net proceeds received for such arrangements are recognised in profit or loss from the commencement dates of such finance leases.




(i) Depreciation

Depreciation is calculated to write off the cost of items of fixed assets less their estimated residual value, if any, using the

straight-line method over their estimated useful lives.

The estimated useful lives are:

Interest in leasehold land Unexpired term of lease

Airfields:

Runway base courses, taxiways and road non-asphalt layers,

aprons and tunnels

15 years to unexpired term of lease

Runway wearing courses, taxiways and road asphalt layers,

lighting and other airfield facilities

5 to 25 years

Terminal complexes and ground transportation centre:

Building structure and road non-asphalt layers Unexpired term of lease

Road asphalt layers, building services and fit-outs 5 to 25 years

Access, utilities, other buildings and support facilities:

Road and bridge non-asphalt layers 20 years to unexpired term of lease

Road and bridge asphalt layers, other building and support facilities 5 to unexpired term of lease

Utility supply equipment 5 to 25 years

Systems, installations, plant and equipment 3 to 25 years

Furniture, fixtures and equipment 3 to 15 years

Investment properties:

Building structure Unexpired term of lease

Building services and fit-outs 7 to 25 years

Furniture, fixtures and equipment 5 to 15 years

Where parts of an item of other property, plant and equipment have different useful lives, the cost of the item is

allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset

and its residual value, if any, are reviewed annually.

(j) Intangible assets (other than goodwill)

Intangible assets that are acquired by the group are stated in the balance sheet at cost less accumulated amortisation

(where the estimated useful life is finite) and impairment losses (note 28(k)).

Amortisation of intangible assets with finite useful lives is charged to profit or loss on a straight-line basis over the

assets’ estimated useful lives. The group’s intangible asset, which is a franchise with a finite useful life, is amortised from

the date it became available for use over the franchise period of 20 years. The period and method of amortisation are

reviewed annually.



(k) Impairment of assets

(i) Internal and external sources of information are reviewed at each balance sheet date to identify indications that

the following assets may be impaired, or an impairment loss previously recognised no longer exists or may have

decreased:

• interest in leasehold land;

• investment properties;

• other property, plant and equipment;

• intangible assets; and

• investments in jointly controlled entities.

If any such indication exists, the asset’s recoverable amount is estimated. The recoverable amount of an asset is

the greater of its fair value less costs to sell and value in use. In assessing value in use, the estimated future cash

flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments

of the time value of money and the risks specific to the asset. An impairment loss is recognised in profit or loss if

the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount.

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the

recoverable amount. A reversal of an impairment loss is limited to the asset’s carrying amount that would have been

determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to

profit or loss in the year in which the reversals are recognised.

(ii) Interim financial reporting and impairment

At the end of the interim period, the group applies the same impairment testing, recognition and reversal criteria as

it would at the end of the financial year. Impairment losses recognised in an interim period in respect of unquoted

equity securities carried at cost are not reversed in a subsequent period.

(l) Stores and spares

Stores and spares are carried at the lower of cost and net realisable value. Stores and spares are stated at cost and

comprise all costs of purchase and costs incurred in bringing the stores and spares to their present location and condition

and is computed on a weighted average cost basis, less provision for obsolescence. The amount of any write-down of

stores and spares to their net realisable value and provision for obsolescence are recognised as an expense in the period

the write-down or provision occurs. Any obsolete and damaged stores and spares are written off to the profit or loss.

(m) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for

impairment of doubtful debts, except where the receivables are interest-free loans made to related parties without any

fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost

less allowance for impairment of doubtful debts.

Impairment losses for bad and doubtful debts are recognised when there is objective evidence of impairment and are

measured as the difference between the carrying amount of the financial asset and the estimated future cash flows,

discounted at the asset’s original effective interest rate where the effect of discounting is material.

Impairment losses for trade debtors included within trade and other receivables are recorded using an allowance

account. When the group is satisfied that recovery is remote, the amount is written off against trade debtors directly

and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts

previously charged to the allowance account are reversed against the allowance account.




(n) Interest-bearing borrowings and borrowing costs

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial

recognition, the unhedged portion of interest-bearing borrowings is stated at amortised cost with any difference

between the amount initially recognised and redemption value being recognised in profit or loss over the period of the

borrowings, together with any interest and fees payable, using the effective interest rate method. Subsequent to initial

recognition, the carrying amount of the portion of interest-bearing borrowings, which is the subject of a fair value

hedge, is remeasured and the change in fair value attributable to the risk being hedged is recognised in profit or loss to

offset the effect of the gain or loss on the related hedging instrument.

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily

takes a substantial period of time to get ready for its intended use are capitalised as part of the cost of the asset. Other

borrowing costs are expensed in the period in which they are incurred.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the

asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its

intended use are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities

necessary to prepare the qualifying asset for its intended use are interrupted or complete.

(o) Trade and other payables

Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of

discounting would be immaterial, in which case they are stated at cost.

(p) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand, demand deposits with banks and other financial

institutions and short-term, highly liquid investments that are readily convertible into known amounts of cash and which

are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(q) Employee benefits

(i) Short term employee benefits and contributions to defined contribution retirement plans

Salaries, performance annual bonuses, paid annual leave, contributions to defined contribution retirement plans

and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by

employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated

at their present values.

The Authority and its subsidiaries in Hong Kong are required to make contributions to Mandatory Provident Funds

under the Hong Kong Mandatory Provident Fund Schemes Ordinance. Such contributions are recognised as an

expense in profit or loss as incurred.

The employees of the subsidiary in the PRC participate in a defined contribution retirement plan managed by the

local governmental authorities whereby the subsidiary is required to contribute to the plan at fixed rates of the

employees’ salary costs.

(ii) Defined benefit retirement plan obligations

The group’s defined benefit retirement cost and the present value of defined benefit obligations in respect of the

group’s defined benefit retirement plan is calculated annually by the plan’s actuary using the projected unit credit

method.

The net charge to profit or loss mainly comprises the current service cost, plus the unwinding of the discount on

the present value of the plan liabilities less the expected return on plan assets, and is presented in staff costs and

related expenses.



(q) Employee benefits (continued)

(ii) Defined benefit retirement plan obligations (continued)

The amount recognised in the balance sheet represents the group’s net exposure to the plan. It is calculated as the

present value of defined benefit obligations less the fair value of the plan assets adjusted to exclude any cumulative

unrecognised actuarial gains and losses. Where the fair value of the plan assets exceeds the present value of the

defined benefit obligations, the asset recognised by the group is limited to the total of any cumulative unrecognised

net actuarial losses and past service costs and the present value of any future refunds from the plan or reductions

in future contributions to the plan.

The present value of the defined benefit obligations and the cumulative unrecognised actuarial gains and losses are

computed as follows:

The group’s present value of defined benefit obligations is determined by estimating the amount of future benefit

that employees have earned in return for their service in the current and prior periods allowing for future salary

increases until the date of termination of employment and that benefit is discounted to determine the present value

of the obligation. The discount rate is the yield at the balance sheet date on high quality corporate bonds that have

maturity dates approximating the terms of the group’s obligations. If there is no sufficiently deep market in such

bonds, the market yield in government bonds is used.

Actuarial gains and losses comprise experience adjustments (i.e. the effects of differences between the previous

actuarial assumptions and what has actually occurred), as well as the effects of changes in actuarial assumptions.

Actuarial gains or losses are generally not recognised if they are at or below a threshold amount. This threshold

is set at ten percent of the greater of (i) the present value of the defined benefit obligations and (ii) the fair value

of plan assets. To the extent that the net cumulative actuarial gains or losses exceed that threshold calculated at

the end of the previous reporting period, that portion is recognised in profit or loss over the expected average

remaining working lives of the employees participating in the plan.

(r) Income tax

(i) Income tax for the year comprises current tax and movements in deferred tax assets and liabilities and are

recognised in profit or loss except to the extent that they relate to items recognised in other comprehensive income

or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or

directly in equity respectively.

(ii) Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively

enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

(iii) Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the

differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax

bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it

is probable that future taxable profits will be available against which that asset can be utilised, are recognised.

Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary

differences include those that will arise from the reversal of existing taxable temporary differences, provided those

differences relate to the same taxation authority and the same taxable entity and are expected to reverse either in

the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss

arising from the deferred tax asset can be carried back or forward.




(r) Income tax (continued)

(iii) (continued)

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising

from goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither

accounting nor taxable profit (provided they are not part of a business combination) and temporary differences

relating to investments in subsidiaries to the extent that, in case of taxable differences, the group controls the

timing of the reversal and it is probable that the differences will not reverse in the foreseeable future or, in the case

of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of

the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance

sheet date. Deferred tax assets and liabilities are not discounted.

Additional income taxes that arise from the distribution of dividends are recognised when the liability to pay the

related dividends is recognised.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other

and are not offset.

(s) Provisions and contingent liabilities

Provisions are recognised for other liabilities of uncertain timing or amount when the group has a legal or constructive

obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle

the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at

the present value of the expenditure expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated

reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is

remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or

more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is

remote.

(t) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the

economic benefits will flow to the group and the revenue and costs, if applicable, can be measured reliably, revenue is

recognised in profit or loss as follows:

(i) Airport charges, representing landing charges, parking charges and terminal building charges, are recognised when

the airport facilities are utilised.

(ii) Security charges in respect of aviation security services to passengers are recognised when the airport facilities are

utilised.

(iii) Aviation security services revenue from the provision of security services to airlines, franchisees and licensees is

recognised when the services are rendered.

(iv) Franchise revenue from awarded airside support services, retail revenue from awarded retail licences, advertising

revenue from awarded advertising license, other terminal commercial revenue from leasing of check-in counters

and airline lounges and office rental and other service revenue and recoveries, are recognised on an accruals basis

in accordance with the related agreements.

(v) The consideration received in respect of the sale of a portion of the income from the aviation fuel system is

accounted for as income over the period to which the future income relates and on the basis of the estimated

future quantum of income for each period after allowing for the implicit financing cost therein. The amount

received not recognised as income is included in the balance sheet as deferred income.



(t) Revenue recognition (continued)

(vi) Real estate revenue arising from sub-leases of interest in leasehold land and office buildings is recognised in profit

or loss on a straight-line basis over the periods of the operating leases, except where an alternative basis is more

representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted

are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent

rentals are recognised as income in the accounting period in which they are earned. Amounts received in advance in

respect of sub-leases of interest in leasehold land granted are accounted for as deferred income and are recognised

in profit or loss on a straight-line basis over the periods of the respective sub-leases.

(vii) Income arising from finance leases of interest in leasehold land is recognised at the inception of such leases, when

substantially all the risks and rewards incidental to ownership are transferred to the lessees.

(viii) Dividend income from unlisted investments is recognised when the shareholder’s right to receive payment is

established.

(ix) Interest income is recognised as it accrues using the effective interest rate method.

(u) Translation of foreign currencies

Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates.

Monetary assets and liabilities and non-monetary assets and liabilities that are stated at fair value and are denominated

in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and

losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using

the foreign exchange rates ruling at the transaction dates.

The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the foreign

exchange rates ruling at the dates of the transactions. Balance sheet items, including goodwill arising on consolidation

of foreign operations, are translated into Hong Kong dollars at the closing foreign exchange rates at the balance sheet

date. The resulting exchange differences are recognised in other comprehensive income and accumulated separately in

equity in the exchange reserve.

On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation

is reclassified from equity to profit or loss when the profit or loss on disposal is recognised.

(v) Related parties

For the purposes of these financial statements, a party is considered to be related to the group if:

(i) the party has the ability, directly or indirectly through one or more intermediaries, to control the group or exercise

significant influence over the group in making financial and operating decisions, or has joint control over the group;

(ii) the group and the party are subject to common control;

(iii) the party is an associate of the group or a joint venture in which the group is a venturer;

(iv) the party is a member of key management personnel of the group or the group’s parent, or a close family member

of such an individual, or is an entity under the control, joint control or significant influence of such individuals;

(v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or

significant influence of such individuals; or

(vi) the party is a post-employment benefit plan which is for the benefit of employees of the group or of any entity that

is a related party of the group.

Close family members of an individual are those family members who may be expected to influence, or be influenced

by, that individual in their dealings with the entity.




(w) Segment reporting

Operating segments, and the amounts of each segment item reported in the financial statements, are identified from the

financial information provided regularly to the group’s most senior executive management for the purposes of allocating

resources to, and assessing the performance of, the group’s various lines of business and geographical locations.

Individually material operating segments are not aggregated for financial reporting purposes unless the segments

have similar economic characteristics and are similar in respect of the nature of products and services, the nature

of production processes, the type or class of customers, the methods used to distribute the products or provide the

services, and the nature of the regulatory environment. Operating segments which are not individually material may be

aggregated if they share a majority of these criteria.

29. Possible Impact of Amendments, New Standards and Interpretations Issued but Not Yet Effective for the Year Ended 31 March 2011Up to the date of issue of these financial statements, the HKICPA has issued the following amendments, new standards and

interpretations which are not yet effective for the year ended 31 March 2011 and which have not been adopted in these

financial statements.

Effective for annual periods

beginning on or after

Revised HKAS 24, “Related party disclosures” 1 January 2011

HKFRS 9, “Financial instruments” 1 January 2013

Improvements to HKFRSs 2010 1 July 2010 or 1 January 2011

Amendments to HKAS 12, “Income taxes” 1 January 2012

The group is in the process of making an assessment of what the impact of these amendments is expected to be in the period

of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the group’s

results of operations and financial position.


Five-year Financial & Operational Summary

(in HK$ million) 06/07 07/08 08/09 09/10 10/11

Income Statement

Turnover 7,738 8,577 8,886 9,015 10,583

Operating expenses before depreciation

and amortisation (3,085) (3,292) (3,497) (3,402) (3,570)

EBITDA 4,653 5,285 5,389 5,613 7,013

Depreciation and amortisation (2,014) (2,307) (2,234) (2,191) (2,207)

Interest and finance costs (378) (425) (233) (178) (195)

Share of profits less losses

of jointly controlled entities 88 89 193 177 239

Profit before taxation 2,349 2,642 3,115 3,421 4,850

Income tax (430) (374) (532) (580) (812)

Profit for the year 1,919 2,268 2,583 2,841 4,038

Attributable to:

Equity shareholder of the Authority 1,920 2,273 2,588 2,844 4,035

Non-controlling interests (1) (5) (5) (3) 3

Balance Sheet

Non-current assets 49,792 50,286 50,356 49,431 48,245

Current assets 1,233 1,531 1,508 1,939 2,185

Current liabilities (5,629) (2,455) (3,541) (4,138) (2,666)

Net current liabilities (4,396) (924) (2,033) (2,199) (481)

Total assets less current liabilities 45,396 49,362 48,323 47,232 47,764

Non-current liabilities (10,896) (13,969) (12,285) (10,543) (11,382)

Net assets 34,500 35,393 36,038 36,689 36,382

Share capital 30,648 30,648 30,648 30,648 30,648

Reserves 3,656 4,539 5,185 5,839 5,522

Non-controlling interests 196 206 205 202 212

Total Equity 34,500 35,393 36,038 36,689 36,382

Key Financial and Operational Statistics

Dividend declared (HK$ million) 1,600 2,000 2,200 2,300 3,100

Special dividend declared (HK$ million) – – – 2,200 –

Return on equity 5.6% 6.5% 7.2% 7.8% 11.1%

Total debt/capital ratio 24% 23% 21% 18% 16%

Passenger traffic1, 2 (millions of passengers) 45.1 48.9 47.7 46.9 51.5

Cargo throughput1, 3 (millions of tonnes) 3.6 3.8 3.4 3.6 4.2

Air traffic movements1 (thousands) 283 300 296 280 316

1 “Operational Statistics” is based on the Airport Authority Hong Kong’s traffic data of Hong Kong International Airport only.

2 “Passenger traffic” includes originating, terminating, transfer and transit passengers. Transfer and transit passengers are counted twice.

3 “Cargo throughput” includes originating, terminating and transshipment cargo. Transshipment cargo is counted twice. Airmail is excluded.


AeroflotAeroLogic*Air AsiaAir CanadaAir Cargo Germany*Air ChinaAir FranceAir Hong Kong*Air IndiaAir MauritiusAir New ZealandAir NiuginiAir PacificAirBridgeCargo*ANAAsiana AirlinesAtlas Air*Bangkok AirwaysBiman BangladeshBritish AirwaysCargoitalia*Cargolux*Cargolux Italia*Cathay PacificCebu Pacific Air

China AirlinesChina Cargo Airlines*China EasternChina SouthernContinentalDeccan Cargo & Express*Delta Air LinesDETA Air*Donghai Airlines*DragonairEL AL IsraelEmiratesEthiopian AirlinesEtihad Airways*EVA AirEvergreen*Federal Express*FinnairGaruda IndonesiaHong Kong AirlinesHong Kong ExpressIndonesia AirAsiaJade Cargo*Japan AirlinesJeju Air

Jet AirwaysJetstar Asia AirwaysJett8*Juneyao AirlinesKalitta Air*Kenya AirwaysKingfisher AirlinesKLMKorean AirLufthansaLufthansa Cargo*Malaysia AirlinesMandarin AirlinesMartinair Cargo*Nepal AirlinesNippon Cargo Airlines*Orient ThaiPakistan International AirlinesPhilippine AirlinesPolar Air Cargo*Qantas AirwaysQatar AirwaysRoyal BruneiRoyal JordanianSaudi Arabian Airlines

Shanghai AirlinesShanghai Airlines Cargo*Shenzhen AirlinesSichuan AirlinesSingapore AirlinesSingapore Airlines Cargo*South AfricanSouth East Asian AirlinesSpring AirlinesSriLankanSwiss Air LinesThai AirAsiaThai AirwaysTiger AirwaysTNT Airways*Transmile Air Services*Turkish AirlinesUnited AirlinesUPS*Vietnam AirlinesVirgin AtlanticXiamen AirlinesYangtze River Express*

*Freighter services only

Airlines Operating at HKIA as at March 2011

Scheduled Destinations Served from HKIA as at March 2011

North AsiaBeihaiBeijingBusanChangchunChangshaChengduCheongjuChongqingDalianFukuokaFuzhouGuangzhouGuilinGuiyangHaikou HangzhouHarbinHefeiJinanJinjiangKaohsiungKunmingMeixianNagoyaNanchangNanjingNanningNingboOkinawa Osaka/KansaiQingdaoSanyaSapporoSeoul/Incheon

Shanghai/HongqiaoShanghai/PudongShantouShenyang Shenzhen*ShijiazhuangTaichung/ChingchuankangTaipeiTaiyuanTianjinTokyo/HanedaTokyo/NaritaWenzhouWuhanWuxiWuyishanXiamenXianXuzhouYanchengYichangYiwuZhanjiangZhengzhou

South East AsiaB S BegawanBangkokCebuClarkDenpasarHanoiHo Chi MinhJakartaKoh SamuiKota Kinabalu

Kuala LumpurKuchingManilaMedanPenangPhnom PenhPhuketSingaporeSubang*Surabaya

Middle East/Central Asia/South AsiaAbu Dhabi*Almaty*AmmanBahrainBangaloreChennaiColomboDelhiDhakaDohaDubaiIslamabadJeddahKarachiKathmanduLahoreMumbaiRiyadhSharjah*Tel Aviv

EuropeAmsterdamBarcelona*Brussels*Budapest Ferihegy*Cologne*FrankfurtHahn*HelsinkiIstanbulKrasnoyarsk*Leipzig*Liege*London/HeathrowLondon/Stansted*Luxembourg*Manchester*Milan/MalpensaMoscow/DomodedoroMoscow/SheremetyevoMunichParisRomeStockholm*Zurich

Australasia/Pacific IslandsAdelaideAucklandBrisbaneCairnsGuamMelbourneNadi

PerthPort MoresbySydney

AfricaAddis AbabaJohannesburgMauritiusNairobi

North AmericaAnchorage*Atlanta*BostonChicago/O’hareCincinnati*Columbus*Dallas*DenverDetroitHonoluluHouston*Indianapolis*Los AngelesLouisville*Memphis*Miami*New York/John KennedyNewarkOakland*Ontario*Philadelphia*San FranciscoTorontoVancouver *Freighter services only

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Documents

Annual Report of HKIA