Hong Kong's Airport Authority has received approval from the Central Government to form a joint venture to operate the airport in the nearby city of Zhuhai, in a plan that could help Hong Kong fend off growing competition from lower-priced transport hubs in southern China.

Analysts said the proposed agreement could enhance Hong Kong airport’s flexibility in handling an expected surge in air-cargo traffic amid booming trade growth in the Pearl River Delta, South China’s industrial hub.

"We welcome the decision of the General Administration of Civil Aviation of China to approve the joint venture cooperation agreement (with Zhuhai airport)," an Airport Authority spokesman said.

He declined to provide further details of the agreement with Zhuhai Airport Group Corp., which operates Zhuhai airport. "We are working out the details and will issue more information in due course."

A spokesman for Zhuhai Airport Group declined to comment on the agreement, though another company official, who asked not to be named, confirmed that an agreement with Hong Kong's Airport Authority “will be completed shortly.”

Hong Kong-based Ming Pao newspaper reported Friday the Airport Authority will invest about 200 million yuan (US$24.66 million) for a 55 percent stake in a joint-venture company that will manage Zhuhai airport for a period of 20 years.

Citing sources, the report said Zhuhai Airport Group will hold the remaining 45 percent stake in the venture, which won't own any of the airport's assets nor take on the airport’s outstanding loans.

"The joint venture will strengthen ties between Hong Kong and the Pearl River Delta, benefiting both Hong Kong and Zhuhai," the Airport Authority's spokesman said. "Both cities will see greater economic benefits as both cargo and passenger traffic continues to grow in the region."

Analysts said Zhuhai's underutilized facility could complement Hong Kong's role as a major air-cargo hub in southern China.

Hong Kong's airport handled 3.4 million tons of cargo last year, up 10 percent from 2004. The cargo facility had capacity of just 3.0 million tons per year when it opened in 1998. Expansion plans are under way and the Airport Authority expects cargo throughput to reach 4.3 million tons by 2010.

Lower handling charges in Zhuhai will also attract cargo carriers to its facilities if adequate investment is committed to improve surrounding infrastructure.

"The major problem with Hong Kong is its high landing fees. Cargo airlines such as FedEx have set up bases in Guangzhou and elsewhere to take advantage of cheaper fees," said Karen Chan, a transport analyst at Credit Suisse in Hong Kong.

Chan said it may take considerable time for synergies in cargo to emerge due to a lack of convenient connections to the airport. More roads need to be built to facilitate access to the airport, she said.

(Shenzhen Daily February 21, 2006)