'In the final analysis, the question is whether the costs of constructing and running the airport should be fully recovered from its users in the long run. It is a choice between securing a better value at IPO (initial public offering) by increasing airport charges in the next few years, or keeping airport charges more competitive at the risk of undermining valuation at IPO, thereby diminishing the taxpayers' investment in AA. This is a difficult choice we have to make.' Consultation paper on airport privatisation AND IF THAT seems a long introductory paragraph to you, let me tell you that it boils down the entire consultation paper to one statement. The rest is just the usual dance of on-the-one-hand and on-the-other-hand. Let me also tell you that the authors of this paper have effectively already made their choice. The document is full of pledges of allegiance to the user-pay principle although I grant you that this may not mean much. Our government mostly observes the principle in the breach these days. But the question is not only one of whether we, the taxpayers, will get a sufficiently high price on privatisation to recoup our investment in the airport. As the chart shows, traffic is building up so rapidly at Chek Lap Kok that we will soon need a third runway. It will be costly and the other big question is thus whether we will be asked to dip into our pockets once again to pay for this runway or whether the airport can be put on a sufficiently sound commercial footing to finance the project on its own. I think the choice is not difficult at all. Our airport charges are already so low that a study last year by the Transport Research Laboratory rates Chek Lap Kok as 44th in charges out of 50 major international airports it reviewed, far below the average. The consultation paper also points out that airport charges amount to no more than 4 per cent of airline operating costs and notes: 'There is no strong evidence to suggest that the level of airport charges will sway airlines' choice of destinations.' Exactly, and thus let us see those charges raised to a level that would induce investors in a privatised entity to value it at its $30 billion book cost, preferably more. This would require perhaps an 8 per cent return on equity, about what British Airports Authority gets, and far above the present level. But now we come to the big protest against this by the airlines. It is that Chek Lap Kok was built only five years ago and ought to be valued as a start-up. In the words of one commentator who could have got them directly from Cathay Pacific (and perhaps did): 'When was Heathrow completed? When did BAA last spend $36 billion on a new airport?' I do not buy it. The argument implies that older airports may recover their costs but new ones may not and even older ones had best not embark on renovations at present day costs. We will have to call a worldwide halt to any further growth in air traffic if this is the case. The only guarantee that investors in new airport facilities can be given is that they will lose money. But if this is the way the airlines look at things, then I have a matching proposal for them. In the future they must establish their air fares on the basis of what aircraft, fuel and staff costs were 30 years ago. If this is how Chek Lap Kok's charges are to be established, then let us make it so for the airlines that use it too. What is sauce for the goose is sauce for the gander. Any takers? Let us also remember that the airlines are already charged less than half of the airport's costs. The remainder comes from shops, restaurants and other commercial activities at the airport. The airlines argue that it is only fair they should be given this subsidy as they bring in passengers and there would be no commercial activity at the airport without them. It is a dubious argument. There would also be no shopping in Tsim Sha Tsui if there was no way of getting there. Does this mean that the rents paid by shops in Tsim Sha Tsui ought to be expropriated for subsidies to the public transport operators that serve the district? Let us say, however, that we indeed thought this natural justice. Very well, then. The Airport Express brings passengers to the airport too. Perhaps its costs ought also to be defrayed by shop rental income at the airport. But you get the picture. The airlines will clutch at any straw argument to cloak their real motive of self-interest. Let us declare ours. As taxpayers who paid for the airport we want a decent return on our money if it is now to be sold to private interests. We can dispense with the objections of the airlines. It was not their investment.