Cathay Pacific Coo Ivan Chu speech on third runway at Skal Luncheon

Good afternoon everyone.

I'm very pleased to be invited to speak to you today on a subject that's important for the future prosperity of Hong Kong as a whole.

I'm talking, of course, about the proposal to build a third runway at Hong Kong International Airport.

The Airport Authority opened up public consultation on this issue in June and so far it has been a very lively - and, I believe, very balanced - debate.

We are being asked to consider two options to address a matter of great urgency: how to ensure that our airport, HKIA, has the capacity it needs to remain competitive long into the future.

The first option is to enhance the capacity of the existing two runways - a quicker fix, and a cheaper fix, but one that will only provide a short-term respite from the capacity constraints we face.

The second option - to build a third runway - is the option supported by Cathay Pacific and the vast majority of players in the travel, trade and logistics industries.

There are compelling economic reasons why Hong Kong should build a third runway, and I'll come on to those in a moment.

I'll also talk a bit more about the environmental issues, and how the aviation industry has been working hard to improve the efficiency of our operations.

Before that, I'd just like to say how pleased I am that members of the tourism industry in Hong Kong are lending their voice in support of the third runway option.

Most of you here are connected with tourism in some way.

Tourism - along with finance, trade and logistics, and professional services - is one of the "four pillars" of Hong Kong's economy, all of which are international, not domestic, industries.

These four industries rely heavily on Hong Kong's connectivity to the rest of the world to succeed - and for great connectivity we need a first-class aviation hub.

HKIA has grown over the last decade to become Asia's premier aviation hub - and those of you who fly through it on a regular basis know that it is one of the finest airports you can find anywhere in the world.

Operationally, though, HKIA is a victim of its own success. It will be reaching saturation before the end of the decade - 15 to 20 years ahead of the originally forecast date.

It's clear that Hong Kong's pre-eminence as a hub could be under threat if we don't choose the right solution for meeting our long-term needs. There are plenty of fast-rising hubs in Asia - some of them on our own doorstep - that would be happy to take away our traffic and the economic benefits that come with it.

The choice we now face couldn't be clearer.

Last week, I attended a session at the Legislative Council, along with another 100 or so concerned parties, speaking to the Economic Development Panel on why we favour - or oppose - the option of building a third runway.

It was gratifying to see a number of tourism-related organizations come out clearly in favour of the third-runway option.

The Federation of Hong Kong Hotel Owners, for example, said the third runway is "the only viable way" to ensure the long-term competitiveness of Hong Kong as an important financial, trading and logistics, tourism and professional services hub.

Their submission stressed that connectivity to the world, and especially Mainland China, is the key for Hong Kong's future success - and I couldn't agree more.

The Hong Kong Association of China Travel Organisers, meanwhile, said that it will be too late to make a big noise if we lose air traffic to other cities and can no longer maintain our status as one of the most important aviation hubs.

Why, they asked, don't we look at the facts and prepare for the growth of Hong Kong.

And the facts are these.

Aviation plays a very important role in Hong Kong's economy. In 2008, the total economic contribution made by aviation in Hong Kong and other businesses at HKIA amounted to around 4.6% of the city's GDP.

The four pillar industries I mentioned earlier constitute almost 57% of our GDP - and they rely heavily upon the efficient flow of people and goods made possibly by our superb airport.

If that flow of people and goods becomes constrained, you begin to restrict the growth of these industries that provide jobs to Hong Kong people.

A study by the Chinese University estimates that a fully utilised third runway would create an annual economic contribution of $37 billion Hong Kong dollars to the city

Each additional flight mounted would generate $375,000 to the local economy.

The runway would of course have a positive impact on employment. The Airport Authority estimates that a third runway would increase direct employment on the airport island to 141,000 by 2030, compared with the current 65,000.

That's a lot of jobs for a lot of people. But the employment benefits wouldn't just come at the airport itself.

It is estimated that the aviation industry supports about 268,200 direct, indirect and induced jobs, equivalent to some 7.7% of the total working population.

Hong Kong is, of course, a truly international city and is home to some 3,500 offices of multinational companies that employ around 140,000 people. Most of these companies cited the local transport infrastructure as a significant factor in choosing to locate in Hong Kong.

And we shouldn't overlook the impact of a third runway on tourism - one of the mainstays of the local economy.

The fact that Mainland China is on our doorstep is a fantastic story for Hong Kong. We have already seen huge growth in Mainland visitors and it's really just the beginning.

The World Tourism Organization forecasts that the Mainland will become the world's fourth-largest tourist source market and the largest domestic tourist market by 2015.

Imagine the potential for Hong Kong's tourism industry if we can tap into that phenomenal growth - and connectivity will be the key here as the vast majority of these new tourists will be travelling by air.

We want to make sure they come to or through Hong Kong, and that will only happen if we ensure we can meet our long-term capacity needs.

I hope you'll agree that the economic case for the third runway is a robust and convincing one - but that doesn't mean we can ignore the environmental arguments.

The focus of Cathay Pacific's presentation to Legco last week was on the environmental debate and, more specifically, the huge effort that has been made by the aviation industry to limit its impact.

Aviation is by necessity an efficient industry, and efficiency is the essential first step on the road towards a sustainable development

The aviation industry has committed to reduce its impact and has set challenging targets to reduce emissions.

• We will see an average improvement of 1.5% in fuel efficiency per year up to 2020;

• A cap on aviation-related CO2 emissions from 2020 (that is, carbon-neutral growth); and

• A reduction in net CO2 emissions of 50% by 2050, relative to 2005 levels

These are ambitious targets but we in the aviation industry are clear in our mission to limit our impact.

It is an undeniable fact that the construction of the third runway at HKIA will affect the environment. We can't deny that - aircraft will generate noise and emit carbon.

But Cathay Pacific and other airlines, led by the industry body, IATA, are tackling the issue, with clear targets, plans and a timetable to put a cap on emission levels and to miminise noise levels.

The industry is improving its efficiency all the time. Aircraft entering today's fleets are 70% more fuel efficient than they were 40 years ago, and we have seen a 16% improvement between 2001 and 2008 alone.

The next generation of aircraft coming out of the factories in Seattle and Toulouse will be even more efficient. Aerospace manufacturers in Europe, including Airbus, have instigated research programmes with the aim of achieving a further 50% reduction in CO2 emissions by 2020.

We have seen a significant amount of work and activity in the use of sustainable biofuels in recent months. These biofuels have recently received certification for use in commercial aviation, as a blend with conventional jet fuel.

On 10 August, Air China will conduct a domestic test flight with a Boeing 747-400 that will mark an important milestone in scaling up the supply of aviation sustainable biofuels in China.

Indeed, all airlines and manufacturers are looking to accelerate the introduction of biofuels in our industry.

At Cathay Pacific we have our own biofuel strategy. As a member of the Sustainable Aviation Fuel Users Group, we are now actively engaged in identifying appropriate options to take us forward in this area over the coming months.

This is a very significant opportunity for our airline and we see the strategic potential that biofuels offer in supporting our commitment to reducing our impact on the environment and climate change.

By the time the third runway project comes to fruition, the industry's carbon footprint will have been greatly reduced through a more widespread use of biofuels.

In terms of noise, today's aircraft are much quieter than those of just a decade ago. The noise footprint of a new-generation aircraft is estimated to be at least 15% lower than that of the aircraft it replaces.

By 2020, the noise level generated by aircraft during take-off and landing will be halved compared to today - and improved navigation using the global positioning system will reduce night-time noise levels by routing approaches away from built-up areas.

At Cathay Pacific we are investing more than HK$180 billion in new aircraft, including the new-generation A350s from Airbus that will give us a greener operation.

It's vital that we do this. As the biggest single operator at HKIA, we are serious about our environmental commitment. We want to show that economic development can go hand in hand with environmental protection.

Public consultation on the third runway still has another month or so to run, and the debate will continue to be vigorous. That's the way it should be - this is a huge project that, if given the go-ahead, will have a huge impact on Hong Kong's future.

We shouldn't get discouraged by the fact that the third runway might arouse controversy. That's nothing new in Hong Kong - just think back to previous decades when we faced controversies about projects such as the cross-harbour tunnel or the building of the MTR.

Imagine where we'd be if those infrastructure projects had been shot down!

Ladies and gentlemen, I hope I've been able to give you some useful insights into Cathay Pacific's position on the third runway, and why it is important for all of us to support this essential project.

Thank you.