PHOTO: Wall Street Journal.

LONDON – Hong Kong International Airport, one of the most profitable airports in the world, has just announced that they are to introduce a fee for each piece of baggage unloaded from planes onto conveyor belts. This move could cost fliers up to HK$40 million ($5.1 million) or more every year.

Local media are saying that the fee will be around HK$1.32 per bag from July 6 with airlines facing the prospect of paying two sets of baggage costs if they are still under an existing contract with their ground handling company.

Airlines are currently using external handling companies to handle all the duties when an aircraft arrives, such as unloading its baggage from the cargo hold onto carts and putting them on conveyor belts that lead to luggage reclaim.

The aviation authorities in Hong Kong have therefore decided to take the role of moving bags from carts onto the belts by outsourcing this to workers but by passing this cost onto the ground handlers who will ultimately pass it on to the airlines.

According to the Hong Kong Post, sources are saying that “Most airlines are resisting. The authority said they consulted with airlines, but it was all heavy-handed. Initially, they were going to [make this change] at no cost but a few months before implementation, they said it would cost HK$1.32 per bag.”

Although the cost per bag is small, it is also significant because of the amount of bags the airport handles.

Statistics show that 80,000 bags are loaded to/from an aircraft on a daily basis, with 68 million passengers passing through the airport every year.

Criticism From International Organizations

IATA has been critical of this move and has said that the airport has been increasing costs across the board on the operational front to fund the construction for a third runway which is to be ready by 2024.

A spokeswoman for Hong Kong Airport commented on this announcement saying that “The objective of this new arrangement is to ensure sufficient manpower at each of the baggage reclaim belts so that bags could be delivered efficiently to passengers. No revenue is generated for the Airport Authority as the sole purpose of the new arrangement is to enhance operational efficiency, that will, in turn, ensure the quality of service for passengers.”

The Airport Authority stated that money would be clawed back from the airline’s contractors on a “cost recovery” basis.

The Authority also confirmed that they wouldn’t make money from this arrangement.

Many from the likes of the Centre for Aviation have come out against this, with David Bentley, one of CAPA’s chief airport analyst’s saying, “I can’t see what the justification for the charges is. Hong Kong holds a monopoly position, unlike an increasing number of other major airports worldwide.”

A Profitable Venture

The airport recorded profits of HK$11.48 billion ($1.46 billion) from advertising, retail licenses, as well as charging airlines higher fees.

The airport was also able to raise revenues with a new speedier security screening process, with carriers paying up to HK$20 per passenger.

To fund the HK$141.5 billion expansion, the airport has raised plane parking, and landing fees by 27% spread over three years since September 2016.

Overall, it is very unclear why the airport needs to continue to find more money for the expansion, especially as their financials are in a very good position at the moment.

It will be interesting to see whether they are trying to find additional funds because the expansion price tag could increase as time goes on potentially.