ENG-2004 — Page 349

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than 70 000 square metres of exhibition space at the airport when it is opened in 2005. SkyPlaza, a multi-purpose development comprising a new departure hall, airline check-in counters, ground transportation facilities and retail and office space, is under construction for commissioning in 2006.

Privatisation of the Airport Authority

In August 2003, the Government announced a plan to start work in preparation for partial privatisation of the AA. A financial adviser was subsequently appointed to provide professional services and assistance. Privatisation will reinforce the airport's first-class operations to bring about more commercial opportunities. It will enhance the AA's access to the capital market and introduce an additional quality stock to add diversity to the local financial markets. In addition, it will offer an opportunity for Hong Kong people to participate in the success of a well-managed company with strong growth potential. Proceeds from privatisation will help strengthen the Government's finances in the short to medium term. As a first step in preparing for the privatisation, the Government optimised the capital structure of the AA in September 2004 by reducing its equity capital by $6 billion. In November 2004, the Government issued a public consultation document to seek the community's views on the regulatory and institutional framework for the privatised AA to help formulate the necessary legislative proposals.

Air Services

The HKSAR Government's policy objective on air services is to maintain the status of Hong Kong as an international and regional aviation centre and to ensure the provision of air links to a wide range of destinations to meet the needs of the travelling public and shippers.

Under the specific authorisation of the Central People's Government, the HKSAR Government continues to negotiate and conclude bilateral Air Services Agreements (ASAs) with aviation partners, providing the legal framework for scheduled air services between Hong Kong and other places. In 2004, the Government concluded new ASAS with Kuwait, Kenya, Iceland and Jordan. By the end of 2004, a total number of 54 ASAs had been concluded.

The Government also actively reviews the traffic rights arrangements with our bilateral partners to expand Hong Kong's aviation network and introduce more competition into the market. In 2004, the Government substantially expanded traffic arrangements with 11 aviation partners, including major partners such as the Mainland, Australia, Thailand, Malaysia, Spain and Russia.

In 2004, the Air Transport Licensing Authority (ATLA) granted nine licences: four to Cathay Pacific Airways (CPA), three to Hong Kong Dragon Airlines (HDA), one to Air Hong Kong (AHK) and one to Hong Kong Express Airways (HKE) (formerly known as Helicopters Hong Kong Limited). At year-end, CPA held nine licences to operate scheduled services to 137 destinations, HDA held 12 licences to operate scheduled services to 109 destinations, AHK held seven licences to operate scheduled services to 57 destinations, CR Airways held two licences to operate scheduled services to five