Hong Kong International Airport (HKIA) is set to begin the construction of a third runway and associated infrastructure.

The HK$150 billion project has been backed by both Hong Kong flag carrier Cathay Pacific, and the International Air Transport Association (IATA), with the interpretation that a third runway is necessary in order to see the aviation industry in Hong Kong flourish.

Construction on the third runway is expected to commence next year, to be completed by 2023, and will help Hong Kong International Airport boost capacity to 100 million passengers and 9 million tons of cargo a year by 2030.

IATA have said that HKIA plays a crucial role as an economic catalyst – Hong Kong is home to some 3,500 regional headquarters and boasts a HK$250 billion tourism industry. The airport serves 63 million passengers and processes 4.4 million tonnes of cargo.

“IATA has long been an advocate of the need for a third runway in Hong Kong. And it is in the interest of everyone in Hong Kong to see the aviation industry flourish. Aviation and aviation-related tourism account for 8.2% of the Hong Kong economy. Increasing HKIA’s capacity to be able to serve 100 million passengers and 9 million tonnes of cargo by 2030 will ensure that the airport continues to be a pillar of Hong Kong’s success—provided the expansion is built, financed and funded wisely,” said Tony Tyler, IATA’s Director General and CEO in a speech to the Foreign Correspondents Club of Hong Kong.

IATA has outlined a framework which will allow Hong Kong’s new infrastructure to be built without increasing airline charges, without placing a burden on taxpayers, without making it more expensive for travellers, without adding an extra burden to shippers and while increasing competitiveness of the hub’s air transport network.

HKIA is consistently profitable, and IATA’s Tony Tyler has suggested the airport use its advantageous financial situation to fund its expansion by borrowing through commercial loans or bonds.

Flag carrier, Cathay Pacific has supported IATA’s suggestions to fund the project by saying that the third runway can be self-funded through existing income streams, especially as the number of passengers moving through the airport continues to grow.

“Hong Kong International Airport is extremely successful. It is the world’s busiest airport for international freight and the third busiest in terms of international passenger traffic. The Airport Authority enjoys the highest net profit of any airport in the world and benefits from strong cash flows, a healthy balance sheet, and growing income from retail and aeronautical streams,” said Ivan Chu, Cathay Pacific Chief Executive.

Cathay Pacific also believes that, as a public body, the Airport Authority should reinvest its income in the development of the third runway, so that the airport can maintain its premier hub status and continue to make an important economic contribution to Hong Kong.

Hong Kong’s air transport network is under pressure to remain competitive, after its share of the market connecting China to the rest of the world shrank from 20 percent to 17 percent between 2005 and 2013.

Its share on the ASEAN to North America market has remained at 10 percent, whereas the airport’s share on ASEAN to European traffic has contracted to 2.4 percent from 3.3 during the same period.

“There are lots of reasons why these changes are happening. The Middle East airlines are proving to be strong competitors with efficient and affordable hubs being a central piece of their success. And hubs closer to Hong Kong continue to improve their offerings to enhance the competitiveness of their networks,” said Mr Tyler.