AIR TRAFFIC DEMAND FORECAST In 2008, we handled about 80% of GPRD airports’ international passengers (excluding Hong Kong – Mainland traffic) and about 90% of its international cargo throughput. As long as our handling capacity is not constrained, we are well positioned to continue to capture a handsome portion of this growing market by leveraging our extensive international air network. surrounding airports and airlines’ strategies) that might affect its air traffic demand forecast. Most, if not all, of them have been found to be either having negligible impact or have already been factored into IATA Consulting’s economic models. The assessments on the two most frequently cited factors are set out below. Cross-Strait Direct Flights Hong Kong/Taiwan has for many years been the busiest air route out of HKIA with currently about 50 flights per day. Before crossstrait direct flights first commenced in July 2008, passenger traffic segments potentially impacted by direct flights constituted about 16% (i.e. 7.7 million) of our total throughput in 2007, which has been decreased to 10% (i.e. 4.9 million) in 2010. Cargo traffic was reduced from 17% (i.e. 0.6 million tonnes) ADJUSTMENT FACTORS RELEVANT TO HKIA IATA Consulting has specifically looked into a range of special factors (namely, air services agreements, cross-strait direct flights, trade agreements, travel policy, tourism development, cross-boundary infrastructure development, passengers’ travelling preferences, modal competition from containerised shipping, developments of 18 of our throughput in 2007 to 13% (i.e. 0.5 million tonnes) in 2010. However, this short-term negative impact has been partly mitigated by the relaxation of the policy for Mainlanders to visit Taiwan and the new demand for air travel stimulated by increased cross-strait economic activities. In 2010, overall passenger and cargo traffic between Hong Kong and Taiwan grew 4% and 14% respectively, over 2009. Looking ahead, increasing tourism and trade activities across the strait is expected to stimulate further growth in the Hong Kong/Taiwan passenger and cargo market. High-Speed Rail The high-speed rail would cut current rail travel time by nearly two thirds and is therefore generally expected to compete with air services on short-haul and overlapping markets. With the development of the Express