Hangzhou airport, in which Airport Authority Hong Kong holds a 35 percent stake, will choose an investment bank in early July to arrange a 2009 initial public offering in Hong Kong or Shanghai, an Airport Authority senior executive said yesterday.

Hangzhou Xiaoshan International Airport Co wants to raise funds for a multi-year expansion, including the construction of a second terminal, that could cost 7 billion yuan (HK$8 billion) to 8 billion yuan, Airport Authority executive director for finance and investment Raymond Lai Wing-chueng told Reuters. "We view Hangzhou airport as a long-term strategic investment," Lai said. "And from our perspective, we of course would want it to list in Hong Kong."

The Airport Authority may also take an equity stake in Shenzhen airport as it seeks to expand its presence in the Pearl River Delta, Lai told The Standard. "We are actively participating in ... cooperation discussions," Lai said. "We have plans to do many things to deepen our relationship," including taking an equity stake in the Shenzhen airport, he said.

The Airport Authority is not actively working on an initial public offering, Lai said, as it has not received any instructions from the government.

Meanwhile, Lai said the Airport Authority has slashed its target for passenger growth 50 percent this year, given global economic uncertainties.

"I think this year we will have a much lower growth rate," Lai said. "I think 4 percent; 5 percent maximum."

The Airport Authority announced yesterday that total passenger volume rose 8 percent to 48.9 million for the fiscal year ending March 31. Net profit for the year rose 18 percent to HK$2.273 billion. Revenue rose 11 percent to HK$8.577 billion on the back of expanding air traffic and higher retail sales. A dividend of HK$2 billion was declared to the government, up 25 percent from the previous year.

Lai said Taiwan-mainland direct air links would not have a big impact on the Airport Authority over the next few years, as any opening-up was likely to be gradual.