(Bloomberg) -- It could be one of the world’s most expensive white elephants.

Hong Kong is scheduled to open a third runway at its airport on Friday, part of a HK$141.5 billion ($18 billion) project that will increase its footprint by 50%, adding 650 hectares (1,606 acres), equivalent to the size of Gibraltar. 

Also under construction is a HK$20 billion entertainment, retail and commercial complex being built by local conglomerate New World Development Co. that will be larger than New York’s Grand Central Terminal.

It’s all designed to solidify the city’s role as a global aviation hub, but comes at a time when the government’s flight bans and quarantine rules have crushed demand for air travel to and from Hong Kong.

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The policies “seem to have been almost designed to try to kill off Cathay Pacific and the Hong Kong hub,” said Robert Boyle, founder of London-based aviation advisory Gridpoint Consulting.

Only 545,000 passengers passed through the airport in the first five months of 2022 versus 31.4 million in the same period of 2019.

After more than two years of isolation, Hong Kong was “off the map” as a global hub, the head of the International Air Transport Association said in April.

“Every day that passes it becomes more difficult for Hong Kong,” IATA director general Willie Walsh said last month, speaking at an industry summit. “I think it’s going to be a really hard job for Hong Kong to regain its former glory.”

Read more: Hong Kong Halts Covid Flight Bans That Caused Travel Chaos

Hong Kong on Thursday announced it would suspend a system that banned airline routes that brought infected passengers to the city. The policy had led to the temporary cessation of 100 flight routes this year, discouraging carriers from flying to the financial hub.

Infrastructure investments are meant for the long term, but even when the city eventually moves away from its pandemic policies, it risks losing its competitiveness to Asian rivals that have reopened their borders faster, said Natixis SA Chief Asia Pacific Economist Alicia Garcia Herrero. “Hong Kong really needs to move as soon as possible,” she said. “It’s hard to pinpoint a date of no return. We are close to that already.”

Singapore, meanwhile, is leading the region’s air travel revival. The Southeast Asian country’s Changi Airport last month announced it will reopen two terminals that were shuttered due to Covid-19 as travel springs back faster than expected.

Dubai and Doha, both of which compete with Hong Kong as air transit hubs, managed to keep large volumes of flights moving throughout the pandemic.

Hong Kong airport’s current expansion project is the biggest since the airfield opened in 1998, having been at the center of a controversy between China and the UK.

The British colonial government announced a replacement for Kai Tak, the cramped, World War Two-era airport near the city center, about a decade before the return to Chinese rule, but Beijing officials were angry about the plans to finance it.

Still, all was quickly forgiven as Hong Kong International Airport became critical in solidifying Hong Kong’s role as a global hub for aviation. By 2018, more than 74 million passengers traveled through it, compared to 29.5 million at Kai Tak in 1996.

In 2019, though, pro-democracy demonstrations rocked the city, depressing its attractiveness as a tourist destination, and then in 2020, the pandemic hit.

Airport Authority Hong Kong on Wednesday posted a second consecutive fiscal year loss, taking its total losses during the pandemic to HK$7.4 billion. Revenue fell for a fourth straight year.

Hong Kong has retained its status as the world’s busiest air cargo hub, a rare bright spot in the pandemic. However, the city’s standing as a hub in global shipping could be a cautionary tale: As recently as 2004, Hong Kong’s port was the world’s busiest, but it now is a distant No. 9, with Shanghai the undisputed frontrunner.

With bigger facilities, more domestic flight connections and easier transfers, China’s airports are on a course to grow their slice of the pie for both passenger and cargo traffic at Hong Kong’s expense.

Beijing’s 80 billion yuan ($11.9 billion) Daxing airport opened in 2019. Shanghai, Guangzhou and other cities are expanding aggressively, too.

Neighboring Guangzhou, with its heavy focus on domestic China travel, leapfrogged Hong Kong to fly 73.3 million passengers in 2019.

Reestablishing flights and routes for hubs like Hong Kong would require a lot of work, said Joanna Lu, head of Asia consultancy with aviation services firm Ascend by Cirium. “Market demand would be very different from pre-Covid times,” she said, pointing to the desire of mainland travelers to fly direct rather than transfer through Hong Kong.

To make travel to and from the mainland easier, the government is considering introducing pre-clearance Chinese customs and immigration facilities in Hong Kong. Travelers from Hong Kong could therefore arrive in China as domestic passengers.

The authority also wants more transportation links between the airport and cities in Guangdong province, as part of the central government’s plan to integrate the region into what it calls the Greater Bay Area.

“All the money is spent well for the future,” said Algernon Yau, former CEO of Greater Bay Airlines who this month joined new Chief Executive John Lee’s government as Secretary for Commerce and Economic Development. “Hong Kong’s future needs investment and all the money put in 11 Skies and the third runway is planning for a bright future,” he said, referring to the new entertainment precinct.

Hong Kong’s status as an aviation hub hasn’t suffered permanent damage, Cathay Pacific CEO Augustus Tang told Bloomberg News in an interview on June 15.

“Now suffice to say that if Hong Kong remains closed for an extended period,” he said, “obviously, there will be impact.”

Speaking at a public forum on May 26, Fred Lam, the CEO of the AAHK, was optimistic about a rebound. “I hope that air traffic will soon return to the great heights we experienced prior to the pandemic and even surpass these previous levels so that Hong Kong will continue to be a shining city,” he said.

There is still time before the expanded airport is fully operational. After the new runway opens, the AAHK will close one of the two existing ones for an upgrade. The authority expects that work to conclude in 2024.

©2022 Bloomberg L.P.