Leading Asia-Pacific hubs continue to invest in capacity and service upgrades while infrastructure, handling processes and over-zealous regulations remain a challenge in rising Indonesia and Vietnam, report airlines and forwarders
Air cargo volumes across much of Asia Pacific may have been stagnant for the last two years, but investment in fresh airport cargo handling capacity,
new support services and technology has continued to move forward apace, as competition between airports and handlers for scarce cargo heats up.
The capacity expansion is most apparent at Hong Kong International Airport (HKIA). Phase one of the new HK$5.9 billion Cathay Pacific Cargo Terminal is set to launch on the market on 21 February, catering initially for in-group carriers Cathay Pacific and Dragonair. A second-phase launch in the summer will see the terminal also start handling transhipment and import cargo and managing empty ULD release, with full-scale operations commencing in the second half of the year when the facility − designed, built and operated by Cathay Pacific Services Ltd, a wholly-owned subsidiary of Cathay Pacific Airways − will also compete for third-party business.
Although there may be ebbs and flows in the growth and development of air cargo volumes from one year to another, spokesman Ivan Chan says China is going to remain an important player in the global economy for a long time to come. “That will include moving goods manufactured there outbound to other countries, but also bringing goods in as the mainland Chinese people choose to broaden their purchases to globally produced products,” he says. “Whatever the short- or long-term development, we believe Hong Kong is going to have a significant role, and that’s why we will be beginning the first phase of opening our new cargo terminal in February.”
When fully operational, the facility will boast a gross floor area of 240,000 sqm, with 2,245 container storage system positions, a 563 sqm livestock area and a HK$1.4 billion material handling system provided by Siemens. Its designed annual capacity of 2.6 million tonnes will eventually take HKIA’s total annual capacity to 7.9 million tonnes.
“This facility is designed to offer our customer airlines the advantage of extended cut-off times, last-minute cargo acceptance and reduced connection handling time for transhipments due to a strategic mix of just-in-time operations and advanced technology,” said Algernon Yau, CEO of Cathay Pacific Services. “As we move forward and ultimately bring our services fully on-line, we will further enhance Hong Kong’s position as a world-leading air cargo hub.”
For HKIA’s two established cargo handlers, AAT and Hong Kong Air Cargo Terminals Limited (Hactl), the new 2.6m tonnes of cargo capacity at HKIA presents a major challenge. Hactl handled around 70% of HKIA’s throughput in 2012, recording the second-best year in the company’s history following a 6.2% fourth-quarter volume increase. This took the total annual throughput to 2.8m tonnes, up 2.1% compared to 2011 and just 4.2% short of the company’s 2010 record.
But the migration of Hactl original and biggest customer will reduce the company’s throughput by around 35% in stages during 2013. Executive director Lilian Chan says that despite continuing uncertainty in Europe and the US and the loss of Cathay’s traffic, the strong end to 2012 was cause for optimism, and Hactl is confident it will retain its position as HKIA’s dominant handler, as the company’s other airline customers expand. But she acknowledges: “2013 will be challenging for us, as Cathay Pacific Airways migrates to self-handling and we relinquish their business in phases throughout the year.”
Hactl expects its other 100 airline customers to gradually take up some slack and help cushion the impact of the loss of Cathay’s volumes, although the opening of the new Cathay cargo terminal will undoubtedly leave HKIA with an excess of cargo-handling capacity in the short term. In the mean time, new revenue streams will also be pursued, says Chan. Hactl is also investing in upgrading facilities and expanding its road-feeder system to plug into HKIA’s three-prong attraction as a gateway for local, Chinese and transhipment traffic.
Despite some recent speculation to the contrary, the company says it is now “easily” meeting the new TSA requirements to x-ray screen 100% of air cargo carried on passenger aircraft to the US, which became mandatory from 12 December. Compliance, says a spokesman, is going smoothly and absorbing only 25% of the company’s 500 tonnes per day of x-ray screening capability.
“The new TSA requirement is only that cargo from Hong Kong to the US carried on passenger aircraft must be screened. For Hactl, that amounts to some 11-13% of all US-bound cargo, and only 25% of our daily x-ray screening capability,” he says. “Should the TSA requirement eventually be expanded to include cargo carried on freighters, that would certainly involve greater volumes and place more pressure on the airport’s air cargo industry – but Hactl is already attuned to this possibility, and will be expanding its screening capability in anticipation.”
Preliminary figures suggest that HKIA just managed to retain its title as the world’s busiest cargo airport last year, after winning the bragging rights in 2010. Volumes at HKIA grew by 2.2% in 2012 to 4.025 million tonnes, just 8,000 tonnes more than Memphis International Airport, where volumes increased 2.5% to 4.017 million tonnes in 2012. Third-ranked Shanghai Pudong International Airport’s volume fell slightly to 2.9 million tonnes.
Over at Bangkok’s Suvarnabhumi Airport, WFS subsidiary Bangkok Flight Services says it has “almost completed” a THB 170 million (US$6 million) upgrade, which includes new picking and retrieval systems, including handheld terminals, with the aim of delivering more transparency to customers and enhancing productivity in order to keep costs down. A spokesman says the company, which now has a 46% share of the Suvarnabhumi cargo market, is averaging 12-13 minutes between receiving orders and delivering cargo to the dock.
Upgraded x-ray machines will also increase screening capacity this year, with the current scanners being replaced by ‘Dual View’ units, which are expected to provide increased effectiveness as well as shortening inspection times. The first ‘Hi-Scan 180180-2is’ was delivered in late December, and the remaining units will be delivered over the next few months.
The upgrade is expected to take annual capacity to over half a million tonnes. Volumes through the facility climbed 12% last year, taking throughput to more than 360,000 tonnes in 2012. David Ambridge, Cargo General Manager at BFS, says the upgrade will allow room to grow for three to five more years, “while we wait for Airports of Thailand to approve our request for the additional land next to us, so that we can build another cargo terminal for the future”.
Korea’s Incheon Airport handled some 2.4 milion tonnes of freight last year, although a spokesman for the airport authority said he was dissatisfied with the hub’s cargo performance in 2012, after most lanes − apart from some intra-Asia trades − recorded year-on-year declines versus 2011, not least because excess cargo supply saw transhipment traffic subside. The airport is opening a second LogisPark this year and is trying to attract manufacturers, global distribution centres and logistics companies in a bid to boost volumes.
“Regarding developing new routes and attracting new airlines, we are focusing on developing new routes in emerging markets, such as western China, South America, and Central Asia,” says the spokesman. He says plans to invest in new cargo services and infrastructure are in place, but are currently being kept under wraps.
Changi Airport Group (CAG), which manages the Singapore hub, is looking to buck the trend that has seen cargo volumes remain static for much of the last ten years. For the first six months of 2013, rebates for landing fees at Changi Airport will be raised to 50% for all scheduled freighter flights. This additional initiative, amounting to S$4.5 million, brings CAG’s total support for the air cargo sector to close to S$20 million since the start of the 2012-2013 financial year, the airport claims.
James Fong, assistant vice president for cargo and logistics development at CAG, says other efforts to boost volumes are also on-going, and he expects volumes to rise in the long-term as Changi’s competitive position improves. “A recent example is the launch of Federal Express’s South Pacific Regional Hub, where Changi Airport constructed aircraft parking stands at the facility and worked with FedEx to ensure its smooth operational start up,” he says. “In addition, CAG is also supporting the e-freight@Singapore initiative, led by the Civil Aviation Authority of Singapore (CAAS).”
The latter made progress last year when CAAS and the Infocomm Development Authority of Singapore selected three consortia, comprising 37 companies and including shippers and forwarders, to develop Infocomm Technology (ICT) solutions to manage paperless air freight processes in Singapore.
The three solutions are designed to link stakeholders in the air cargo supply chain electronically by integrating ICT systems, business processes and data. All three solutions will use inter-operable platforms and standards for data exchanges, giving shippers and freight forwarders wider choices of solutions when these are fully implemented in 2014. Pilot trials among consortia members are scheduled to begin later this year.
“This initiative is expected to benefit the industry with higher efficiency, better service and lower costs,” says Fong.
But despite all the advances being made at Asia’s leading airports, airlines and forwarders would like to see Asia’s leading hubs and secondary destinations make more progress on service quality.
Peter Scholten, VP commercial at Saudia Cargo, said procuring the necessary services for the company’s expanding freight network is not always easy in Asia. While HKIA and Changi offered world-class service and quality and a variety of service providers, elsewhere choices on the ground and at the ramp were more limited.
“It varies so much; it depends on what’s available,” he says. “In lots of places, there is only one ground handler, so you have to work with them. Elsewhere there is choice, so we can put out a tender and choose on price and service. You have to deal with what’s available at every different location.”
Scholten says service quality in Shanghai is “excellent” but in other locations in China, there is sometimes a lack of choice. “It’s hard to compare different places such as Tiajin, Nanjing and Chongqing against one another because they are all very different,” he says. “They have different arrangements for ground handling and different warehouse availability, etc. Every destination is different. India is similar. We serve eight destinations and some airports offer top-quality service,” he adds. “But in places like Mumbai, it can be hard.”
But Paul Tsui, MD of Hong Kong’s Janel Group, a leading air cargo forwarder, as well as chairman of the Federation of Asia Pacific Aircargo Associations (FAPAA), believes airports in Asia have made major improvements in recent years in terms of matching benchmarks in the US and Europe. He says infrastructure and service in China is increasingly sophisticated and able to accommodate large volumes. However, he says more could also be done in terms of providing shippers and their representatives with human resources to perform security tasks and ensure protection of cargo from the environment, while greater use of single customs windows would speed processing of cargo.
He believes operators in Asia could also be more proactive in meeting new security compliance regulations. “Many airports are sitting back and applying a ‘wait and see’ strategy,” he says. “I think they should be more aggressive in monitoring international security compliance regulations to cooperate with future requirements, as some of the initiatives will take time to implement.”
Michael Blaufuss, senior vice president for air freight at Agility Logistics, says airports in the Far East, such as Singapore, Hong Kong, and Incheon, are very well developed and often operating on a higher efficiency level than counterparts in Europe or the US. But “airports in South Asia still need a lot of improvements to reach EU, US and Far East standards”, he adds. Bureaucracy and overly zealous regulations are also often challenges, while a lack of capacity is an issue in some areas. “There are airports in south Asia and south-east Asia that need infrastructure upgrades and considerable handling process improvements,” he adds.
Charles Kaufmann, head of air freight and value-added services at DHL Global Forwarding, echoes his peers in praising major hubs such as Incheon, HKIA and Singapore, but says elsewhere cargo users face major headaches, including poor service by airlines’ handling agents in some fast-growing countries, and warehouse facilities that are sometimes too small, which, in India for example, often leads to delays. He names India, Vietnam and Indonesia as countries that urgently need infrastructure and handling upgrades due to rising demand.