Hong Kong: A land of air cargo opportunity

The role of Hong Kong as a country is multi-faceted; it is simultaneously a market and manufacturing base in its own right, a gateway to the world for Southern China’s top industrial region, and a cargo hub for the entire Asia region. Little wonder that it is now the world’s number one cargo airport, handling almost four million tonnes of cargo each year.

Within Hong Kong’s air cargo community, Hong Kong Air Cargo Terminals Ltd. (Hactl)’s 80 per cent share of the commercial handling market makes it virtually synonymous with the airport. And looking at analyses of cargo flows through Hactl is like looking at the world in microcosm.

Positive growth

The past four years have been interesting to say the least. 2008 and 2009 saw declines of 3.8 per cent and 8.3 per cent respectively, fuelled by the global recession (but these declines were nowhere near as bad as the 25 per cent dive in volumes experienced on many routes). 2010 marked a sharp rise of 24.8 per cent, creating the appearance of a strong recovery, but this was actually a peak caused by a widespread correction to the running down of global inventories. Normality finally returned in 2011 with a fall of 6.2 per cent year-on-year, although still Hactl’s second most successful year to date. And, despite the continuing economic woes in Europe and the USA, overall traffic in the first half of 2012 has shown signs of a return to a gentle underlying growth.

Comparisons between first half year tonnages for 2002 and 2012 inevitably show growth in all regions; but while traffic to and from Europe and the USA has shown only modest growth over the intervening decade, it is Korea, South East Asia, Taiwan, China, South Asia and the Middle East that have displayed strong increases. These regions have all risen from relative obscurity in 2002 to become important facets of Hactl’s business today.

A significant factor in this trend has been the changing roles of Hong Kong and Hactl: transshipment traffic via Hong Kong is climbing steadily, and now regularly challenges imports for second position behind exports. This is a component of Hong Kong’s growing standing as Asia’s regional hub: within five hours flying time of 50 per cent of the world’s population, and with English as its first language of business, it is a magnet for airline services. Every new airline service adds to its appeal as a transit centre for passengers and cargo. Hactl itself handles 100 airlines under one roof which makes interlining very easy.

There is no reason to think that Hactl’s growth across Asia and the Middle East won’t continue. China will certainly continue to grow as it finds new markets for its goods, and as its increasingly prosperous population acquires ever more sophisticated tastes that cannot all be satisfied domestically. For the future, we are also watching Africa and South America with interest.

Hactl has set up a dedicated Business Development Team to monitor the developments of these markets and provide support to carriers planning to launch services into Hong Kong. Another dedicated team, operating under the banner of Hactl Development Holdings Limited (HDHL), is providing professional consultancy services to overseas airports on cargo terminal operations and IT infrastructure.

TSA implementation

In the U.S. the Transport Security Administration (TSA) originally proposed the screening of all U.S.-bound cargo on passenger planes by the end of 2011. This prompted some 30 per cent of all international airlines to voice concerns over their ability to meet this deadline, without significant disruption to cargo processes and traffic flows. As a result, the TSA announced a revised deadline for the screening of all cargo carried on U.S.-bound passenger planes, which will come into effect on 3 December 2012.

There is no question that the inter-conn – ectivity of the global economy and the air cargo industry that serves it demands that aviation security remains the highest priority, and that it is fully supported by all countries, airports and aviation-related operations around the world. However, there are always practicalities in imple – menting new or additional security measures. It is not sensible or practical to ask the industry to implement different regulations for different markets. So screening procedures and inspection regimes must become more standardised, driven by a more uniform global approach to security requirements by individual countries.

Careful consideration must also be given to what is possible using current technology. At present, there is a need for more sensitive scanning equipment that can satisfactorily distinguish between items that pose a real risk, and others which are innocuous.

Furthermore, regulators must recognise what is realistic, given the nature of air cargo and its underlying need to maintain speed. Air freight carries just one per cent of world trade by weight, but around 40 per cent by value; so anything that makes air cargo either significantly more expensive, or introduces delays that undermine its viability as a transport mode, could create havoc in global trade, causing many commodities to disappear from retailers’ shelves, while others suffer huge increases in price that will effect consumers.

It is anticipated that the TSA – and possibly others – may eventually switch their attention to cargo travelling on freighters. While no firm date has yet been given for such a measure, major cargo airports like Hong Kong, for whom freighters provide a significant proportion of cargo uplift, cannot afford to lose valuable time in hoping this threat may not become a reality.

For any airport with very high volumes of cargo moving on freighters, any move to introduce 100 per cent screening must again take account of practicalities. As much of this cargo tends to be presented as pre-built units at the airport, and as many high-volume cargo airports do not have the facilities or space to switch to accepting this cargo loose and processing it on site, it will be necessary to examine either new technology that can satisfactorily screen preunitised cargo, or find ways of transferring the screening process further back along the supply chain without compromise to security standards.

At Hactl, we are already heavily engaged with our government and other stakeholders to ensure that any future move to 100 per cent screening of cargo on freighters is met without impeding the fast processing of high cargo volumes for which Hong Kong – as the world’s top cargo airport – is renowned.

Thinking outside the box

It is often said that handlers have no control over their own destinies: they are effectively boxed-in by the popularity of their base airport, and the success (or otherwise) of their handled airlines. Both impact the cargo tonnages on which their revenues are directly reliant.

There is some truth to this theory, but it’s not one that Hactl has ever allowed to impede its progress. Very early on in our 36-year history, we recognised that Hong Kong had the potential to achieve great success in air cargo as a major regional hub and gateway to China. But we also recognised that other airports would compete strongly for these roles.

The quality of air cargo is not made in the air, but on the ground: it’s the calibre of ground handling that makes the real difference between carriers. For freighter operators in particular, this is a fundamental deciding factor in their choice of airport: ultimately, the airport that offers the strongest cargo proposition – a blend of market access, interline opportunities and optimum handling efficiency – is the winner.

That was why our first cargo terminal (opened in 1976) at the old Kai Tak Airport was designed with speed and efficiency in mind: with truck gates on two levels to separate exports and imports, and sophisticated container handling equipment to speed processing. The whole operation was also underpinned by our own bespoke Cargo Management System, Computing Systems for Air Cargo (COSAC), which was Hong Kong’s first community system for air cargo. Our big chance came with the opening of Chek Lap Kok in 1998. Although the new airport opened up handling competition for the first time, we still saw it as our role and duty to set and maintain the highest possible standards for air cargo handling in Hong Kong.

Our commitment was clear: we spent $1 billion on our new SuperTerminal 1 facility, embodying the world’s most modern cargo handling systems within a six-storey building. This remains the largest and most technologically advanced cargo terminal in the world. The design capacity of the facility was 2.5 million tonnes per year, which has since been expanded to 3.5 million tonnes through subsequent improve – ments to equipment and processes.

The investment continues: in early 2012, we launched our latest-generation Cargo Management System, COSAC-Plus. This is Hactl’s third-generation system, the culmination of 69,870 man days of development and an investment of $31 million. COSAC-Plus is not just a state-of-the-art cargo management system, but a tool to make Hactl’s airline customers more efficient and customer-friendly.

Staff training and development are essential to Hactl’s success: Hactl employs approximately 2,600 staff and the company has a long-standing employee induction and training programme designed to attract, train and retain high-calibre staff. The success of this policy can be seen in the many staff who have successfully progressed from trainee to senior management.

We offer continuous training and develop – ment opportunities including a Supervisor Development Programme, a four-year pro – gramme for Engineering Trainees (leading to qualification as Chartered Engineers), and other programmes on subjects such as essential supervisory skills, effective communication and writing skills.

The air cargo opportunity

Hactl’s ongoing success is largely due to its proactive stance in marketing. Instead of taking the obvious route of promoting its own services to airlines, it has assumed a wider, ambassadorial role for Hong Kong as a land of air cargo opportunity. Senior Hactl executives are regular speakers at conferences around the world, and miss no opportunity to extol the unique package that is Hong Kong.

Once a carrier has understood the enormous benefits of serving Hong Kong, it’s a relatively simple matter to convince them that Hactl’s resources, track record and neutrality make it the clear handling choice.

The result of all this investment and hard work: 80 per cent share of the Hong Kong commercial handling market, 100 handled carriers, cargo throughput that consistently outperforms the global trends, and commercial success that is the envy of the cargo handling sector.

About the author

Lilian Chan joined Hactl in May 2001 and was appointed Executive Director in 2011. Lilian is responsible for the commercial and competitive strategies, managing customer relations and overseeing business growth and development. Prior to joining Hactl, Lilian held various managerial positions within the Jardine Matheson Group.