There’s more room for cargo, so when will the new business come?

By P.T. Bangsberg

t first glance, you could hardly tell there are economic problems across Southeast Asia by the construction-marked landscapes surrounding the region’s airports. From Kuala Lumpur north to Macau, airports have been working on new buildings to handle the growth they hope to see someday. And despite declines in traffic to match currency devaluation across the region, talk of airport privatization has been muted but not completely silenced. In Malaysia, in fact, a sharply contracting economy has hardly dulled airport operators’ hopes for luring some of the region’s battered air trade to the new Kuala Lumpur International Airport and to the airport on the northwestern industrial island of Penang.
Southeast Asia’s airports are “very limited in terms of what they can support,” said Angelo Kokkino, head of the aviation group at McClier, an engineering firm that develops cargo facilities. “That’s why you’ve seen a surge in Asia of developing new, large airports.”
KLIA embodies some of the region’s economic contradictions: Even though the government has postponed massive road projects aimed at making the site more accessible, some of the larger international air forwarders are moving ahead with new operations that they believe will leave them well positioned for a recovery.
“The main reason for our business expansion is Malaysia’s growing importance for international industrial and trading companies, particularly in the high tech and consumer goods sectors,” said Edmund Cheung, general manager for Panalpina Malaysia.
Malaysia is trying to set itself up to win back the freight that has diverted to neighboring Singapore Airport Changi, annually rated among the best airports in the world.
Transport Minister Ling Liong Sik said about 170,000 tons, or 40 percent, of air cargo moves from Kuala Lumpur to Singapore for transshipment each year. Ling said Malaysia is willing to negotiate open skies agreements with “virtually any country in the world” to expand the number of destination cities available for airlines flying out of the country.

Whoever wins new traffic in 1999 will take a share of a much smaller air cargo market.
Economic turmoil caused significant drops in cargo traffic at many Southeast Asia airports last year, figures from Airports Council International show.
Provisional data from the ACI for January-October 1998 show Hong Kong fell 8.5 percent, to 1,356,516 tonnes, compared to the same period in 1997. Singapore’s Changi contracted 4.6 percent to 1,072,381 tonnes and Bangkok fell 7.2 percent to 590,215 tonnes.
ACI data from January-June show lower cargo volumes for other airports, including Kuala Lumpur, off 4.3 percent to 197,819 tonens, and Jakarta, off 21.4 percent to 137,972 tonnes. As of mid-year, traffic at Manila, hit hard by the troubles at staggering Philippine Airlines, dove 17.7 percent to 191,703 tonnes.
The downturn is beginning to cost the airports millions of dollars as they start offering incentives to keep air carriers. Changi, for instance, is taking its landing fees back to 1981 levels with a 10 percent rebate this year, which the airport says will cost some $18 million, and cutting rents on airport warehouses 15 percent for a year starting this July.
Macau International Airport, on the other hand, benefited from the disastrous opening

troubles at Hong Kong’s new Chek Lap Kok to register a 43 percent gain, freight business the newly-modernized airport hopes to use as the foundation of a new air cargo transshipment stronghold. Some believe Macau’s growth may presage greater use of alternative gateways along the Pacific Rim as infrastructure at older airports constrains growth possibilities. Expensive land and high landing fees at older airports closer to cities make it uneconomical to set up cargo hubs, said McClier’s Kokkino.
Analysts say Macau offers a good base for companies operating chiefly on the western side of the Pearl River Delta — a hub of industry — not needing the ultra-sophisticated facilities at Hong Kong. Macau International Airport says it handled 65,167 tons last year. Since its November 1995 opening, the airport has handled 135,000 tons of freight. “We feel very satisfied about the fact that the airport retained growth under the circumstances of Asian economic depression in 1998,” said Joao Manuel de Sousa Moreira, airport chairman of the Macau International Airport Co.
Macau returns to Chinese sovereignty at the end of 1999 after some 450 years under Portuguese control. The airport serves 13 airlines operating 390 flights a week to 25 destinations around the world, 13 in China.

With the fleets of national carriers such as Garuda Indonesia contracting, many airports are hard-pressed to find the new business that will bring cargo traffic.
But Malaysia Airports Bhd., the government-run operator, has been sending people on overseas study trips to bring the new Sepang airport up to standard. After a troublesome start to the new KLIA, Ling says processes have improved (in one of the more prosaic statistics released by any airport, KLIA officials say they destroyed some 3,340 rats in the six months ending Jan. 30). But the airport is still 40 miles from downtown Kuala Lumpur; the old Subang airport is more than three times closer to the city.
Improved access is hindered by the country’s worst economic crisis in decades. Malaysia has deferred $1 billion worth of highway projects, including an express highway linking the airport with the business center.
But Ling says that with improvements and new destinations, KLIA forecasts the annual air cargo capacity of 1 million tons will be fully used. Current volume is around 300,000 tons. Large forwarders, perhaps taking advantage of a weakened local currency, are moving in.
Panalpina’s expansion follows a move by Danzas to merge the activities of its Danzasmal subsidiary with those of local agent Allied Link Express. A spokesman for Danzas said the venture “will enable Danzasmal to expand its activities, and the added know-how will position the company to offer its local and international customers in Malaysia better door-to-door logistics solutions.”
In Indonesia, officials announced plans to lease management of Jakarta’s Sukarno Hatta international airport to a foreign company under a 30-year contract. “We have sent the information memo to the foreign bidders,” said Miskul Firdaus, president of state owned airport management company PT Angkasa Pura II.
Privatization is expected to be completed by the end of March, he said, with “strong interest” coming from companies in the United States, Australia, Germany and the Netherlands.
Some new capacity is even moving into Thailand, where the currency crisis began in 1997 with the devaluation of the local baht. Expressing confidence in growing export business, Lufthansa Cargo introduced MD-11 freighters to Thailand in October, tying its cargo network in more closely to that of Thai Airways.
“This new aircraft is the ideal size to expand our frequencies in all areas and overall volume,” said regional sales director David Keary.

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