Airports throughout China and Asia are looking to gain a share of the expanding Far East air cargo market
s the stampede into China steps up, more airports are vying for a piece of the action. Airports throughout China and in other parts of Asia are promoting themselves as key hubs for passengers and cargo; every big Asian airport, it seems, is the "gateway" for traffic heading into the rapidly developing Far East. And each of these airports claims it is ideal for serving a vast swath of Asia, not just the region or country in which the given airport is located.
Shanghai Pudong, currently the world's airport du jour, is aggressively trying to boost its reach and cement its status as a hub beyond an immediate catchment area. Pudong is a highly sought after destination, the object of desire for a host of international airlines. The Shanghai Airport Management Group is looking to the government to help take advantage of this demand and turn the airport into a wide-ranging hub.
To that end, the airport operator wants Chinese authorities to grant more fifth freedom rights to international carriers for Pudong-beyond services. This policy unfolded last year and produced freighter flights from the likes of Qantas Airways, which flies from Australia to Shanghai via Singapore and on to Los Angeles.
U.S. airlines that run freighters to China seem happy enough with Shanghai. For the most part, UPS, FedEx, Northwest Airlines and Polar Air Cargo are slotting their freighters through Pudong. The only other Chinese airports that have got a slice of that action are Beijing, Shenzhen (courtesy of FedEx) and Guangzhou's Baiyun International Airport, which opened last summer.
Both FedEx and Northwest have filed for traffic rights to Baiyun, and United Airlines wants to mount passenger flights to the airport.
Those points cover U.S. carriers' appetites for the moment, save for limited forays into smaller ponds. UPS currently has no plans beyond Shanghai, Beijing and Guangzhou, according to company spokesman John Wheeler. Provided it gets the full complement of flights it has applied for, Northwest wants to add Xiamen to its network and has earmarked three freighter flights a week to the city.
FedEx has looked at Qingdao for flights that will probably connect to one of its Shanghai-bound flights. Beyond that, no other destinations are on the integrator's radar. "There's only a limited number of (Chinese frequencies) available," said FedEx spokesperson Kristin Krause.
It seems only a matter of time, however, before other destinations come into the picture. According to estimates by UPS, air freight capacity between China and the U.S. must increase by 420 percent over the next 15 years in order to meet demand.
Baiyun, a new kid on the block, still has room to grow. By 2010, it is earmarked to have an annual cargo handling capacity of 2.5 million tons.
Home to China Southern Airlines, the $2.4 billion airport has been depicted as a major threat to preeminent freight power Hong Kong. CSA is in the second phase of a self-proclaimed three-stage strategy, moving from leased freighter operations to owned all-cargo planes to a broad expansion with a view to generating over 20 percent of revenues from cargo.
Integrator activity at the new gateway is lively. Notwithstanding its recently opened $100 million hub at Hong Kong, DHL sees plenty of scope for growth at Baiyun. It intends to build a sizeable facility at the Guangzhou airport.
Despite such moves and overtures from U.S. carriers - FedEx has signed a memorandum of understanding to explore developing Baiyun into a hub - the airport so far hasn't exactly been inundated with new services.
That will come over time, say cargo players. "Setting up new or renovated airports isn't the whole thing" in terms of attracting service, said Raymond Chan, United's cargo manager in the South Pacific. "Look at the new Guangzhou airport. It takes some time to get new flights."
Neighboring Shenzhen presents a similarly spotty picture. The airport authority modestly aims to turn Shenzhen into one of the world's top 30 airports by 2010 and the Pearl River Delta's pre-eminent cargo airport by the year 2015. Lufthansa Cargo seems to agree with this assessment and is willing to play its part to get the airport there.
Last May it signed a 50:50 joint venture agreement to operate an international air cargo terminal at Shenzhen. It will use the airport's existing 10,000-square-foot freight terminal, which is going to be upgraded to handle over 300,000 tons a year by 2009. Five moths after that deal came a second Lufthansa venture, an agreement with Shenzhen Airlines to form an airline called Jade Cargo International.
The initial plan for Jade was to begin serving Chinese and other Asian destinations from Shenzhen this February with two A300-600 freighters. But those ambitions have been postponed until later this year, apparently due to official Chinese reservations about the wet-leasing concept underline the new carrier's strategy.
Despite these lofty ambitions, many carriers have doubts about Shenzhen's freight potential. "It's too close to Hong Kong," said Jim Friedel, president of Northwest Airlines Cargo.
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China's Other Hubs
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Lots of smaller Chinese airports are also moving to boost their cargo prospects. Nanjing, which attracted fifth freedom freighter flights by Singapore Airlines to the United States, is widely seen as an emerging international gateway. Not far away, Hangzhou International Airport is planning to set up a freighter park and wants to open a cargo terminal before the end of this year. The airport has found a powerful ally in the Hong Kong airport authority, which signed a letter of intent last year to develop logistics facilities at Hangzhou.
Northwest Airlines favors Xiamen, an airport that has attracted a fair amount of investment from across the Taiwan Strait. In January, an unlikely alliance consisting of China Airlines, EVA Air, Far Eastern Air and Taiwan Air Service signed a $6.6 million agreement to construct a cargo warehouse at the airport. Three years ago, the foursome invested a total of $27 million in an air freight terminal at the airport.
China's southwest is also getting restive. Work is underway at Chengdu to develop a logistics park at the airport. Slated to be built in three phases, the logistics facility should eventually cover an area of two square kilometers, housing freight buildings as well as an IT center and an express distribution facility.
In central China, Xianyang International Airport in Xian is preparing a $562 million expansion, includes a new runway. It will boost the airport's cargo capacity from 130,000 tonnes of cargo to 400,000.
Up north, Tianjin aims to become a transit hub for northern China. Having clocked up tonnage growth in excess of 50 percent, the authority is looking to expand the airport by 1.3 billion square feet.
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Airports elsewhere in Asia aren't standing pat. The biggest change on the landscape the opening last month of the new airport in Nagoya, Japan. The airport is designed to handle all international services and domestic flights carrying more than 60 passengers that come into Nagoya.
Predictably, airlines have flocked to the new gateway. All Nippon Airways has turned the airport into a major hub, and international carriers like United Airlines opened passenger links. On the freight side, both Japan Airlines and Nippon Cargo Airways launched all-cargo flights out of the airport, which has also attracted freighters from FedEx, Singapore Airlines and Korean Air.
The city is in the country's third-largest industrial area, about a 30 minute drive from Toyota's main production facility. As such, the new airport is expected to draw a good deal of traffic away from other gateways, chiefly Osaka, which has been struggling under one of the highest cost structures of any airport in the world.
Over in South Korea, KAL is adding a fourth module to its Incheon base, which will be managed with a new automatic control system. Meanwhile, the Ministry of Information and Communication is doing its bit to make Incheon a pre-eminent hub in the region with a $43 million logistics center to be built by Korea Post.
Mainly designed to facilitate the export of digital home appliances and IT products, the facility, which is slated for completion in 2007, will also be used as a hub for the storage and international distribution of goods.
Another mega-cargo complex is taking shape next to Singapore's Changi airport. For some time, operators were hesitant to grab a spot in the 26-hectare Air Logistics Park Singapore, but the free trade zone project has recently gathered momentum.
"It's definitely not a white elephant," said Steve Dearnley, president for the Asia-Pacific region of BAX Global. BAX has made a $48 million investment in the facility, which will give it some 400,000 square feet of warehouse space. Another major investor is AMB Property, which is spending $11.4 million on a 254,000 square foot multi-tenant facility.
Changi clocked up a record 1.78 metric tonnes last year, 10.2 percent above its 2003 throughput. Swissport received the nod to set up shop at Changi later this year, a move that local forwarders have welcomed as a step to boost competition.
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