Incheon Rising

Seoul's airport is facing a slowdown from
its chief carrier and rising airports in China

By Ian Putzger

owards the end of last year Korean Air sent out some disturbing signs for its home base. The world's largest international air freight carrier that had been the most powerful growth engine for Seoul Incheon International Airport signaled that economic conditions called for a slowdown of its until now relentless expansion drive.

KAL Cargo president Ken Choi, who had led the operator to the top of the international cargo carrier hierarchy, left at the end of 2007, but KAL had been visibly slowing down before his departure. Declining yields in the face of rising fuel prices, directional imbalances, softening markets and a migration of traffic to ocean vessels caused a stronger emphasis on profitability of activities. Underperforming sectors were cut or combined with other stations.

At the same time, KAL announced it would set up a joint venture handling company at Tianjin. The northern Chinese city is the home base of nascent KAL-Sinotrans joint venture cargo airline Grandstar, which was supposed to start operations in late 2007 but has yet to take off. According to some sources in China, the carrier recently filed for traffic rights to Brussels and Chicago.

China Factor

Another question mark for Incheon's growth momentum came from the rise of Chinese airports and their increasing international networks threatening the Korean gateway's status as a hub for Northeast Asia.

China figures strategically in Incheon's fortunes. Last year, transshipment traffic for the first time surpassed origin/destination cargo, and China accounted for a large chunk of that. In 2007 Incheon's cargo to and from China amounted to slightly over 624,000 tonnes, 24 percent of the airport's total throughput.

Jaehee Lee, chief executive and president of the Incheon International Airport Corp., acknowledged "capacity and airport developments in China have affected our role and strategy in some extent." But he says they have had little impact overall due to a number of factors in the Korean gateway's favor, including its location and connectivity, cargo infrastructure and the range of services available.

With 61 Asian cities, with populations over 1 million within a three-and-a-half-hour flying radius, Incheon can boast a vast route network, including 34 destinations in China, 24 in North America and 29 in Europe. By Lee's estimate, the network could improve further through open skies agreements in the region.

Lee said he's bullish about the free trade agreement with the United States, which with 27.5 percent has the largest share of Incheon's tonnage among the airport's destination countries. Besides boosting imports and exports, the trade agreement should help reduce cargo-handling times, Lee said.

"We expect that this would have a positive impact on inviting companies to build a regional distribution center for Asia at Incheon," Lee said. "In short, we assume that Incheon-U.S. cargo volume would be increased by 10 percent due to the FTA."

An expansion of the airport's cargo area last year boosted its capacity from 2.7 million tonnes to 4.5 million tonnes. By 2035, Incheon hopes to be able to handle 10 million tonnes. To generate more traffic, Incheon has a 1.044-million-square-meter area for logistics and manufacturing activities adjacent to the airport, with Free Trade Zone designation for both. The master plan calls for the development of another 1.4 million square meters for the "Logis Park" by 2011.

Road Aid

Eager to maintain its reach to manufacturing areas in northern China, Incheon started road feeder service to Qingdao last August. According to the airport authority, this is four to six hours faster than the regular sea-air patterns and only two to four hours slower than shipping by air alone.

Incheon wants to expand this model. "Within this year we will further our RFS network to Yantai and Dalian," Lee said.

Effective Jan. 1, the airport cut its landing fees by 10 percent and land rental fees by 21 percent. This should help sooth carriers' cost worries in times of high fuel prices. Last year, numerous passenger airlines, including Delta Air Lines, Qantas and Aeroflot, boosted their presence at the airport. On the cargo side, Great Wall Airlines, China Cargo Airlines and Nippon Cargo were among the new entrants.

Incheon clocked up 2.56 million tonnes of cargo last year, which was more than twice the volume recorded in 2001, the airport's inaugural year.

Lee is confident that the momentum will continue, pointing to Korean government projections of double-digit growth in exports and imports for 2008.

… Briefly

Cargo traffic for Asia-Pacific carriers expanded 2.4 percent in February on a 0.8 percent gain in capacity, according to the Association of Asia-Pacific Airlines. … Japan Airlines international cargo traffic fell 2 percent in February, the sixth time in the last seven months the carrier's cargo business has declined. The cargo traffic was down 0.7 percent in the first 11 months of its 2008 fiscal year. … TNT Express started freighter flights to Singapore, connecting the airport to Shanghai and Liege, Belgium. … India's Jet Airways started daily 777-300 service between Mumbai and San Francisco. … Developer AMB Property took a lease on a 318,000-square-foot facility at Tokyo Narita International Airport. … Hong Kong Air Cargo Terminals tonnage grew 9.5 percent in March and was up 6.5 percent in the first quarter over the same quarter a year ago. HACTL also won India's Jet Airways as a new customer. … Thai Cargo will use Global Logistics System and its Ezycargo portal as its e-booking platform. … Supply Chain IT companies TAKE Solutions and Four Soft plan to merge. TAKE has strong market share in Asia and the United States, while Four Soft is strong in Europe and Japan. … All Nippon Airways exercised options for two more 767-300 converted freighters. …Garuda Indonesia ordered four 777-300 extended range aircraft valued at around $1 billion, and confirmed a previously unidentified order for seven 737-800s. Boeing said the carrier also converted 18 of its existing 737-700s on order to 737-800s and six 777-200 extended range aircraft to 777-300ERs. … Hong Kong Air Cargo Terminals handled 171,299 tonnes of freight in February, 1.8 percent more than the same month a year ago. … AirAsia X, the new long-haul low cost-carrier within the AirAsia Group, ordered 10 A330-300s, bringing to 25 the airline's total order for the aircraft. … Australia's newest international airline, V Australia, will begin direct Los Angeles-Sydney flights mid-December.