Land of the Rising Hubs
You may be forgiven for associating Changi with Singapore rather than Nanjing or airports in India. Changi Airports International still runs Singapore''s international airport, but these days it is pushing aggressively into other Asian markets. The wholly owned subsidiary of Singapore''s Civil Aviation Authority announced in late February it had formed a partnership with Indian conglomerate Tata Group to bid jointly for airport projects in India.
The agreement came just weeks after Changi announced it would spend USD138 million to acquire a 29 percent position in China''s Nanjing Lukou International Airport. Just two months earlier, in late December, Singapore Airport Terminal Services, the handling subsidiary of Singapore Airlines, had revealed it intended to expand in China.
Hong Kong International Airport has already moved into Mainland China. Last October, a joint venture with the state-owned Assets Supervision and Administration Commission of Zhuhai Municipal People''s Government started managing Zhuhai Airport under a 20-year agreement. According to Vivian Cheung, the joint venture''s general manager, the operation aims to boost traffic from 640,000 passengers and 10,000 tonnes of cargo in 2005 to 1.5 million passengers and 50,000 tonnes by 2010.
The airport''s first international freighter operation will be a twice-weekly service to Manila, which is going to be launched soon, she said.
HKIA formed another joint venture in China in mid-December, this time with Hangzhou Xiaoshan International Airport. The Chinese airport''s expansion looks to add a new passenger terminal and facilities to accommodate A380 aircraft. By 2015, the joint venture expects to be able to handle 25.6 million passengers and 500,000 tonnes of freight.
It turns out manufacturers, carriers and logistics companies are not the only part of the air cargo business interested in China''s potential.
Attracted by an ambitious expansion program led by the government, and by the flood of related businesses moving into China, foreign capital and management expertise is pouring into China''s airport operations. The push by China''s regional neighbors and other airport and cargo handling companies is remaking the country''s airport landscape as surely as the bulldozers and building cranes are remaking the city skylines, and it promises to remake air trade patterns that already are being reshaped by China''s manufacturing boom.
One of Xiaoshan''s first international all-cargo tenants could be MASkargo. Management is considering a freighter service using recently won fifth freedom traffic rights out of Hangzhou to Northern Asia. J.J. Ong, senior general manager of cargo at the Malaysian carrier, said he was looking at flying on to Russia, but no decision has been reached so far.
Fifth freedom rights have induced Korean Air to launch a freighter operation to Europe through Chengdu, an emerging center for China''s electronics and chemical industries. This spring it is starting a twice-weekly 747 freighter run from Seoul to the city in Southern China and on to Delhi and Brussels. KAL Cargo joins Lufthansa, which inaugurated twice-weekly all-cargo flights to Chengdu in December of 2005 in partnership with Air China.
China shows no signs of running out of expansion opportunities for foreign airports any time soon. The country''s dizzying growth in air traffic has the authorities scrambling in a race to avoid paralysis. By last June, 18 of China''s 142 commercial airports had reached capacity, and another 29 stood to reach their cargo limits by 2010, the Civil Aviation Administration of China warned.
Aiming to push the number of commercial airports in China to 186 by 2010, authorities in Beijing have earmarked more than USD17.5 billion for modernization and construction of airports over the next four years.
The CAAC''s plans call for the establishment of 44 new airports and the expansion of 52 mid-sized airports such as Dalian, Xiamen, Ningbo and Qingdao. It is doubtful the government coffers will dispense enough funds to get all these projects airborne, however, so many airports are looking for overseas partners with deep enough pockets to step in. Such overtures are not limited to aspiring minnows.
Guangzhou''s Baiyun International Airport, which is pursuing a USD2.16 billion expansion project only a few years after its opening in 2003, has signalled it is considering bringing in foreign partners to help bankroll its expansion plans.
Beijing Capital Airport launched a $248 million expansion project at the end of 2005 to boost passenger capacity in preparation for the Olympics in 2008. On the cargo side, facility developer ProLogis started work last year on a USD36 million logistics park less than two miles from the airport. The company secured land use rights to 26.7 acres there to develop four facilities with a total footprint slightly more than a million square feet.
And although many commercial eyes are turned to Shanghai, the Chinese capital is attracting a growing number of freighter services.
One of the most recent entrants was Cathay Pacific, which launched twice-weekly 747-200 freighter flights between Beijing and its Hong Kong base in mid-November. Using fresh traffic rights for three additional U.S.-China flights, Polar Air Cargo is boosting its presence at the airport this spring, having inaugurated Beijing service last November.
To get a foot into Beijing, Polar actually shifted two flights over from Shanghai.
China''s top gateway continues to expand its cargo business, but the capacity that poured into the airport in recent years has taken its toll on yields and prompted some carriers to look for alternatives. Probably the most drastic step was taken by Air Canada, which whittled its Shanghai-Toronto MD-11 freighter operation from five to three flights a week and returned one freighter to World Airways.
Northwest Airlines Cargo shifted its freighters from Hong Kong to Guangzhou. Having scrapped its six weekly 747-200 freighter flights into Hong Kong in December, the carrier is using its latest batch of China traffic rights to step up its Baiyun flights from four to seven frequencies a week beginning in April. Last year the U.S. carrier doubled its freighter frequency to Baiyun from two to four weekly flights.
"Hong Kong is a severely imbalanced market. The yields were sinking lower," said Jim Friedel, president of NWA Cargo. He said Northwest does not have fifth freedom rights between Japan and Hong Kong, which strengthened the case for switching the freighters to Guangzhou.
The cooler view of the market changes about 90 miles north of Hong Kong, where Guangzho is building up its profile in the international arena thanks to the manufacturing along the Pearl River Delta and the expansion of express traffic from FedEx and DHL.
FedEx Express is developing a USD150 million hub at the airport, which is slated to become the integrator''s largest hub outside the United States. FedEx is building an 880,000-square-foot facility sitting on 156 acres with a capacity to handle up to 24,000 packages in an hour. DHL, which expanded its express facilities at several Chinese airports last year, has pledged to set up an operations center at Baiyun.
On the freight side, the biggest push for the airport likely will come from China Southern Airlines, which is based in Guangzhou.
China''s largest airline announced in mid-February it would open 10 new international routes this year, including Dubai, Luanda, Delhi and Sapporo. In the same month the airline''s management signalled that it was considering doubling an order for 777 freighters from six to 12 aircraft. The Chinese carrier now operates two 747-400 freighters and has plans to convert six A300-600s into freighter configuration.
It is no secret China Southern, which is due to join the Sky Team alliance before the end of this year, is looking for an international partner in cargo. Joint venture ambitions with Korean Air proved short-lived, while talks with Air France-KLM have not been confirmed by either side.
Even closer to Hong Kong, the launch of Jade Cargo International last summer has certainly boosted the cargo volume going through Shenzhen International Airport. For the past year, the International Cargo Center Shenzhen reported 90,000 tonnes of international cargo, up from 62,000 tonnes handled in 2005.
Like Jade, the ICCS is a joint venture involving Lufthansa Cargo.
The rise of Shenzhen and Baiyun has not dented Hong Kong''s Chek Lap Kok airport. Hong Kong Air Cargo Terminals, which handles over 70 percent of the airport''s volumes, recorded a 5.3 percent increase in tonnage last year to 2,561,902 tonnes. Imports grew 3.3 percent and exports 4.7 percent, while the handler''s transhipment tonnage went up 11.3 percent.
HACTL''s position is under threat from Cathay Pacific, which has been gunning for the airport authority''s blessing to open a third cargo terminal at Chek Lap Kok.
The home carrier has argued that its handling costs in Hong Kong are roughly twice as high as its system average. Moreover, Cathay claimed HACTL would run out of capacity by 2009, which is disputed by HACTL management. The airport authority finally announced in December that it would invite tenders for the third facility, a process which it expects to be completed in 2008.
The new facility would be ready by 2011. By the pace of development in China, that is a long way away.
