Regional Mixed Cargo Volume Handled by HATCL in HKIA

8/6/2019 Regional Mixed Cargo Volume Handled by HATCL in HKIA

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Regional mixed cargo volume handled by

HATCL in HKIA


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Table of Content

1.0 Background------------------------------------------------------------------------------- 3

2.0 Data Analysis----------------------------------------------------------------------------- 3

2.1 Australasia-------------------------------------------------------------------------------- 3

2.2 North America---------------------------------------------------------------------------- 5

2.3 Europe (Central Europe, Northern Europe, Iberian Europe and Western

Europe) ---------------------------------------------------------------------------------------- 7

2.4 China--------------------------------------------------------------------------------------- 8

2.5 Asia (Excluded China) ---------------------------------------------------------------- 10

3.0 HKIAs future Challenges--------------------------------------------------------------11

3.1 Airfield and airport congestions ----------------------------------------------------- 11

3.2 Challenge for the competitive environment-------------------------------------- 13

3.3 Connectivity between China and HKIA ------------------------------------------- 15

4.0 Conclusion ------------------------------------------------------------------------------- 16

5.0 Reference -------------------------------------------------------------------------------- 17


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1.0 Background

According to Boeing world air cargo forecast 2010-2011, the top 10 pairs of

trading economies constitute nearly half of total annual intra-Asia air cargo

flows. Eight of the top 10 pairs involve China, Hong Kong, or Taiwan. HongKong International Airport (HKIA) has played an important role as a regional

hub for both trade and business in the world. During the last decades, HKIA

has also served its role as the only gateway for China Mainlands exports and

imports. It is considered to be one of the busiest airports in Asia as well as an

important regional transshipment center in the world. It is ranked the second

busiest airports in term of cargo volume in 2009 by handling about 3,384,765

tons. Nowadays, it is the world largest international cargo handling centre

(Hong Kong International Annual Report, 2009).

This report will discuss the regional mixed cargo volume handled by HATCL in

HKIA according to its historical statistic data and future challenges which HKIA

will face in the near future.

2.0 Data Analysis

2.1 Australasia

Graph 1

The graph 1 has shown the total exports and imports from HK to Australasia

from 2001 to 2010. It can be seen that the imports graph has shown a more

volatile wave than the export. The exports on the other hand has shown a

slightly trend of increasing over the time. As Australia is the biggest country in


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Australasia with the largest contribution to the Australasia imports and exports

to Hong Kong, its exports and imports data is used to help explaining the

graph more thoroughly. There are three countries contributing the exports and

imports from Hong Kong which are New Zealand, New Guinea and Australia.

However, Australia accounts for almost 90% of the total exports and imports

from Hong Kong within the region according to the HATCL data. Therefore,Australia trade data is considered to be sufficient as representative for the

Australasia region with analyzing the graph into more details.

According to the data by Australian Government, Department of Foreign

Affairs and Trade (DFAT)1, the major commodities export to Hong Kong during

1999 to 2009 are fruit & nuts, coal and meat. All of them have raised more

than 60% during the last 10 years. In Hong Kong and mainland, the food is

one of the biggest consumptions during the Chinese New Year festival period

due to the culture as fine dining during the festival is treated as an

improvement of life in the following year. Therefore, during the Chinese New

year period (mostly in Feb every year), a large amount of food products such

as nuts, fruits and fresh seafood are exported to Hong Kong. Part of them will

be then re-exported to mainland. Because foods such as fruits and seafood

have a very short shelf life, it has to be transported by air. This explains why

the air cargo imports peak at the beginning of the year on the graph showing

seasonality. It is also to be noticed that the peak in Hong Kongs imports at the

beginning of the year is not only contributed by the demand of Hong Kong but

also the demand in mainland as well. Once the goods have arrived Hong

Kong, it will be re-exported to other regions in mainland.

Only Australasias imports graph has represents such a volatile wave incomparison of other regions. And its imports growth is not affected by the

economic recession during 2008. This might due to the nature of the products

that are imported from Australasia. Food culture is very important in both

Hong Kong and China and some of food are must have for each Chinese New

Year. With the rapid growth of Chinese GDP, the populations of Chinese who

are wealth enough to consume find imported food will continue to increase.

Therefore, in my opinion, the trend of the imports from Hong Kong to

Australasia is likely to increase at similar growth rate and will not reach a

saturated point in the near future.

The exports on the other hand have shown a more steady development than

the imports. The exports graph has shown a few peaks over time as well.

Most of the peak occurred just before Christmas. Since most of the

Australasia countries are western cultures, it is important that retailers

maintain a safety stock and certain amount of reserve stock to satisfy the

demand of Christmas sales. Furthermore, the exports always dip one month

1http://www.dfat.gov.au/publications/stats-pubs/dme/Direction_of_Exports_2009.pdf


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after the imports peak. It is all because of the Chinese New Year Holiday

which has increased the local demand and decreased the local productivity.

Also, according to the DFAT, the overall imports are falling by an average of

0.4% every year. Even take transshipment from mainland into consideration

that the total imports from China mainland to Australia is declining.

The market imbalance in terms of tonnage between Hong Kong and

Australasia always peak during Christmas and Chinese New Year as the

imports are higher than the exports. As it is discussed above, this is due to the

nature of the commodities that imported through air cargo. Cargo airline tends

to have lower density freight out of Hong Kong and return with high density,

which is wise to be taken into account when making decision on aircraft type

on the route.

2.2 North America

Graph 2

The graph 2 has shown the total exports and imports development from Hong

Kong to North America region. It can be seen from the graph that the exports

line has shown a strong seasonal and regular development during 2001 and

2009. From 2001 to 2002, the exports tonnage has expressed a strong

increase as it has saturated at 43214 in Oct 2002. It is then dropped to 37045

in Oct 2003 and followed by a gradual increase from 2003 to 2007 until the

economic recession. It is also to be noticed that the dip for the export tonnage

also occurs around Feb each year because of Chinese New Year holiday. The

peak occurs in around Oct which is two months before Christmas. Basically,

the exports development seems to be affected a lot by the big events in a year.

Since the date of Christmas and Chinese New Year (roughly around Feb) are

almost certain each year, the exports tonnage follows a regular pattern over


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the time according to these two festivals. Furthermore, the average tonnage

of exports is showing an increasing trend during 2001 and 2007 but followed

by a significantly decrease in 2008 owing to economic recession. However,

the exports tonnage has recovered rapidly after 2009. The exports tonnage in

April 2009 is 25780 compared to the 41092 in April 2010. The figure almost

doubled in a year. This has shown that the supersonic speed of Hong Kongcargo volume is recovering from economic recession. The imports

development from 2001 to 2009 is stable compared to the exports. The

average tonnage each year always maintain at around 7300. However, the

exports have shown slightly increasing trend after economic recession. And

the exports tonnage has reached a history high of 12518 in June 2010.

Although the exports tonnage has almost double from 2009 to 2010, it is still

at its average exports tonnage. In the light that the exports in the future are

likely to maintain a stable development, there are following reasons for this

phenomenon. Firstly, China has shown a massive recovery from economic

recession during 2009 and 2010 and it has even enforced a slowdown of its

economic in order to prevent inflation. The export tonnage from Hong Kong to

North America is also facing the problem that America is having monetary

issues. These two factors will affect Hong Kongs total export tonnage to North

America in the future. As a result, even the exports tonnage has recovered

from the economic recession; it is unlikely the cargo business return to the

level before this economic recession. The overall annual tonnage may

experience some waves for the next few years but it will eventually meet a

saturated point adopted in the new world economic environment. The imports

tonnage will tends to increase due to the China and US that they have

reached a bilateral agreement recently worth about 45 billion US dollarsimports from China to US2. Asia has shown its intention and financial ability as

a driver to help world economic to recover. This is also contributes the opinion

the future Hong Kong imports from US will increase.

The market imbalance is significant between Hong Kong and North America

during 2001 and 2009. The exports tonnage is always higher than the imports

tonnage. However, as it is discussed above, it is believed that the market

imbalance between Hong Kong and North America will be reduced due to the

increase on the imports and decrease on the exports.

2http://finance.yahoo.com/news/US-China-tout-45-billion-in-rb-1194633719.html?x=0


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2.3 Europe (Central Europe, Northern Europe, Iberian Europe and

Western Europe)

Graph 3

The air cargo exports development patterns from Hong Kong to Europe is

similar to the exports development from Hong Kong to North America. The

exports tonnage is also peaking before the Christmas and dipping during the

Chinese New Year. Unlike the development from Hong Kong to North America,

the air cargo exports development from Hong Kong to Europe has shown a

steady and gradual increase from 2001 to 2008 until the economic recession.

Even after the recession, the air cargo exports tonnage has recovered

significantly in 2009 and 2010. However, it is believed that the exports trendwill be declining in the future due to the Euro Zone debt crisis at the moment.

This will impace the import ability of the entire euro zone as it may also affect

the Euros buying power in the future.

The imports development from Hong Kong to Europe is reasonable stable

during 2001 and 2010. Since the exports tonnage has kept increasing while

the imports remain the same, the market imbalance between Hong Kong and

Europe is getting greater from 2001 to 2007. During 2001, the exports

tonnage is almost the same than the imports tonnage. However, during Dec

2007, the market imbalance was almost 40000 tonnages. Although it has

diminished during the economic recession, it has then recovered in 2009.

However, the market balance will become lesser as the Euro Zone debt crisis

will last for a while and it will hit the Hong Kong total exports tonnage to

Europe.


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2.4 China

Graph 4

The reason to have China analysis as an individual region is because that

China has played an important and remarkable role in Hong Kongs total air

cargo imports and exports volume. According to the HATCLs data from graph

4, the total air cargo imports and exports have shown a strong correlation

during 2001 to 2010. The development patterns for exports and imports are

similar. As it is shown from the graph, the overall air cargo imports and exports

is increasing until 2008 when the economic recession hit. Both exports and

imports tonnage has reached the same tonnage as it was before economic

recession in 2009. However, as illustrated from graph 4, the gap betweenimports and exports has started increasing from 2001 to 2008. Especially after

the economic recession, the difference reached about 4000 tonnages from

time to time in 2010 which means Hong Kong is exporting more goods to

China than importing. It is also to be noticed that during 2001 to 2010, the

exports have never exceeded the imports.

Because when China took over Hong Kong from British, Hong Kong became

one of the most important gateways for exporting and importing for air cargo

business. This is due to many reasons such as geographical advantage of

Hong Kong, its advanced logistic system and complicated cargo processing

system. Therefore, unlike other regions, the imports and exports from Hong

Kong to China mainland includes certain percentage of transshipment which

is double accounted in the total air cargo imports and exports from Hong Kong

to China mainland. Thus it is important to understand the nature of the trade

relationship between Hong Kong and China when analyzing the exports and

imports data in this case.


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Graph 5

In order to find out how Chinas transshipment participate in the development

of the Hong Kong total exports and imports, Chinas transshipment tonnages

graph (graph 5) is created from HATCL data set as well as the percentage of

the transshipment (graph 6) in total exports and imports volume. As we can

see from graph 5, Chinas transshipment tonnage in Hong Kong has

increased between 2001 and 2008 until the economic recession. This

increase is correspondent to the total exports and imports showed in graph 4.

However, by looking at the percentage of the transshipment in total volume, it

is clearly seen that the transshipment from China is accounting less in the

total volume over the year. Except during the recession, the transshipment

has increased otherwise.

Although Chinas transshipment in HK was increasing before the economic

recession, the percentage of the transshipment in total volume has decreasedover time. This means China is handling more and more of its own exports

and imports by itself instead of going through Hong Kong. Both Chinas

logistic systems (software) and infrastructures (hardware) are getting capable

of handling larger cargos volume. This is also one of the major challenges that

Hong Kong airport should face in the future and it will be briefly discussed in

future challenge section. However, the percentage of the transshipment in

total volume has increased after the economic recession. This can be

explained as due to the advantages of one country, two systems policy

between Hong Kong and China, the mainland was driving Hong Kongs

economy to a quicker recovery from economic recession.

Since China is enforcing a slow down to its overheating economy and shifting

its exporting commodities after economic recession. In my opinion, the trend

of the both imports and exports from Hong Kong to mainland China in the

future is likely to maintain a smooth development because of following two

factors. Firstly, China is shifting its exporting product from basic commodities

into more high-tech related goods and products. In this case, the air


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transportation is perfect for the quality focused product as its cost is less

significantly compared to the value of the cargo itself. Air cargo transportation

in China will certainly expand in the next few years. Secondly, Chinas

dependence on Hong Kong as a gateway is lessening as the percentage of

the transshipment in total volume is decreasing. This means the more and

more exports and imports will be handled by mainland but not through HongKong.

Graph 6

2.5 Asia (Excluded China)

Graph 7

As it is discussed before that China and Hong Kong have a special trade

relationship, in order to analyze the data more objective and accurate, China

is excluded in the Asia region in regarding to Hong Kongs total air cargo

exports and imports to Asia.


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Even China has been excluded from Asia, the air cargo exports and imports

tonnage from Hong Kong to Asia is still showing strong correlation. The air

cargo exports tonnages has shown a slightly quicker increase than the

imports tonnage. Especially after the economic recession, the exports have

exceeded the imports from the recovery. The difference between imports and

exports tonnage is not significant from during 2001 and 2010. Transshipmentis also playing an important role in Hong Kongs exports and imports to Asia

region. As one of the busiest international hub, Hong Kong airport also

function as a cargo transit base for most of the Asia cities from or to Europe,

Australasia and Middle East. Hong Kongs unique system and geographical

advantage have benefited itself be a transportation hub in Asia efficiently. This

may help explained why the exports and imports are showing such as strong

correlation. Therefore, except being a gateway of China, Hong Kong also

behaves as a transit centre in Asia. The long-term outlook of the global

economic is recovery from recession leaded by Asias fast growth in 2009 and

2010. Hong Kongs future air cargo imports and exports to Asia region is

expected to grow in the next few years as it will be definitely contributes to the

world economy recovery.

3.0 HKIAs future Challenge

In summary, the challenges that HKIA is facing are in three aspects. Firstly,

the airfield congestion in PRD region limits its the future development and

expansion. Secondly, competition from Chinese airports as well as

established regional hubs other than Hong Kong is becoming severe. Finally,

the development of high speed train and advanced road freight connectingHong Kong and Mainland may replace air cargo due to lower cost,

convenience as well as environmental friendly.

3.1 Airfield and airport congestions

There are five airports currently under operation in the Pearl River Delta (PRD)

of Guangdong province and it is considered as one of the most congested

airfield in Asia. There five airports are:

1. Guangdong new Baiyun International Airport

2. Hong Kong Chek Lap Kok International Airport

3. Macau International Airport

4. Shenzhen Baoan International Airport

5. Zhuhai Airport

Although these five airports have different business models, they are


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geographically close to each other and facing serious airfield congestion

these years. Besides, all of these five airports have experienced rapid growth

during the last decade by both passenger and cargo volume. However, the

airports locations and layout were poorly designed as shown from the picture

below from Cathy pacific Airways. Height restriction, different Navigation

system, location of the airport, runway orientations and redundant authoritiesetc have caused complicated procedures to operate aircraft approaching and

landing within PRD region. As a result, the freight handling efficiency in each

airport is significantly affected especially in HKIA. In general, the airspace in

PRD has been controlled by Flight Information Region (FIR). Hong Kong

controls Hong Kong and Macaos approach flight and Guangzhou controls

Zhuhai, Shenzhen and Guangzhou.

Source: Cathay Pacific Airways, 2007

According to the forecast by CAAC, the PRD region will experience around

200 million passengers with 1.76 million aircraft movements per annum by

2020. This is about three times as much as the current traffic (CAAC, 2007).

CAAC has also estimated that the total daily movements in PRD region will

reach 5000 by the year of 2020 which has nearly doubled the current traffic. It

is important for both HKIA and other airports in PRD region to carry out a

union solution before the congestion affecting delay and even collision. On the

other hand, besides airfield congestion, HKIA is also facing airport congestion

challenges. Hong Kong is running out of land, therefore, adding additional

runway to solve the airport congestion may be expensive and difficult.

According to the CAACs forecast on the aircraft movement on 2020, HKIA

airport will suffer from serious congestion during 2020. HKIA should increase

the efficiency of its current air traffic control and internal airport operation


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procedures to utilise the runway capacity in order to meet the increasing

demand for the air traffic.

Although HKIAs airport charges are 10-15% higher than those of Southeast

Asian airports in order to control and limit congestions at HKIA airport (Zhang,

2004). However, given that HK remains a high-cost base from which tooperate, pressure for high levels of service quality will remain intensive.

Furthermore, the cargo-handling charges at Chek Lap Kok also remain high

by Asian regional standards. Increasing airport charges may only be a

temporary solution for the congestion because increasing cost may drive the

freight providers and airline clients away for secondary airports.

3.2 Challenge for the competitive environment

According to Boeings long term forecast, the global cargo traffic is likely to

maintain a 5 percent increasing rate per year till 2024 (Boeing, 2010).

Especially in Asia, the cargo traffic from China to EU and US will likely to show

the fastest growth according to the global market forecasted by Airbus (Airbus,

2010). The potential market demand is promising for HKIA but the competition

within Asia is severe. Furthermore, according to a forecast published by

CAAC (Civil Aviation Authority of China), it has predicted a growth rate of

more than 10 percent for both cargo and passenger traffic for mainland

airports from 2005 to 2025 as the picture below shows.

As it is mentioned, Asia has presented more than 5 percent cargo traffic

growth rate than the world cargo traffic as Boeing and Airbus forecasted,

Chinas more than 10 percent forecast rate is more likely to take most of the


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market share from Asia. On the other hand, as it is stated in Hong Kong

freight transport report (Q3, 2010), Due to the strong competition in Chinese

mainland, the medium-term forecast for air cargo tonnage is to grow by an

annual average of 2.4 percent. The forecast is based on a five year standard.

With the fast growing Chinese economy, China has established a lot ofairports that have the capability of handling international air cargos in the past

decade in the North China. According to CAAC, airports such as Beijing

International Airport and Shanghai Pudong International Airport are now

capable of handling a large scale of both passengers and cargos volume as

illustrated by the picture below:

The increasing rate for the development of Mainland airports may result

volume diversion from HKIA each year. Since most of the cargos,transshipments is being able to carried out in China directly with less cost and

better efficiency thanks to advance aircraft technologies, the total export

figures from Hong Kong airport will drop. As it is mentioned in graph 6

(HATCLs data), the percentage of the transshipment from China to Hong

Kong is decreasing despite an increase on the overall exports and imports

from China. The mainlands air cargo exports and imports dependence on

Hong Kong is lessening. In other words, the faster development of Chinese

mainland aviation industry due to rapid liberalization (Hong, 2006) has

decreased HKIAs superior as a transfer and transit hub. Besides, there are

also other competitors in Asia that competing with HKIA for both potential

cargos and passengers for example Singapore and Taipei which also have a

vision becoming leading airport in Asia region. HKIAs is recommended to

target on collaboration with airlines and other cargo service provider to

establish a strong network that facilitates more transfer flows through Hong

Kong (HKIA, 2005).


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3.3 Connectivity between China and HKIA

After the recession, Chinas has started to show a decreasing rate of its export.

Because of the recession, China is shifting its economic strength from exports

to domestic development and technology focused industry since it relied on its

exports contribution to its total GDP. In the short term point of view, this mayunlikely to affect the potential traffic volume in the future. However, due to the

influence by the recession, China has accelerated its domestic consumption.

Project such as advanced road logistic network and high speed rail system

has been executed. Especially the high speed rail which has achieved several

world speed record has been taken into manufacture production. The

currently railway route will only take approximately 4 hours from Beijing to

Shanghai (1318 km) will be expected to be in service 2011. Mainland will take

advantage of its railway network to increase the connectivity between each

cities and hubs. According to the Hong Kong Freight Transport Report (Q3,

2010), Hong Kong is integrating its trucking industry with Mainland and it is

expected that the Hong Kong annual road freight volume to expand by an

average of 14.3% in the five years to 2015. The road traffic and rail freight

growth is much faster than the air cargo traffic as forecasted by only 2.4

percent. Given the picture below, the connectivity between Hong Kong and

Mainland is only 38 compared to 81 in Guangzhou airport and 57 in Shenzhen

airport. In order to be the most important gateway for China, increase the

connectivity to China is the highest priority for HKIA at the moment.


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4.0 Conclusion

The trend of the global air cargo industry is experiencing significant recovery

especially in Asia. Hong Kongs air cargo export to Europe and North America

regions has kept increasing while import is steady. The development of import

and export from Hong Kong to Australasia is majorly driven by major eventsand holiday season due to the nature of the product. Since HKIA is one of the

most import transiting hub in Asia, its exports and imports to Asia has

presented strong correlation over years. Furthermore, as the only gateway of

China mainland, HKIAs role as a transfer and transiting hub is diminished

because of rapid development and liberalization of mainlands aviation

industry. Regardless of the huge future potential air cargo market in Asia as

well as globally, HKIA faces not only the challenge from China mainland but

also other competitors in Asia. In order to attract more potential cargos and

passenger volume in the future, Hong Kong is recommended to reinforce its

role as a transiting and transferring region hub. Airfield congestion has

potentially limited the current handling capability of HKIA within PRD region.

Under the One country, two systems policy, it has made the PRD airfield

complicated to operate due to boundary controls between Hong Kong and

Mainland. In the long term point of view, communicating and collaborating with

China Mainland is the highest priority for HKIA in the future for expansion in its

handling capability for both passengers and cargos volume. Methods such as

smoothing or eliminating the boundary controls within PRD region, building up

efficient network with Mainland airports and reinforcing HKIA as a cargo and

logistic hub in Asia is suggested. According to the HKIAs Master Plan for

2020 (HKIA, 2020), HKIA is also currently undergoing a project called

SkyCity which is targeted to establish a 24-hour airport city with communityenvironment. And it is expected to help HKIA generating more air traffic and

strengthening Hong Kongs position as a region hub and Mainlands gateway.


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Reference

Airport Authority Hong Kong (2007) Hong Kong International Airport- Masterplan

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American Association of Port Authorities, World port ranking, accessed on 08/10/2010,http://www.aapa-ports.org/home.cfm

Airbus Global Market Forecast 2004-2023

Bozarth CC & Handfield RB 2005, Introduction to Operations and Supply Chain Management,

Pearson Prentice Hall, Upper Saddle River, New Jersey.

Boeing Long-Term Forecast, accessed on 08/02/2010,

http://active.boeing.com/commercial/forecast_data/index.cfm

Civil Aviation Department, Hong Kong (2009), Annual Report 2007-2008.

China Statistics Press (2005), China Statistical Yearbook

Engardio, P 2005, A New World Economy, Business Week, vol.14, no.6, pp52-58, accessed

on 10/02/2010, ProQuest Education Journals Database.

Hong Kong freight transport report Q3 2010,

http://www.researchandmarkets.com/research/cea0b4/hong_kong_freight_transport_report_q

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Hong Kong international Airport (2005), HKIA 2025 Twenty Years from Today.

http://www.hongkongairport.com/eng/pdf/business/airport-authority/HKIA2025.pdf

Hong Kong International Airport (2009), Annual Report 2009/10.

http://www.hongkongairport.com/eng/pdf/media/publication/report/09_10/e_full.pdf

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http://www.hongkongairport.com/eng/pdf/business/airport-authority/MP2020.pdf

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perspective, Journal of Enterprise Information Management, vol.19, no.3

Peoples Republic of China, 11th Five-Year Plan, National Development and Reform

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Regional Mixed Cargo Volume Handled by HATCL in HKIA