Besides increasing the Hong Kong International Airport’s runway capacity, the government’s action in enhancing the infrastructure for the smooth running of the air cargo industry has become an urgent priority, according to Julie Shek, marketing manager for Dyna-Trans Ltd, a Hong Kong-based General Service Agent (GSA).
“In a nutshell, improving Hong Kong’s logistics infrastructure, speeding up the customs process, lowering the airport charges and other local ancillary charges would certainly help to maintain the territory’s position as a gateway hub. Of vital importance is that the industrial players have to compete in a more healthy manner and strictly adhere to the commitment terms.”
Asked about Hong Kong’s third cargo terminal, she says: “We think that Hong Kong needs a third cargo terminal as it does not only give additional choice to the airlines but also to forwarders and shippers too.
“The most important thing is that additional air cargo handling capacity and facilities provided by the third cargo terminal (to be designed, constructed and operated by Cathay Pacific Services, a unit of Cathay Pacific Airways) would further contribute to the competitiveness of Hong Kong’s status as the world’s premier aviation hub.”
This would certainly have a positive impact on the GSA business due to the expected increase in carriers serving Hong Kong, she adds.
The issue of surcharges
Asked about levies such as fuel, security and war risk surcharges, Shek says: “We must admit that the carriers are now suffering from unstoppable fuel price hikes and the additional operating expenses on increasing security requirements, as well as environmental concerns.”
Once such surcharges are included in the freight rates, the overall rates will be increased significantly and this will undermine the viability of shipping by air as the vast majority of shippers and forwarders are price sensitive.
“As the fuel surcharge reflects kerosene price, separating this kind of surcharge from the freight rates will allow the shippers to have more transparency on what they are paying for,” Shek says.
Increasing competition
GSAs in general say that Hong Kong is facing increasing competition from neighbouring airports in the Pearl River Delta (PRD) region and the nearby Macau Airport as they too compete for the lucrative air cargo business. Another problem they point out is the over-capacity on some routes, so the increased number of aircraft in the region is putting tremendous pressure on the air cargo business, particularly on the airfreight business as its demand is highly seasonal.
As long as a number of carriers are prepared to maintain their load factors and their market share at any price, yield will continue to come under sizeable pressure. On the other hand, forwarders are often able to reserve capacity without obligation of having to pay for the no show or cancellation at the last moment due to shipment delay, even if they have signed a commitment deal.
While further liberalisation of the aviation market in Hong Kong has, on one hand, allowed more carriers to serve the territory, on the other, the territory’s position as the leading gateway to the Chinese mainland is under threat due to the greater cargo capacity in the market.
As more airlines fly into Hong Kong, the competition among GSA companies is also increasing, creating a tougher business environment in the GSA market meaning each GSA has to come up with more innovative ways of providing their services to airlines to sustain their business.