Changi’s cargo hub continues to fly high
While astute forward thinking coupled with meticulous planning helped vault Singapore Changi Airport into the league of major global air hubs - despite a tiny land mass and population - a constant focus on innovation, top-notch services and infrastructure has helped fend off hungry regional competition that has become ever more savvy. Manfred Singh has the story.
April 1, 2011
Barely nine months ago, Changi was recognised by the global cargo industry as the Best Airport in Asia. For those who do not keep track of Changi’s progress, the award was not a one-off event – it was the airport’s 24th consecutive win of the honour. Prizes come easily to Changi: It has won 368 Best Airport awards – a number of them for cargo services – from 1981 to 2010. It is no wonder that Changi Airport Group’s Executive VP, Air Hub Development, Yam Kum Weng, went on to point out at the award ceremony, that the airport’s cargo and logistics partners had clearly recognised the fact that the airport operators had been able to create a conducive cargo operating environment and strong partnership at Changi. That favourable environment saw 2010 as a good year for Changi. Global trade and Singapore’s manufacturing sector rebounded strongly from the economic crisis leading Changi to register 1.81 million tonnes of total airfreight movements in 2010, growing 11 per cent year-on-year. To top it all, Changi welcomed three new all-cargo airlines in 2010, Transmile Airlines, China Cargo Airlines and Tri- MG Airlines. Hong Kong Airlines also started charter freighter operations at Changi in the fourth quarter of 2010, which were converted to scheduled freighter services in January 2011. Connectivity has always been a strong point in the airport’s favour, with nearly 100 airlines flying off to some 200 cities in about 60 countries and territories worldwide, making bellyhold cargo a significant force. In 2010, the airport handled 42 million passengers, a 13 per cent increase over 2009 making Changi the 18th busiest airport in the world and the fifth busiest in Asia by passenger traffic. Systemic challenges It has been a long journey since Singapore’s international airport moved from its small Paya Lebar enclave in 1981, but its also been a remarkable story of ongoing growth for Changi. While other airport operators – especially those in Asia – could be resting on their oars having seen the back of the global economic downturn, Changi is cautious – what with the earthquake in Japan and fuel prices on the rise. Albert Lim, VP Cargo & Logistics Development at Changi, agreed that the economic downturn had affected Singapore’s air cargo industry with trade volumes plummeting. All of us know that global supply chains today are increasingly interconnected with one another across the globe. Hence, supply chain disruptions resulting from the aftermath of Japan’s earthquake, tsunami and ongoing nuclear crisis would also affect manufacturing operations elsewhere”, and affect global trade. He was quick to point out that on the local front, Singapore’s manufacturing and export sector, especially electronics exports, could also be affected in the next few months as they are sensitive to disruptions in the high technology supply chain. As for Japan, Changi’s cargo bosses are keeping a close watch on the situation there. After all, as Lim pointed out, “Japan is Singapore’s seventh largest export market and Changi’s sixth largest air cargo market in 2010 accounting for about 6.5 per cent of our total volume. We will be monitoring closely the impact over the next few weeks.” Other than Japan, there were other factors too that could have an effect on Changi’s cargo fortunes. “Higher fuel prices would hit the profitability of the carriers, as well as result in higher fuel surcharges for shippers,” said Lim. While it would be a major concern for the global aviation industry, overall, these systemic factors would also have a negative impact on Changi’s cargo sector. But potential downside is has always been analysed into the big picture as much as possible – a skill that has made not just Changi, but Singapore in general, as successful as they are. Cargo infrastructure The airport’s planners want cargo to play a big role and the airport has a specific development policy of always building years ahead of demand to help to avoid congestion problems common in major airports and maintain high service standards. In fact, the airport has planned improvement in the cargo infrastructure facilities all around. There were, indeed, several new air cargo infrastructure projects at Changi in 2010, Lim told Payload Asia. There was the opening of [email protected] by ground handler SATS that allowed Changi’s air cargo community to more fully tap the perishables cargo segment. [email protected] is Singapore’s first air freight terminal dedicated to perishables cargo handling and is all set to position Changi as an efficient and reliable hub for the perishables trade in Asia. The S$12 million (US$9.5 million) specialised facility with an annual operating capacity of 250,000 tonnes, is creating new value-added services and market opportunities for airlines and cargo agents to capture new trade flows. And then there is also Singapore Freeport, a state-of-the-art, highly secured storage facility with free trade zone status and direct access to the airport terminal. The largest such facility in the world, Freeport provides international fine art collectors, auction houses and financial institutions a secure location to store and trade valuable assets and collections. “This new initiative,” Lim emphasised, “complements Singapore’s overall development as a leading financial and wealth management hub in the Asia Pacific.” While the Changi Airport Group (CAG) is not part of the investment consortium of Singapore Freeport that comprises overseas and local investors, the airport operations team helps facilitate the efficient flow of cargo between the airport terminal and the facility. Taking it up a notch Innovations are part of the game that Changi is adept at playing. In November 2010, in a move that the airport’s operators hope will significantly enhance Changi’s express cargo handling capabilities and reinforce its leading position as a key cargo hub in Asia Pacific, the Civil Aviation Authority of Singapore (CAAS) and CAG launched the development of a unique first-ofits- kind air cargo express facility in the region – an Air Cargo Express (ACE) Hub – with a leading, but as yet unnamed at press time, express cargo carrier. Market speculation has named FedEx as the possible partner. Scheduled to start operations in the first half of 2012, the ACE will improve Changi Airport’s “competitiveness in the air cargo space,” according to CAG’s CEO, Lee Seow Hiang. The project, he pointed out, “reflects our commitment to work with our partners to grow their business at Changi, as well as invest in innovative ideas to promote Changi as a global aviation hub. The ACE Hub facility will enable our air cargo partner to cater for its future expansion in Singapore and capitalise on long-term growth opportunities from increasing intra-Asia trade growth.” According to the airport’s masterplan, 80,000 sq metres of land have been set aside for the development of the ACE Hub. Located beside the Singapore Airport Logistics Park and within the airport’s free trade zone, the hub – primarily for use by air express companies – will have direct airside access for cargo to move from the aircraft and vice versa at the shortest possible time. This will crucially shorten the processing time for time-sensitive shipments to achieve greater efficiency and speed in transporting express cargo. CAG will manage the development and operations of the new facility, which is targeted to be operational in the first half of 2012. To support the Hub, CAG will invest more than S$25 million to build a new airside infrastructure that will include two aircraft parking bays. Speaking about ACE, Lim said: “Air express players largely focus on express freight which have higher yield and the ACE’s business model fits well with the relatively higher cost structure in Singapore”. The establishment of the hub was virtually taking the competition in the region by the scruff of the neck. Hubs in nearby Hong Kong or at Bangkok would surly raise the competition bar, but Changi, not surprisingly, is prepared for that. “There will always be competition amongst airports,” acknowledges Lim. “However, it is important to note that the Asian growth story would not be a zero-sum game as long as the overall pie is growing. The rise of the tide would be able to lift all boats as long as we ensure that our own boat is a good one with no leaking holes – like ensuring our own competitiveness and competitive advantages are intact.” Those advantages have seen Changi through last year when air-air transhipment constituted about 40 per cent of Changi’s total volume while imports and exports were relatively balanced for the remaining 60 per cent. Like all major international airports, passenger bellyhold cargo remained an important pillar of support. At Changi, about 63 per cent of total cargo tonnage is carried in bellyhold of passenger flights with the remaining by maindeck lift. Though low-cost carriers are making headway in the region, they are still not a force to contend with in the mainstay air cargo scene. The likes of Jetstar Asia and AirAsia in particular, do not contribute much in terms of total tonnage for Changi. But Lim agreed that though the volumes were growing, “the absolute total tonnage of LCCs is still in low single percentage points at Changi; hence, it does not have a significant impact at this juncture”. Most of the freight through Changi comprises electronics, consumer goods and machinery, but “we are also seeing a strong growth in perishables, oil/gas, aerospace spares and pharmaceuticals products”, said Lim. He also pointed out that northeast Asia especially China and Hong Kong were the fastest growing cargo markets for Changi in 2010. In particular, air cargo trade with China and Hong Kong grew 53 per cent and 36 per cent, respectively at Changi. Intra-Asia growth The US, Europe, Southeast Asia and Australia remained key cargo markets for the airport,” commented Lim, but even so, the intra-Asia market – cited as the next big trade lane – was growing. Changi’s cargo bosses could not agree more. Lim noted forecasts that intra-Asia trade would grow at an average rate of 12.2 per cent per annum until 2020. He went on to say that between 2003 and 2008, trade volume between ASEAN and India grew four-fold while trade volume between ASEAN and China tripled between 2003 and 2008. The new ASEAN-China and ASEANIndia Free Trade Agreements (FTA), which came into effect last year, are expected to accelerate trade growth within the region. “Yes indeed, China- India is a major transhipment lane for Changi and there is certainly potential for more growth in years ahead,” said Lim. However, he brushed aside the belief held by many that the intra-Asia growth would see a transition from belly capacity to a dedicated maindeck market. As for the bellyhold versus main deck argument, “my personal view,” said Lim, “is that there would not be much difference to the existing model today where bellyhold would continue to be the mainstay for connectivity, while freighter flights would complement to ply major trade lanes within Asia”. [email protected] Changi airport’s cargo bosses have been at the forefront of international initiatives like the e-freight initiative. The move in Singapore is spearheaded by CAAS which chairs the [email protected] Singapore Ste ering Committe e comprising various key stakeholders including Infocomms & Development Agency (iDA), CAG, Singapore Air Cargo Agents Association, amongst others. In fact, Changi and Amsterdam Airport Schiphol, both leading air cargo and logistics hubs in Asia and Europe, respectively, have come together to collaborate on e-freight and other key air cargo initiatives that would benefit airlines, cargo partners and shippers from both regions. The MoU signed between Schiphol, CAAS and CAG last November would see an agreement between all three parties to exchange knowledge and expertise as well as explore the possibilities of joint research and development efforts that aimed to stimulate the use of e-freight between Amsterdam Airport Schiphol and Singapore Changi Airport. Lim also spoke about how Changi was “also sharing our experiences and best practices with one another on a regular basis. We met again at the recent IATA World Cargo Symposium for a discussion,” he said. Schiphol Airport, said Lim, had created a very interesting interactive web game to educate their air cargo community on the use of technology to enhance efficiency, security and cost savings, which Singapore could learn from. Similarly, our e-freight Steering Committee has completed an industry research study to try and quantify the cost savings and potential value creation of e-freight adoption for various stakeholders in the supply chain, which we would also be open to share with Schiphol. It is not only the key overseas market that satisfies Changi’s cargo unit. The airport is often approached for tie-ups. “We do have our fair share of enquiries. Over the last 1-2 years,” said Lim, “we were very focused in working closely with our partners to ride through the economic crisis. Hence, it was not a key focus for our cargo team for international consultancy projects. Looking ahead, however, we are more ready to support our Changi Airport International (CAI) colleagues if they request for our support in their overseas management projects.” A bright future Changi’s future success, will likely be helped by its recent corporatisation, which in July 2009 split the airport operations from the aviation regulatory role by creating two separate entities: the Changi Airport Group (CAG) and the Civil Aviation Authority of Singapore (CAAS). “As a corporatised entity, CAG can be more nimble and flexible in our partnership with airlines and air cargo community. For instance, in the earlier phase of the downturn in 2009, CAG was able to respond swiftly and positively with various initiatives to help our cargo partners tide over the difficult period. For instance, the Cargo Incentive Scheme (CIS) aimed at offering CAG’s cargo tenants additional cost relief in 2009, was extended and further enhanced into 2010.” “CAG also launched the new Changi Airport Growth Initiative (CAGi) in early 2010, which aims to partner our cargo community with better customisation and flexibility to help them achieve their growth plans.” In fact, the airport’s cargo division was stepping up the collaboration with cargo partners to identify new market opportunities and position for future growth. ———————————————– Numbers game • 22,000 flights handled at Changi in February 2011 (an increase of 12.2 per cent yearon- year) • 128,048 tonnes of cargo in February 2011 (a decline of 1.9 per cent compared to a year ago due to the Lunar New Year holidays). 275,272 tonnes of cargo handled in the first two months of the 2011, an increase of 1.3 per cent compared to 2010. • Seventh busiest airport: For the 12 months that ended in September 2010, Changi Airport was No 7 in the world in terms of international freight traffic handled. • 12 per cent year-on-year growth recorded in 2010: Singapore registered strong cargo growth, with airfreight movements climbing nearly to 1.66 million tonnes for the first 11 months of 2010. • 15 all-cargo operators: Aerologic, Air Hong Kong, Cardig Air, Cargolux, FedEx Express, Jett8 Airlines Cargo, K-Mile, Martinair, Nippon Cargo Airlines, Shanghai Airlines Cargo, Singapore Airlines Cargo, TNT Airways and United Parcel Service. • 8 passenger carriers with maindeck operations into Changi: Asiana Airlines, Cathay Pacific Airways, China Airlines, EVA Airways, Japan Airlines, KLM and Korean Air.