HK’s top air cargo handler jumps on the e-commerce bandwagon

With the unprecedented and staggering pace of growth in online purchases, Hong Kong’s Hactl has entered the arena with the aim of getting a slice of the e-commerce pie. Hong Kong’s top air cargo handler Hactl sees huge potential for airlines in the transport of e-commerce products. The chief executive of Hong Kong Air Cargo Terminals Ltd, Mark Whitehead, noted the staggering pace of growth in the e-commerce market. Global e-commerce sales grew from US$572 billion in 2010 to more than a trillion dollars in 2014, according to market research.

“It is an exciting business and I think there is a role to play for cargo carriers and Hactl in this ever-developing market,’’ said Whitehead. There is serious competition in this field, Whitehead admitted, “but what everybody is coming to terms with is that e-commerce has been a huge market and what it potentially is going to become.’’ The integrators, DHL, FedEx, UPS, and to a certain extent China player SF Express, have gobbled up most of the business because of their infrastructure and network investment but Whitehead sees an opportunity for airlines to get a slice of the pie because of the huge potential of the market. According to market research, the Asia-Pacific region is now the largest e-commerce market in the world, with online retailers winning market share over brick and mortar stores. China and the US are by far the world’s leading e-commerce markets, accounting for more than 55% of global Internet retail sales in 2014. China’s growth over the next five years is expected to widen the gap between the two countries with China tipped to exceed US$1 trillion in retail e-commerce sales by 2018, accounting for more than 40% of the global total of US$2.5 trillion. The US is forecast to maintain its position as the second-largest retail e-commerce market in 2018 with a total of nearly US$500 billion.

The massive demand for online shopping is paying handsome dividends for the integrators and airlines, realizing the potential of the market they are jumping on the e-commerce bandwagon, too. “The US and China are the dominant players in the buying and selling of goods online but somebody has to get the stuff from A to B,’’ noted Whitehead. “Of course, the business is pretty well dominated by the integrators, who ask a huge premium for their services, but it seems to me there is a big opportunity for airlines to get a share of that business. That is what they should be looking at and how they can get their share of that business. “My belief is that the airlines tend to take up the slack. For example, if one of the integrators simply doesn’t have the capacity they would fly it on another airline on their behalf. And that seems to be the way at the moment. But there are certain airlines that are also offering express services, which on the face of it, is trying to attract e-commerce. And that is great. There are quite a number of airlines doing that.’’ Hactl has been getting a piece of the e-commerce business via the airlines as well as the integrators through their relationship carriers. Hactl subsidiary Hacis (Hong Kong Air Cargo Industry Services) also plays a key role in the e-commerce field. Initiatives such as SuperLink China Direct and Airport Direct – operation of cross-border trucking services between Hong Kong Airport and China cities – helps lift cargo volumes for Hactl. SuperLink currently connects Hong Kong airport to Shenzhen, Guangzhou, Xiamen, Fuzhou, Chongqing Chengdu, Wuhan, Shanghai Zhengzhou and Beijing. “I believe the link between air and road is the trend for e-commerce,” said Vivien Lau, managing director of Hacis, the added-value logistics unit of Hactl. China road feeder service plays an important role in joining the dots and ensuring airlines are able to consistently serve their customers across the continent. Trucks and planes need each other to arrive at the end result. “We cater for the e-commerce sector, but we do not seek to provide a single solution in our own right, so we do not compete with integrators, which enjoy enormous advantages in e-commerce business with their advanced capability in last-mile delivery,’’ said Lau. “We look for partnership with the integrators – supporting their operations in Hong Kong as well as cross border activities between Hong Kong and China. In fact, some of the integrators are already Hacis customers.’’ Explaining Hacis’ contribution to Hactl, Lau said: “Hacis provides integrated logistics support services, which complement Hactl’s handling services. This enables carriers to extend their market catchment areas into China, and so generate additional cargo and revenue.’’ An example of Hacis’ success in the e-commerce business was its relationship with Expeditors International, a global logistics company headquartered in Seattle, Washington. Hacis has more than doubled its business with Expeditors Hong Kong with the provision of its Airport Direct Export service. Expeditors now uses Hacis SuperLink China Direct bonded express road feeder services to re-export cargo primarily to Huangpu, Shenzhen and Guangzhou. By adding export processing and re-exports to China to the import services previously provided by Hacis, Expeditors has successfully streamlined all its operations and logistics processes at the airport by bringing them into a single location. Meanwhile, the fighting between the three Hong Kong air cargo terminals for airline clients, which began in 2013 with the opening of Cathay’s cargo terminal, has intensified. The three cargo handlers – Hactl, Cathay Pacific Cargo Terminal and Asia Airfreight Terminal – are continuing to try to lure each other’s carriers by offering various services as well as cutting prices. “Inevitably, the competition has become very intense and it is what we all expected,’’ said Whitehead. “Everybody is fighting to hold on to their customers and where they can try to attract other carriers. All we can do is continue to provide the best service that the industry demands – stay close to our customers in terms of what their requirements are and the difficulties they face and how we can help them. If you don’t provide the services you are dead in the water.” Turning to the extension of Hactl’s lease at the airport, Whitehead explained: “Basically, when we tendered for the project we got a franchise for a 20-year lease with the option for extension for another 10 years and we exercised that option in May 2015.’’ The 10-year extension is from July 2018, when the current franchise expires. “In a nutshell, the new agreement is on the same terms and conditions as the 20-year lease,’’ Whitehead added. He refused to elaborate on the terms of the lease. “For us by signing the lease it shows Hactl’s commitment to the air cargo industry in Hong Kong and our shareholders are very comfortable to continue for an extra 10 years.” Turning to the performance of Hactl in the first six months of this year, Whitehead said: “We started well with the Chinese New Year but generally air cargo has been slow since then. That is a reflection of two things, one a slowdown in exports from China and the fact that the European market continues to be soft.” Hactl January-June volume was 778,768 tonnes.