Hong Kong International Airport lifts value chain proposition
It’s no coincidence that Hong Kong International Airport marks one gateway (or endpoint) of the Hong Kong-Zhuhai highway project. Already vital, airfreight will become ever more important in Hong Kong trade in the years ahead as Chinese products move up the value chain, as do consumer-based goods bound for China. Higher margins and more stringent time demands will combine to favor air over sea. Regional air transshipments are also increasing at a rapid clip. While still in the planning stages, the airport’s third runway project is testament to this evolution. The $17.5 billion (as of a 2011 estimate) undertaking will give Hong Kong a decades-long capacity buffer. Otherwise, officials and outside experts alike warn, the 16-year-old airport on the island of Lantau will reach traffic capacity by the end of this decade and possibly sooner. Airfreight providers are already gearing up operations. Handling capacity received a major boost last year when Hong Kong’s flag carrier Cathay Pacific opened its own cargo terminal. The almost $1 billion investment increases overall cargo capacity at the airport by 50%. Although it has yet to make up all the business lost to now-rival Cathay Pacific Cargo Terminal, Hong Kong Air Cargo Terminals Ltd. (formerly owned in part by Cathay Pacific) gained almost 12% in tonnage during the first half of this year compared to a similar period in 2013. In announcing the first half 2014 results, HACTL pinpointed an almost 35% gain in transshipments and cited road feeders in and out of China as especially noteworthy. This “reflects the continuing development of Hong Kong as the preferred regional transshipment hub,” the company said. That role will expand considerably with a new 12-kilometer viaduct and tunnel project, called the Hong Kong Link Road, which will provide a direct and dedicated connection between the airport and the main bridge to Zhuhai. This link is expected to open up the airport facilities to economic powerhouse Guangdong province, as well as neighboring Guangxi Zhuang Autonomous Region. That’s more than 150 million people and an economy about the size of South Korea’s. The position of airfreight in Hong Kong trade is already well established. Hong Kong is now the world’s busiest airport in terms of cargo traffic, having surpassed Memphis in 2010. Last year, airfreight totaled 4.12 million tons, which is almost three times its throughput in 1998. Hong Kong International Airport is, by far, the world’s largest international air cargo hub, almost twice its nearest competitor, Inchon, South Korea. For the first half of this year, tonnage at Hong Kong’s airport increased another 6.3%. Airfreight now accounts for 37% of the value of Hong Kong’s external trade, a percentage that has been creeping up year by year. In volume terms, it is just a tad more than 1% of the total.