The opening up of the Asian ground handling market is creating some exciting new opportunities for operators that specialise in the handling of cargo shipments. The situation has led to renewed interest in the region from some of the world’s biggest cargo handling companies, which appear to be queuing up for a piece of the action.
And their interest is expected to intensify in the years ahead as record levels of cargo are predicted to pass through the region’s gateways.
One of the airports to buck with the tradition and allow a ‘foreign’ operator to enter the market is India’s Hyderabad International Airport, which has set up a joint-venture company with Menzies Aviation to run the cargo warehouse at the newly opened gateway.
As part of the deal, Menzies has been awarded a 15-year concession to operate and manage the facility until it reaches its 100,000-tonne capacity, which in reality is expected to happen in the next six or seven years.
The gateway’s operator, GMR Hyderabad International Airport Ltd (GHIAL), holds a 51% stake in the venture company.
Elsewhere, a host of international handling companies have Asian airports in their sights. Singapore Airport Terminal Services, for example, has signed a joint venture agreement with Air India to provide ground handling services at Bangalore’s soon to be opened Bengaluru International Airport.
And in China – Asia’s other chief growth engine besides India – Lufthansa Cargo has set up a joint venture ground handling company to operate the Tianjin Airport Hua Yu Air Cargo Terminal at the up and coming gateway of Tianjin Binhai International Airport.
Korean Air Cargo and its Chinese partner, Sinotrans, intend to base a joint venture cargo airline at Tianjin.
Lufthansa Cargo owns 46% of the handling company, which is slated to run a new freight terminal with an annual capacity of 360,000 tonnes.
The Tianjin project is indeed its third foray into freight handling in China, for the German carrier holds a 50% stake in the International Cargo Centre Shenzhen Ltd (PACTL) – where Lufthansa Cargo’s Chinese subsidiary Jade Cargo Airlines is based – and has a 29% interest in the Shanghai Pudong International Airport Cargo Terminal.
Nils Haupt, head of corporate relations of Lufthansa Cargo, claims that the Shanghai initiative has proved “very successful for the joint venture partners” to date.
In fact the facility broke the one million tonnes of cargo per annum barrier for the first time in 2007 and now accommodates close to 50% of freight handled at Shanghai Pudong. Cargo throughput at the gateway hit a record high of 2.5 million tonnes last year.
And it appears to be a similar success story in Shenzhen where Lufthansa Cargo claims that PACTL – which was founded in 1999 – has grown into the second-largest independent cargo terminal operator in China.
Multi-national handling conglomerates Swissport and Worldwide Flight Services have also been pushing into the Asian freight handling theatre.
Swissport opened a 17,600sqm cargo complex at Singapore Changi in 2006, the year after it acquired local passenger and cargo handling agent, Globe Ground Korea, to become the third force at Incheon International Airport.
Its Changi terminal is equipped with a fully automated ULD handling system and other advanced features. With an initial capacity of 250,000 tonnes and expansion potential to 400,000, it was the largest station in the handling company’s global footprint when it came on stream.
Worldwide Flight Services opened a cargo terminal at Bangkok Suvarnabhumi in 2006, a move that company president Olivier Bijaoui described as the start of a growing presence in Asia.
“The Asian area is growing fast and above the average, what makes an engagement interesting,” comments Swissport spokesman, Stephan Beerli.
To his frustration, however, Beerli claims that the opportunities for international handlers in the region remain limited. “There is still a long way to go as real liberalisation and deregulation of the market cannot take place everywhere until many existing reciprocity agreements come to an end,” he comments. “We are, however, moving in the right direction.”
His feelings are echoed by some airlines, former Northwest Airlines Cargo president, Jim Friedel, most notably declaring that handling duopolies at many Asian gateways stood in the way of airlines’ efforts to improve service levels due to lack of competition.
Notwithstanding its links with subsidiary Singapore Airport Terminal Services (SATS) – the largest ground handling provider at Singapore Changi – Singapore Airlines Cargo also favours more competition.
“More handlers means more choice,” says Goh Choon Phong, president of Singapore Airlines Cargo. “This will be good for us and all other carriers, since the ground handlers will compete to drive down cost and improve service levels for the airlines.”
Swissport and Worldwide Flight Services were among the first handling companies to embrace Cargo 2000, a quality initiative launched by airlines and freight forwarders to establish benchmarks for processing and monitoring air cargo along the supply chain.
“With the Cargo 2000 initiative, handling agents have become more aware of the importance of timely updates of shipment status information to satisfy customer requirements,” Goh observes.
Many of the large international handlers are also involved in IATA’s e-freight drive, which aims to banish paper from the air cargo processes, an objective that could save the industry $1.2 billion in costs a year, according to IATA estimates.
Incumbent operators at large Asian gateways, however, reject the argument that they are less likely to invest in service upgrades without more competitors breathing down their neck.
Warren Bishop, director of corporate development at Hong Kong Air Cargo Terminals, can certainly point to a number of recent investments to speed up processes and extend the company’s reach to other airports in the Pearl River Delta.
Bishop, for one, believes that enhancing productivity maximises throughput at Hong Kong International Airport, ultimately reduces costs for the airlines and improves service levels.
Times are indeed a-changing, although few are likely to go as far as the partnership agreement that Swissport signed in November 2005 with Russian freighter airline AirBridge Cargo and Siberia-based KrasAir, to jointly develop and operate a cargo hub in the Siberian city of Krasnoyarsk.
Still, the rules of engagement have evolved for many carries over the years, as the emergence of multi-national handling outfits has allowed the pursuit of multi-station agreements.
Indeed Beerli says that Swissport’s international expansion across the region is in part driven by requests from its customers to enter new markets to provide more competition.
United Airlines claims that costs savings and greater flexibility have proved to be the key gains of its 2003 decision to hand over the cargo facilities at its biggest US stations to two large handling outfits.
“It’s a more process-driven environment,” notes Scott Dolan, president of cargo and senior vice president of airport operations. “The Swissports of this world don’t have the constraints that we have on the service side.”
Is this trend likely to be repeated in Asia-Pacific? It is hard to say as most airlines appear reluctant to embrace multi-station or broad regional agreements, mindful of local variations in performance and service levels.
“Our selection of ground handling at online stations depends on the strength and quality of service that the general handling agent is able to provide at that particular location,” says Ram Menen, senior vice president of cargo at Emirates Airlines.
“From our experience, although within one group or company all branches should have consistency of service, the reality is that it is not the case. Service levels vary quite a bit.”
Which does not mean that the Dubai-based carrier has no regional handling deals. Servisair is the sole handling provider for Emirates SkyCargo throughout the UK, which Menen attributes to the company’s service levels at each individual station there.
“When we look at an offline station or online via road feeder service, we tend to look at a handler who can provide us service in several countries or stations and who is able to bill us centrally for service rendered,” he adds.
Compared with Europe and the US, the Asia-Pacific region has a lot of catching up to do in terms of the opening up of the ground handling market, but if the growing number of joint ventures are anything to go by, it is going in the right direction.
Aisa-Pacific Airports 2008 Issue 1
