Hong Kong is offering cargo exporters discounts to prop up trade and the world’s busiest cargo airport, as freight shipments take a hit from the long-running US-China trade war.
The Airport Authority Hong Kong (AAHK) has teamed up with airlines to offer concessions for cargo that passes through the city’s international airport, which will kick in from April 1, 2020.
Cathay Pacific, which runs its own dedicated cargo terminal in Hong Kong and is a driving force behind the scheme, said it would offer customers a discount of 30 HK cents per kilogram on general and special cargo, in the first such offer. It would amount to a discount of between 18 and 20 per cent compared with current charge levels.
Under the scheme, the AAHK will contribute 20 per cent of the terminal charge concession amount offered by an airline to freight forwarders for export cargo, subject to agreement between the authority and individual airlines.
Cathay Pacific, Hong Kong’s largest airline, did not allude to the effects of the trade-tariff spat it had been caught up in this time round – unlike during its monthly traffic reports – but stated that it introduced concessions to defend the competitiveness of Hong Kong International Airport (HKIA).
“We are driving the terminal charge concession to reinforce the competitiveness [of HKIA],” said Ronald Lam Siu-por, chief customer and commercial officer at Cathay, the world’s fifth-largest cargo airline.
“We take it upon ourselves as the home carrier to ensure that our hub continues to grow with increasing volume,” said Lam, who has responsibility for cargo.
HKIA has been the leading air cargo hub for nine years running. On a rolling 12-month basis, the airport handled 4.8 million tonnes of cargo up to the end of October, down 6.4 per cent from 5.1 million tonnes last year.
We take it upon ourselves as the home carrier to ensure that our hub continues to grow with increasing volume
Ronald Lam, Cathay Pacific’s chief customer and commercial officer
Memphis International Airport is the second-largest – and handled 4.4 million tonnes last year.
The airline said the charge would help offset rising costs associated with cargo customers absorbing and dealing with new International Civil Aviation Organisation security rules on cargo.
The Cathay Pacific Group comprises its premium namesake flagship airline, regional carrier Cathay Dragon, budget unit HK Express and dedicated Asia freight airline Air Hong Kong, which operates nine planes. The entire group operates 238 planes, including 20 cargo planes under Cathay Pacific Cargo.
AAHK said it was supporting the charge to help defend Hong Kong’s air cargo hub status.
Cissy Chan Ching-sze, executive director of commercial at AAHK, said: “The new initiative will help maintain the cost efficiency of the industry and strengthen our cargo volume growth, ultimately reinforcing HKIA’s competitiveness.”
Brian Pearce, chief economist with airline trade body the International Air Transport Association, described 2019 as a “really miserable year” for cargo. Demand for cargo was set to fall to its lowest level since the global financial crisis, according to IATA research.
“It is pretty clear it is driven by the tariff and trade wars and the effect it has had,” Pearce said.
During two years of annual losses in 2016 and 2017, Cathay Pacific had used its cargo unit – which had rebounded – to subsidise the sharp decline in its passenger travel business, though the situation had now been reversed.
Phillip Forsyth, president of T&P Logistics, a small freight forwarder, said the concession would not benefit his company, though it would probably help much larger operators.
“Most of our air freight moves directly from Shenzhen and Guangzhou due to lower freight pricing and, of course, much lower terminal fees when compared to HACTL,” Forsyth said, referring to Hong Kong Air Cargo Terminals, a rival cargo terminal operator business to Cathay Pacific.