HONG KONG INTERNATIONAL AIRPORT: IN DEMAND

CEO, Fred Lam, talks to Joe Bates about Hong Kong International Airport’s plans to grow its cargo facilities and services, infrastructure development and coping with rising demand.

With a record 74.7 million passengers passing through Hong Kong International Airport (HKIA) in 2018, it is easy to forget that it is actually the world’s biggest cargo airport and has been for nearly a decade, handling in excess of five million tonnes of freight per annum.

While last year’s total of 5.1 million tonnes was only 1.5% up on 2017, the total meant that the airport handled an incredible one million more tonnes in 2018 than it did in 2013. Or, put another way, HKIA’s freight figures have soared by 25% in five years.

The world’s next biggest cargo airports in terms of cargo volumes are FedEx world hub Memphis International Airport (MEM), which handled 4.47 million tonnes in 2018, followed by Shanghai Pudong (PVG), Incheon (ICN) and Dubai (DXB) which accommodated over 4 million, 2.9 million and 2.64 million tonnes respectively last year.

So, HKIA remains the biggest air cargo gateway on the planet by quite some margin, but operator, Airport Authority Hong (AAHK), is clearly not taking things for granted as two recent developments testify.

In December, AAHK and the Alibaba Group confirmed their commitment to working together to jointly build a global smart logistics network to foster more inclusive trade.

And earlier this year, HKIA and Brussels Airport announced the launch of an airport-to-airport pharma corridor to meet the needs of pharmaceutical shipments.

Key cargo developments

The Alibaba Group collaboration entails the creation of a premium logistics centre on a 5.3-hectare site at Kwo Lo Wan in the South Cargo Precinct of HKIA.

Set to open in 2023, the complex will be built and operated by Cainiao Network – the logistics arm of the Alibaba Group – and, according to AAHK, will be future-proofed with high design specifications for large-scale, cutting-edge robotics and automation as well as temperature-controlled features.

AAHK CEO, Fred Lam, confirms that the airport wants to establish “a world-class digital logistics centre in Asia” that serves the fast-growing global cross border e-commerce trade and strengthens Hong Kong’s international competitiveness.

In response to why this is important for the airport, he says: “The centre is anticipated to become a smart hub in Asia, reinforcing the cargo leadership position of HKIA.

“This also aligns with our overall cargo development strategy to capture opportunities arising from increased cross-border e-commerce and related businesses, as well as the growth in the logistics business related to temperature-controlled products such as pharmaceuticals.”

Talking of pharmaceuticals, earlier this year HKIA and Brussels Airport announced the launch of an airport-to-airport pharma corridor to meet the growing demand for pharmaceutical shipments.

Both airports have attained IATA Centre of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV Pharma) Certification by community approach, which guarantees that airport cargo service providers adhere to high standards in handling pharmaceutical shipments.

AAHK’s general manager for aviation logistics, Alaina Shum, says: “We are pleased to collaborate with Brussels Airport, Europe’s key air cargo hub for handling pharmaceutical shipments, to establish this A2A pharma corridor.

“It marks another milestone in our continuous endeavours to make Hong Kong a preferred pharmaceutical trans-shipment hub and to strengthen our status as the world’s busiest cargo airport.

“Moreover, to ensure airport-wide seamless temperature-controlled handling, we are taking delivery of 19 additional cool dollies for common-use by the airlines, meaning that all airlines will always have the option to deploy cool dollies for their temperature-sensitive shipments.

“We are also building apron shelters to protect the pharmaceutical shipments from direct weather elements.”

Infrastructure development

With traffic rising to almost 75 million passengers (+2.5%) and 5.1 million tonnes of cargo in 2018, and forecasts predicting that these figures will exceed 100 million passengers and nine million tonnes respectively by 2030, the need for HKIA to open a host of new facilities over the next decade just to cope with demand needs little explanation.

By far and away the biggest project underway today is the $18.2 billion (HK$141.5bn) Three-Runway System (3RS) programme, which involves the construction of a third runway and associated taxiways, third runway passenger building and an apron on 650 hectares of reclaimed land; the expansion of the existing Terminal 2; a new Automated People Mover (APM) system; additional baggage handling system, and more.

The third runway is scheduled to open in 2022, and when the whole system is operational in 2024 – ongoing works will force the original north runway to close for two years after the third runway opens – the airport will be capable of accommodating around 600,000 aircraft movements per annum.

The new 280,000 square-metre, 57-gate terminal – located north of the existing Terminal 1 and connected to an expanded Terminal 2 by a 2,600-metre long Automated People Mover (APM) system – is scheduled to open in 2024.

The airport’s existing Terminal 1 is also being upgraded and expanded over the next two to three years to ensure that its facilities are on a par with those in the new buildings.

Indeed, when finished, the new more passenger-friendly T1 will have 48 additional check-in counters and two new baggage reclaim carousels, its own central courtyard with an outdoor garden, a host of new retail outlets and new self-service technologies such as self-boarding e-gates designed to create a smooth and hassle-free airport experience.

AAHK actually describes the planned upgrade as a “refreshing revamp” that will transform the look, feel and ambiance of the terminal.

A key part of project will be dividing the entire boarding area into 12 feature zones with different themes. These will include an ‘entertainment and technology’ zone showcasing digital games and movies; an interactive ‘kids-friendly’ zone where children can play; and a ‘leisure’ zone, which among other things will provide a host of comfortable seating areas and greenery where visitors can relax in a quiet environment.

Lam says: “Other changes to T1 will include the revamp of the binnacles and cabins to make the entire terminal more luminous; the main F&B area at the East Hall will provide more cuisine choices and more seats in a more spacious environment; and over 100 toilets will undergo a make-over from this year.

“It will take us three to four years to finish everything, but when it’s done, the interior of T1 will look totally different and like a new terminal.”

Terminal 1 will be connected to the North Satellite Concourse (NSC) by an eye catching new 200-metre long SkyBridge over the airfield, scheduled to open in early 2020.

The lofty new addition will save up to 400 bus journeys a day between T1 and the NSC and provide passengers with a brand new experience when travelling between the two complexes.

The air-conditioned footbridge will boast its own restaurant and bar and provide spectacular views of the airport. And at 28 metres above the ground, SkyBridge will be high enough for an A380 to pass under it.

“SkyBridge will be a cool new addition to the airport that I believe will quickly become one of our most popular attractions,” promises Lam.

Airport city

The airport received a huge boost in late 2018 when the Hong Kong government announced its vision to develop an Aerotropolis on its Lantau Island home in the Chief Executive’s Policy Address.

In line with its vision of transforming HKIA from being a “city’s airport to an airport city”, in the last few years AAHK has undertaken a series of strategic projects which it is confident will further integrate the airport’s development with the broader regional economic activities, in particular those of Lantau Island.

“Our Airport City strategy complements the government’s overall planning for Lantau, which will generate enormous synergy and further consolidate Hong Kong’s position as an international aviation hub and the major business centre in the GBA,” enthuses Lam.

Projects that form the crucial parts of the AAHK’s Airport City strategy include SKYCITY, which is set to be the largest commercial development in Hong Kong and a new regional destination comprising entertainment, retail and dining facilities, as well as hotels and offices.

Last year, AAHK acquired the rights to run AsiaWorld-Expo, where this year’s ACI Asia-Pacific/ACI World Annual General Assembly, Conference and Exhibition takes place, and is studying the future development of it to create synergy for the overall airport development.

Another key driver of AAHK’s airport city strategy is Alibaba’s premium logistics centre, which AAHK hopes will capture the opportunities arising from the exponential growth of e-commerce and consolidate the global cargo leadership of HKIA.

“Our airport city is not just about shopping,” points out Lam. “It is also very much about cargo and other services as proven by the recent contract award to a subsidiary of Alibaba to build an e-commerce/logistics centre at the airport.

“We feel that Lantau Island’s location next to the Hong Kong-Zhuhai-Macau Bridge crossing, which connects to other parts of the Greater Bay Area, means that our airport city can eventually extend beyond the airport island itself to the benefit of all of Hong Kong and the region.”

He notes that the airport’s success has prompted the Hong Kong government to expand the town nearest to the airport site and to reclaim more land from the sea for residential and other developments, which could create more manpower and resources for HKIA.

“The airport city will further enhance our status as a key driver of Hong Kong’s economy,” says Lam.

“Yes, of course, the airport’s success is our priority, but when we develop HKIA we cannot do so without considering and taking into account the overall interests of Hong Kong as the two cannot be separated. If Hong Kong doesn’t do well, the airport doesn’t do well, and vice versa.

“So, from this perspective, we must have the higher goal of making sure we best use the airport and all the planned new facilities to drive Hong Kong’s overall growth.”

New technology

Talking about some of the new passenger friendly and capacity enhancing technology we can expect to see introduced at HKIA over the next few years, Lam first reminds me that biometric initiatives such as e-gates are already beginning to transform the gate experience at the airport.

The airport has recently installed 44 e-gates in Terminal 1, and other queue-busting technologies either recently installed or on the way include self check-in kiosks, self-bag drop counters and e-boarding gates.

Biometric enabled ‘single token’ travel, which allows passengers to pass through the airport using facial recognition technology – effectively eliminating the need for passports and boarding passes – is the ultimate goal, reveals Lam.

He says: “With end-to-end biometric deployment, passengers will be able to get rid of repetitive document checks and go through check-in and boarding procedures with minimal queuing time.

“The airport will also be able to process a greater number of passengers than ever before, providing a seamless, stress-free experience for the millions of people we welcome each year.”

Multi-modal connectivity

With over 1,100 flights a day, rapid train links to downtown Hong Kong and beyond, over 90 daily ferry services to neighbouring Macau and Mainland cities in the Greater Bay Area (GBA) via its SkyPier, and hundreds of daily coach and bus connections to the city and surrounding territories across the boundary in Mainland China, HKIA is without doubt one of the world’s best-connected airports.

SkyPier, HKIA’s ferry terminal, handles around 2.6 million transfer passengers a year travelling between HKIA and the GBA ports of Dongguan Humen; Guangzhou Lianhuashan; Guangzhou Nansha; Macau (Maritime Ferry Terminal and Taipa); Shenzhen (Fuyong and Shekou); Zhongshan; and Zhuhai Jiuzhou.

And things just got better for passengers flying with home-based carriers Cathay Pacific, Cathay Dragon, Hong Kong Airlines and HK Express as they can now check-in for flights from Hong Kong International Airport at the passenger clearance building of the new Hong Kong-Zhuhai-Macao Bridge (HZMB).

With the new bridge, the time required to travel from HKIA to Zhuhai has been significantly reduced from four hours to just 45 minutes.

Located in the Arrivals hall of the passenger clearance building of the Hong Kong port of HZMB, the new check-in centre boasts check-in counters and smart check-in kiosks, which passengers can use to check their baggage and obtain boarding passes.

This means that after checking in, passengers can either go direct to the airport or spend the day in Hong Kong without the hassle of carrying their luggage around with them.

The upstream check-in services set up by AAHK at the Zhuhai Boundary Crossing Facilities started operations in October 2018, in tandem with the opening of the bridge, while the same service will be available at the Macau Boundary Crossing Facilities later this year.

For passengers who prefer to check-in at HKIA, dedicated transportation services are also available for them to proceed from Zhuhai or Macau via Hong Kong port to the airport directly.

“Leveraging HKIA’s advantageous geographical location as a gateway to the Mainland, we will continue to strengthen our multi-modal transportation services, striving to offer HKIA’s extensive connectivity to passengers travelling to and from cities throughout the GBA and beyond,” enthuses Lam.

Next up is a new bonded bridge that will provide vehicle access between the HZMB and a planned new Intermodal Transfer Terminal opening at HKIA in 2022.

The HK$3 billion new additions mean that passengers who have completed upstream check-in procedures in the Mainland and Macau and travel to HKIA via the HZMB will no longer need to undergo border clearance procedures at Hong Kong port as they would just need to take bonded transportation to the airside and head directly to their boarding gates.

How significant are these developments (the HZMB, Hong Kong port and new Intermodal Transfer Terminal) to the future growth of HKIA?

Lam says: “The development of the Greater Bay Area is one of the key strategic plans in China’s development blueprint, and the region will see great growth potential in the future.

“With the new HZMB and HKIA’s new initiatives in place, it would be easier for more people to travel between GBA and the rest of the world, strengthening our multi-modal transport hub status in the region.”

Coping with growth

With 90 million people alone living in neighbouring Guangdong Province in Southeast China and another 60 million in the Pearl River Delta area – the nation’s wealthiest and one of its fastest growing regions – there is simply no getting around the fact that growth will be on the cards for HKIA for the foreseeable future.

Indeed, China’s vast population and huge growth potential means that rather that viewing airports such as Guangdong Baiyun, Shenzhen Bao’an and Zhuhai Junwan as rivals, Lam states that the long-term future for all of them might be best served on finding ways that they can work together to meet demand.

“According to IATA Consulting, even after factoring in all the anticipated expansions in the handling capacity of the airports in the Pearl River Delta region, the combined supply of capacity will still fall short of the forecast demand by 52 million passenger trips in 2030,” muses Lam.

“In Mainland China today, the propensity to travel is low compared to other parts of the world. This will change in time, but how will the system cope with it?

“Most people on the Mainland can now afford to travel by air once a year, and just imagine what would happen if everyone wanted to fly once or twice a year like in Europe or the US?

“So, rather than talk about rivals and worry about competition, we all actually have to find ways of better working together and possibly co-ordinating operations to cope better with the expansion of the Chinese market.”

Sounds like Fred and his team are going to be very busy over the next few years.