Hong Kong airport chaos hampers air cargo

Hong Kong airport chaos hampers air cargo

Hong Kong is the busiest air cargo airport in the world, handling more than 5 million tons in 2018. This means any disruption to cargo flows, such as those caused by the suspending of all passenger flights Aug. 12, quickly create bottlenecks that take time to unplug. Photo credit: Shutterstock.com.

Logistics service providers with cargo transiting the world’s busiest air freight airport are scrambling for alternatives after escalating anti-government protests forced the Hong Kong Airport Authority to cancel all passenger flights on Monday.

Thousands of protestors descended on Hong Kong’s international airport, with sit-ins taking place at both terminals. More than 200 passenger flights were canceled, delaying thousands of tons of belly cargo. There were few last-minute options available for logistics providers, while the knock-on effects of the grounded flights are expected to be felt for the rest of the week.

Edoardo Podestá, Dachser Far East’s managing director for air and sea logistics in Asia Pacific, said cargo terminals were still accepting cargo on Monday evening, although the roads leading to the airport were heavily congested.

“Tomorrow morning, we will assess what has happened tonight and based on that we shall decide the course of action, including diverting export and import cargo to South China airports,” Podestá told JOC.com.

A spokesperson for DB Schenker said freighter departures and arrivals have not been affected, but he also pointed to mounting delays for cargo trucks getting to and from the airport because protests would “invariably affect operations.”

The Hong Kong Association of Freight Forwarding and Logistics (HAFFA) said from 6 a.m. local time Tuesday, all freighter and passenger flights would be subject to rescheduling. A spokesperson for Hong Kong Air Cargo Terminals (Hactl) said it was servicing all freighters as normal.

Knock-on freight delays

But concerns are mounting that even if flights resume Tuesday, the knock-on effects for air cargo will take time to smooth out because of the sheer volume of freight flowing through the airport terminals. Hong Kong airport saw its throughput pass the 5-million-ton mark for the first time in 2018, handling 5.62 million US tons (5.12 million tonnes).

Worst affected by the closure of the airport is Hong Kong-based Cathay Pacific, which earlier this month reported unimpressive first-half results. The company’s cargo revenue fell 11.4 percent compared with the previous year and tonnage dropped 6.1 percent. The United States-China trade war has hit Cathay’s extensive trans-Pacific cargo operations hard, and the poorly performing cargo business will be further impacted by the airport closure.

Investment analyst Jefferies has estimated that cargo tonnage for Cathay in the second half will fall almost 10 percent year over year, and more importantly from a profitability viewpoint, it said the yield will plummet 15.4 percent.

Another pain point Cathay is facing that could affect its fleet operation by creating delays and groundings — and ultimately the movement of cargo — is a new requirement by the Civil Aviation Administration of China for all airline staff passing through Chinese airspace to first apply for approval by mainland authorities. Any staff member of Cathay involved in the protest action will be barred from entering China or even passing through its airspace.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.