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Stop unreasonable charges or bear negative outcomes

Stop unreasonable charges or bear negative outcomes

In the Guangdong-Hong Kong-Macao Greater Bay Area Development Framework, Hong Kong has been identified as the international aviation hub for the Greater Bay Area (GBA).  I have no doubt that Hong Kong will benefit greatly from this initiative, should it be achieved. However, we must understand that we have to work very hard for the realisation of this target role in GBA, as there are many challenges ahead.

Air cargo has always been a core part of Hong Kong’s reputation as an international aviation hub. Indeed, as far as air cargo throughput is concerned, Hong Kong has been the world’s busiest airport for the past two decades. But can we continue to maintain our reputation in the face of our competitors?

The Airport Authority Hong Kong (AAHK) is going full swing with the third runway system project (3RS), and with the full blessing of Hong Kong logistics industries and import/export sectors. While we are all glad to see that AAHK has been able to identify a finance model that allows the much-needed 3RS to go ahead, we are all extremely wary that financing such a mega project is no mean feat and it could be extremely costly for the users.

As far as trading and airfreight are concerned, the industry is facing substantial challenges. The uncertainty of the Sino-US trade negotiation is still uncertain, European-American and subsequently Japanese-American negotiations will dominate the world in the next couple of years, so it would be naïve to think that the geopolitical and economic instabilities will settle easily or quickly.

Due to cost surge and transformation of industry structure in the Mainland, new investments will likely to be diverted elsewhere while trade and political conflicts continue. Although this trend of cargo diversion would be compensated partially by the growth of the high-technology industry in the GBA, we still have an immense challenge ahead of us.

As a shipper myself, I must point out that the cost difference of shipping via Hong Kong and other airports in the GBA is increasing. Sooner rather than later, there may be a difference in freight rates, and as much as 60% in local logistics costs for shipping out of Hong Kong and Shenzhen/Guangzhou by air. Even more worryingly, I am seeing a general trend of surging logistics costs all over Hong Kong.

Shippers are seeing cost hikes in the Handling Charge, Documentation Charge, CT Charges, Customs Clearance Fees, etc. almost every year.

I understand that unless we can find ways to deal with the issues of acute shortage of labour and land properly, in all short, medium and long-term, we might have to live with these challenges, and hope that somehow a balance is struck between the cost and efficiency.

However, what worries me most is that many industry stakeholders are neglecting to consider the effect that such issues will have on the long-term wellbeing, nay, the industry’s long-term ability to survive in the face of such circumstances. Profit could be thinning for operators and service providers, but if everyone only works for the maximisation of short-term profit, the industry will surely meet its end.

The Civil Aviation Department is considering liberalisation of Cargo Fuel Surcharge. Nothing will hurt the industry more if airlines immediately increase their fuel surcharges levels or introduce a new scheme that would result in much higher surcharges. Hong Kong is a small market, and carriers in practice seldom compete over surcharges. Therefore, when an airline increases its surcharges, others are likely to follow suit. Therefore, the cost increase will drive shippers further away. Unfortunately, some airlines are planning for such changes already.

The mandatory 100% scanning requirement will be implemented before mid-2021 and will very likely cause disruptions to operations and substantial cost increases. I understand that this is an International Civil Aviation Organisation requirement and Hong Kong has to comply. However, we need to at least work out the charging scheme related to the scanning costs to ensure users would not be abused. The scanning requirement is going to be implemented in phases, and the issue of how costs will be levied during the transitional period and then after full implementation, could be challenging.

Representing shippers, I must ask the government to take account for the proper development and implementation of the scheme. The government’s role should not be limited only to ensuring that there would be services, but also to how flaws in the market structure that would lead to unreasonable charges be amended.

The Hong Kong airfreight trade is fragile because of its high cost structure and our dependence as a transshipment hub plus the change of business model of the Greater Bay Area which in the past 10 years see massive exodus of manufacturing industries migrating to ASEAN and other parts of the world.

The Hong Kong government must act now to forestall immense negative impact to the import and export communities or be prepared to bear the brunt of the consequences, should they fail to act quickly.