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Securing comparative advantage

Posted By Chinh Van, Friday, August 11, 2017

The world air cargo market has been characterized by lightweight cargo, decreasing demand for finished goods, and stagnant demand due to modal shift to marine transport. On the other hand, competition is worsening due to the expansion of freight transportation through passenger flights and the increase in supply and processing capacity due to aggressive airport infrastructure expansion in China and the Middle East.


In addition, instead of declining demand for existing major items such as electrical and electronic products, demand for fresh cargo and e-commerce goods has surged, and the proportion of freight transport using express carriers such as FedEx is increasing. Thus policy responses reflecting these trends are needed.


What do mango, cherry, lobster, salmon have in common? They are air freight items that are imported directly from local sources. Looking at the major cargo traded through Incheon Airport, there are notable high-margin items such as semiconductors and mobile machines, as well as fresh-food items with high time-sensitivity. This is attributable to the decline in the prices of imported agricultural and marine products due to the FTA and the increase in demand for high-quality fresh food.


Particularly, transportation of food and cargo in small volumes to cities and food around the world is increasing. Thus it is expected that the demand for transportation through passenger planes that are suitable for small volume transportation will increase. An airline can improve its cost efficiency because it can simultaneously carry passengers and freight on the same aircraft through cargo transportation using passenger flights.


As a result, Incheon International Airport is responding to recent changes in the environment and we have implemented several strategies to ensure this. One of our strategies is to develop Cool Cargo Center, a fresh cargo handling facility. IATA CEIV Pharma certification is also planned. Airlines operating at Incheon Airport are working on a project to build a "Cool Cargo Chain Process" ("CCCP") to attract passengers and special cargo such as fresh cargo to Incheon.


The CCCP is a trans-shipment process amongst passenger flights within the airside of the airport which will enable ground handling services within the connection time between flights. It is expected that this will greatly contribute to the competitiveness of airlines operating at Incheon Airport as well as the competitiveness of Incheon International Airport.


In addition, the current occupancy rate of logistics complexes (990,000 ㎡ in the first stage and 550,000 ㎡ in the second stage) is 97%. As a result, Incheon Airport will attract new global distribution centers based at Incheon Airport through the rapid development of the logistics complex (420,000 ㎡) to create new cargo and transit freight.


In this way, facility investment, institutional and process improvement for new industry growth will be an important strategy for the aviation industry.


I would like to find opportunities to find new strategies and insights through workshops, meetings and networking with a variety of airline logistics experts at the 2017 TIACA Executive Summit.


Kwang Soo Lee

Executive Vice President

Incheon International Airport Corporation

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