The opening of the new Baiyun (White Cloud) Airport in the northern Huadu District of Guangzhou has caused concerns in Hong Kong.

The new airport occupies 15 square kilometres, bigger than the Hong Kong International Airport by 231 hectares. And because it is new, some of the hardware is expected to be more advanced than ours. There are fears that it will pose a big challenge to Hong Kong, especially in cargo traffic.

The biggest advantage of the Baiyun Airport lies in its proximity to customers. Guangzhou is situated at the heart of the hustling Pearl River Delta, which has already become the light-manufacturing factory of the world. Because of the now popular just-in-time manufacturing method, material has to come in quickly, be put on the assembly line immediately, and dispatched to customers around the world in as short a span as 48 hours after the order. This can only be achieved with a highly efficient air-freight logistic system.

Proximity is a big plus, yet Hong Kong is not that disadvantaged.

We are much closer to Shenzhen and Dongguan, and when the bridge across the Pearl River estuary is built, we are also linked efficiently with the western part of the delta, especially Macao, Zhuhai, Zhongshan and Foshan, where the pace of development is expected to be even quicker in the future. On top of that, we have already established a green channel with the mainland so that air-freight cargo can move in and out of Hong Kong with minimum red-tape and delay.

Geographically, we do not compete directly with Baiyun Airport for cargo, but rather we complement each other.

Baiyun Airport will excel over Hong Kong with its extensive internal network, but Hong Kong is much stronger in international network.

Currently we serve over 140 international destinations, while Guangzhou only 21. In this trade, the long haul international network is by far more important than the short haul one. As most air cargo is transported by passenger flights, our special position as an international passenger hub is a great advantage.

As the mainland is opening up its sky fast, Hong Kong has also started to relax its restrictive attitude of reciprocal landing rights. Hong Kong will inevitably team up with Shenzhen Airport for inland connections, and competition between Hong Kong and Baiyun airports is expected to be healthy and draw out the best of both, to the benefit of regional development.

A common misconception is that the costs of using the Baiyun Airport are necessarily lower than those of Hong Kong. This is not the case, as the difference lies mostly in the logistic costs in and out of the airport. It is in this area that Hong Kong suffers a great disadvantage, as truck traffic is very expensive, especially across the border. We have to develop a frequent and efficient ferry service utilizing the special advantage of our airport by the sea.

It is now clear that in order to upgrade our competitive advantage in air cargo, we have to enhance our international network through the relaxation of landing rights, to improve our mainland connections through strategic alliance with Shenzhen Airport, and to reduce logistics costs through an efficient ferry service.

A growth area we will have to explore is express parcels. DHL is teaming up with Cathay Pacific to build its regional hub in Hong Kong. On the other hand UPS is planning to build its hub in Baiyun. But as an international commercial centre, Hong Kong will generate more demand in this area, and the growth rate is therefore expected to be higher than its competitor. This would be quite attractive to other courier operators.

If we play all our cards right, we will have no problem maintaining our current growth. But with Baiyun catching up, our market share in the region will certainly fall from the current 70 per cent down to about 50 per cent in the coming decade.

At the moment, Hong Kong Airport is No 3 in the world in terms of cargo traffic, and Baiyun Airport will occupy the 30th position. Air cargo in this region is increasing at the rate of over 20 per cent a year, and this trend is expected to continue for at least a decade. There is room for everybody. In fact, without the new Baiyun Airport, we will soon find ourselves over-loaded, and the industrialization of the region will suffer.

We have to learn to live with a booming mainland, and our lowering market share in it. The White Cloud is there and it is there to stay, and there is nothing much we can do about it. But with a healthy mentality, we can find ways to make the best out of it to our advantage, and to the advantage of the whole region. A mutual back-up arrangement between the two airports may not be too bad an idea.

(HK Edition 08/09/2004 page7)