Development of Airfreight Hubs in the Greater Pearl River Delta

Magisterarbeit von Jana Schebera

Abstract:

„Everything has beauty, but not everyone sees it“ goes a famous saying by Confucius. My wish in writing this paper is to convince readers of the peculiar beauty and importance of the highly dynamic aviation landscape of the southern Chinese Pearl River Delta.

Airfreight is an essential and highly sophisticated part of an economy’s logistics infrastructure. A functioning infrastructure is vital for the development of an economy, in particular for its international trade. As trade is a key component in China’s economic success formula, demand for an efficient infrastructure is high. Air transportation has become one of the most effective tools to explore and serve world markets. In today’s highly competitive business world, just-in-time delivery and good customer service are absolutely crucial. The overall trend towards fast reliable delivery and the transformation of China’s economy along with the value chain of production, have boosted demand for air transportation. Due to these developments, the air cargo market, which is still at low levels particularly in domestic transportation, is one of the fastest growing markets in China.

The regional focus of this study is on the economic powerhouse of China, the Pearl River Delta (PRD) located in the southern province of Guangdong. Everyone who knows the highly industrialised landscape of the PRD would probably agree, that the region’s nickname „factory of the world” is more than appropriate. The PRD has the highest per capita output in China and generates about one third of national exports. The Greater Pearl River Delta (GPRD) consists of the PRD and the Special Administrative Zones Hong Kong and Macao. In many respects, it is one of the most interesting economic entities of the world. Economy and infrastructure are integrated on a very high level. The GPRD features many extremes: its strong economic power, its rapid growth that has been the highest in China for many years, its population density and last but not least, its aviation landscape. Within radial distance of about 100 km, five international airports are at service, creating the highest airport density in the world. Three of these airports are among China’s top five airports.

The clear leader among them is Hong Kong International Airport (HKIA), which has established itself as a major hub in Asia and has been the airport with the highest international air cargo throughput of the world for many years. Its dominant counterpart for domestic traffic is located some 100 km north in the very heart of the PRD, Guangzhou Baiyun International Airport (GBIA).

The strong air cargo business of HKIA, that is largely fed by PRD freight has been watched closely by Mainland administrations. Liberalised air traffic policy in recent years has rapidly expanded China’s own international air cargo traffic. To support this expansive strategy, a completely new airport was built to replace the old GBIA, featuring the biggest and most modern air cargo facilities in China. This new airport might take substantial business away from HKIA in the future.

The focus of this paper is to examine the competitive position of the two airports and to forecast their future role in the southern Chinese and Asian air cargo market. GBIA’s potential ability to catch up with HKIA as major air cargo hub in Southern China brings important implications for the region. While macroeconomic factors will also be taken into account, the emphasis of this paper is on the microeconomic approach of the two airports’ competitive perspectives.

Little literature has been written about the topic. This analysis is founded on available resources such as logistics literature and journals as well as studies and publications by HKIA, which has a very pro-active information policy. A large share of data used was gathered through a field study conducted in late spring 2005 in Guangzhou. Eleven branch and airfreight managers of both local and international cargo agents were extensively interviewed about the PRD air cargo market and the regional airport landscape. Much additional information was gathered by minutes of meeting with airline representatives in Guangzhou and Shenzhen.

The paper is structured in nine sections: While the first part gives a short introduction to the aviation industry in China, section two takes a closer look at the Chinese airfreight market. Part three examines the macroeconomic structure of the GPRD and provides a detailed economic and logistics analysis of the region, while part four analyses the local air cargo market. The two sections give a comprehensive description of the two airports in the focus of this paper. Section seven of the paper highlights the air cargo industry dynamics and the following part provides an in-depth comparative analysis of the two airports based on the fundamental data and additional information provided by the field study. This section also takes a closer look at external factors affecting the overall GPRD air cargo market. Moreover, an introduction to other competing airports in the region is given. Finally, part nine evaluates the two airport’s future development prospects, based on the outcome of this study.

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