The volume of cargo transported globally is expected to increase by 3% to 4% each year until 2035, due to the development of e-commerce, diversification of supply chains, and an increase in international business. However, the airports that operate cargo are failing to keep pace with the growth. Many of the world’s busiest cargo ports were built a decade ago and operate under a totally different context. These facilities can either upgrade their infrastructure to maintain their competitive edge or become obsolete due to the shift of cargo traffic to other airports.
The issue is not whether the hubs should develop. The problem is whether the hubs can develop fast enough not to create bottlenecks in the entire cargo system.
The Capacity crunch has arrived
Dubai World Central has become one of the fastest-growing cargo centers in the world, handling more than 700,000 tonnes of freight every year. But even in peak times, the hub claims that its average cargo stay is 14 to 18 hours more than the historical average for the region. Changi Airport in Singapore is one of the best cargo operators in the world, but it is currently nearing 85 percent of its current capacity utilization level. AMS Cargo Center in Amsterdam processes more than 500,000 tonnes of cargo per year, but congestion in peak times means that some cargo ends up in other secondary airports in Europe.
This is what many major hubs are facing today. They are fully functioning, they are busy, and they have run out of capacity. There is another issue behind the capacity crunch and the mismatch between the capacity capabilities of hubs and the requirements of shippers. The traditional measure of cargo capacity is the tonnes per day, but it does not really reflect the true capacity bottleneck.
The automation gap
Automation for cargo handling has seen an increase in investments, albeit inconsistently. Automated sorting systems have been introduced recently by Dubai, Singapore, and Frankfurt airports. The South Korean airport of Incheon has one of the most automated cargo handling terminals in Asia, where about 60 percent of parcels are sorted using automation. Meanwhile, some of the largest cargo handling airports in North America, Europe, and Southeast Asia still use manual sorting.
As per a major European cargo player, “investment in automation takes between 18 to 24 months from conception till operations, whereas demand growth exceeds that.” “We can automate in stages,” he added, “but the industry grows faster than our ability to implement. The moment one sortation system is implemented, we plan for the next one.”
Automation makes business sense but poses a challenge to many hub operators. Building a cutting-edge parcel sorting center requires an investment of up to £200 million. Such projects cause serious operational disruption during implementation. If the hub is government-owned or operated by the airport authorities, then a huge investment will have to be justified. For the private operator, the payback period could be anywhere between six and eight years because of volatile demand trends.
The complexity of customs and regulatory procedures
Automation will not suffice. Customs clearance is an important bottleneck. To process pharmaceutical goods or a valuable electronics shipment, documentation examination, compliance confirmation, and even inspection should take place; all those actions cannot be automated. For now, most large cargo terminals perform customs clearance on a sequential basis, thus causing one complex shipment to hold up clearance for many other shipments waiting after.
There are pre-clearance programs in Singapore and Dubai, through which carriers and shippers are able to provide all the required documents before the arrival of the aircraft. Not every country has such a system. EU customs procedure, although it has been updated, is more inflexible compared to its Asian counterpart. Even the United States, with its efficient cargo facilities, has bottlenecks in its customs procedures during peak times.
Investment wave to come
Realizing the need for expansion, many of the larger centers have already declared their plans. Singapore aims to invest £2 billion into cargo infrastructure expansion within the next ten years. Dubai is planning to increase the capacity of its cargo center AMS by 50 percent, reaching 1 million tons per year by 2030. Frankfurt has authorized the expansion of its cargo facility, increasing capacity by 100,000 tons per year.
However, timing is important. Almost all announced cargo center expansions will not be completed until 2027, at the very earliest. Currently, demand is rising. The difference between the two will continue to grow.
What readiness really entails
The combination of having enough capacity to handle the additional tonnage, technology to process it quickly, and regulations to facilitate quicker clearing of customs is what it takes to be ready for the next decade of cargo demand.
Most hubs have invested in the former two, while a few of them are tackling the latter.
Those airport authorities who will survive the next ten years will have cargo infrastructure as their strategic focus and not a minor revenue stream. Their investments in technology will not come as an attempt to reduce costs but to increase capacity. They will collaborate with the customs authorities to re-engineer the processes for speed. And lastly, they will understand that growing cargo demand is no longer an added value but the essence of business.
Global hubs are not unprepared, but they operate nearer to the capacity ceiling than the industry admits. If they manage to grow cargo volumes further or start to restrict them will mostly depend on their decisions in the next 12 to 18 months.
The post Airport cargo infrastructure: Are global hubs ready for the next decade? appeared first on Air Cargo Week.
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Author: Edward Hardy
