The Challenges and Opportunities Facing the Hong Kong Airfreight Industry
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1 The Challenges and Opportunities Facing the Hong Kong Airfreight Industry Presented by Ir Dr Anthony Lau Pacific Air Limited 19 June 2013 Pacific Air Limited
2 Definition of Logistics Logistics refers to the process of planning, implementing, and controlling the forward and reverse flow and storage of goods, services, and related information from point of origin to point of consumption while conforming to customer requirements (Council of Supply Chain Management, 2005). Logistics activities can be broadly divided into asset based and non asset based logistics. The forwarding industry sector is a subset of the logistics industry (Markides and Holweg, 2006).
3 Relationship of Supply Chain Management and Logistics Traditionalist Logistics logis SCM Re-labeling Logistics SCM Unionist Intersectionist SCM SC Logistics Logistics SCM Source: Halldorsson and Larson, 2004
4 Hierarchy of the Logistics Industry 5PL EB 4PL TCE 3PL Forwarding/Contract Logistics RBV 2PL Asset-based logistics Location Theory 1PL producer
5 Rise of Freight Forwarder Share of International Trade Source: MergeGlobal 2008
6 Relationship between 2PL, 3PL and 4PL Source: Halldorsson and Larson, 2004
7 Source: MergeGlobal 2008 ROCE by Industry Segment
8 Value Creation by Freight Forwarder Shipper A ships a shipment of shirts with Destination X at HK$20 per kilo Shipper B ships a shipment of watches with Destination X at HK$20 per kilo By consolidating shipment A + B Actual Weight Volume Weight 2,000 kilos 3,000 kilos 2,000 kilos 1,000 kilos 4,000 kilos 4,000 kilos An example of how IFFs achieve lower costs
9 Value Creation by Freight Forwarder Source: Stan Shih, Acer Computer Taiwan 1992
10 Drivers of the Hong Kong Airfreight Industry GDP Growth Globalisation Outsourcing Hong Kong s Freeport Status
11 Recent Developments China, ending a 110 years long US leadership as the World s top manufacturing nation in 2010 (research by US based consultancy IHS Global Insight, accounted for 19.8% of the world s manufacturing output Strong interest in import consumer products from the newly created affluent middle class has created a strong import airfreight market
12 Catchment Area of the Hong Kong s Airfreight Industry
13 Impact of Hong Kong Government on Airfreight Services Providers Hong Kong Airport Port Governance in Hong Kong Hong Kong Logistics Development Council (LOGISCOUNCIL) Creating a Pro Business Environment Low corporate / personal tax Zero tolerance of corruption Efficient customs services Transparent legal system World class financial services World class IT service support
14 How the Hong Kong Airfreight Industry Supports the External Trades in Hong Kong and the PRD Year In Million Kgs , , , , ,742 Year In Million Kgs , , , , ,025 Air Cargo Throughput of Hong Kong Source: Civil Aviation Department
15 Competition from the Airfreight Industry in China S O W T
16 S T R E N G T H S HKG airfreight industry Infra. Facilities World class Improving Airfreight professional Government support Air connectivity Increasingly drawn by the PRD airfreight industry Strong support Reaching out to 120 international cities PRD airfreight industry Lagging behind & attract airfreight professionals from Hong Kong Strong support through regulations Catching up very fast Customs services Transparent & efficient Unpredictable
17 S T R E N G T H S Overseas sales network Regional office status Legal system Tax system HKG airfreight industry Extremely strong World class Transparent Simple and low tax System PRD airfreight industry Catching up very fast Lagging behind Needs improvement Attractive in SEZs IT/financial support Strong support for SCM Needs improvement
18 W E A K N E S S E S Location from mfg centre HKG airfreight industry Less favourable Operating costs High Low Airfreight professional Succession problem PRD airfreight industry Very favourable Attract airfreight professional from Hong Kong & catching up
19 O P P O R T U N I T I E S HKG airfreight industry Political stability Very stable Stable PRD airfreight industry WTO Increase airfreight demand Increase airfreight demand Closer Economic Partnership Agreement Export airfreight demand in China Import airfreight demand in China Export to emerging markets Lessen one major licensing constraint Close to the world s manufacturing power house Gateway to one of the largest import airfreight market Lack of competitive advantages Lessen one major protection Right in the world s manufacturing power house Sitting on one of the largest import airfreight market Supported by manufacturers in the PRD e Commerce e AWB by CX Lagging behind
20 HKG airfreight industry PRD airfreight industry T H R E A T S Skyrocketing fuel prices Sluggish world trades in the last few years Nearsourcing sourcing Mode shifting from air to land/ocean Dampen airfreight demand Weaken airfreight demand Weaken airfreight demand Weaken airfreight demand Dampen airfreight demand Weaken airfreight demand Weaken airfreight demand Weaken airfreight demand Security issues Increase costs Increase costs Sino US relationship Amicable Cautious Competition from other production centre RMB appreciation Not immediate Weaken airfreight demand Not immediate Weaken airfreight demand New labour laws Not significant Not significant Labour supply in Hong Kong/China Getting difficult Getting difficult
21 The Challenges and Opportunities created by the New Markets CIS Middle East Africa
22 Recommendations to Strengthen Hong Kong Airfreight Industry s leading position
23 Questions and Answers
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