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View from the Board by Kwang-soo Lee

Posted By Administration, Friday, November 11, 2016
According to ACI-complied statistics, Incheon Airport ranked in the world's top 3 in terms of international cargo volume by handling approximately 2.6 million tons in 2015. Yet, lately Incheon Airport is facing risks of a protracted slump or decline in cargo demand in the wake of the changing landscape of air cargo business. 
 
As Korean manufacturers that have significant demand for air cargo are moving their production bases offshore at an accelerated pace, outbound export volume is declining or being converted to potential transshipment opportunities. Hence, airports are urgently expected to play proactive roles in fostering demand for air cargo service. 
 
From the global supply chain perspective, to increase air cargo volume an airport needs to be a transportation hub processing carrier-centric transshipment cargoes; or a distribution hub supporting import and distribution activities for the regional consumer market; or a global supply chain hub providing comprehensive support for logistics activities crucial to supply chain management of global enterprises. 
 
Air cargo demands of a carrier-centric transportation hub depend on the cargo turnover of the primary air carriers. The airport's function as a cargo hub is compromised if air carriers modify their network operation strategies. Transportation hubs are limited in their effectiveness at creating added value from landing fees, transshipment services fees, etc. In contrast, global supply chain hubs can create transshipment demand continuously, irrespective of the host country's export/import demands, and they are highly effective in creating jobs by operating storage/distribution/delivery centers of global enterprises. In terms of added value creation, supply chain hubs can foster a variety of business opportunities related to inventory management, packaging, distribution, and so forth. 
 
To be morphed into a global supply chain hub, an airport needs to invite global forwarders who will use it as their logistics base. When logistics firms make a decision on their business location, most important factors are promptness and cost-effectiveness. Promptness of air cargo shipping, ground handling service, and customs clearance plus cost-effectiveness of logistics processing covering air freight charges, infrastructure investment/lease costs, other labor costs and ground services fees also prove to be important in the decision-making process.
 
What should airports do to attract global forwarders? I have deliberated over this question recently. I am very excited to meet many forwarders in the upcoming ACF event to be held in Paris to have a more in-depth discussion to that question. 
 
Kwang-soo Lee
Vice President
Incheon International Airport Corporation

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