THE landing charges dispute between the Airport Authority and airline representatives has overshadowed one key element of airport operations - air cargo. Analysts believe the growth in air freight in Asia will top 9 per cent a year for the next 20 years, 1.5 times the rise in passenger traffic. This will lead to a surge in air cargo-related developments as companies expand warehousing, trucking and associated facilities. Several companies believe Hong Kong has yet to reach its full potential as a cargo centre, largely because of the flight restrictions at Kai Tak. They also feel the Airport Authority could price Chek Lap Kok airport, which will have the capacity to handle three million tonnes of cargo against Kai Tak's 1.6 million tonnes, out of the market. One carrier has already found it cheaper to move cargo across the border and fly from Shenzhen and Guangzhou airports rather than pay the high landing fees that have been talked about for using Chek Lap Kok. Already, the three leading international operators - DHL, Federal Express (FedEx) and United Parcel Services (UPS) - are preparing to take full advantage of market demand. DHL Worldwide Express is about to complete an overview of its operations that will set out the scope of its expansion in the region up to 2005. John Kerr, DHL Far East regional managing director, said 43 airports, both operational and planned, had been studied and matched with trade flows, industrial park developments and customer requirements. 'As a result of these studies, 18 airports are being further evaluated as being of interest; the criteria being to provide the ultimate in meeting the time-sensitive distribution needs of our customers,' he said. The two other carriers are working on their development programmes, which include new services and associated facilities at the region's airports. FedEx is planning to double the number of flights between the US and China to eight a week by June. It is also working on proposals for a round-the-world weekly cargo flight that will route from the US via Europe, the Middle East and India, to Asia. FedEx is hoping to start this service by the end of the year if it can obtain all the necessary landing approvals. Other airlines, including all-cargo carrier Air Hong Kong (AHK), are also launching new services. Earlier this month, AHK added an extra weekly flight between Hong Kong and Osaka and will soon add an extra flight from Hong Kong to Manchester and Brussels. Leading the expansion is increased consumerism largely resulting from the creation of a wealthy middle-class in the Asia-Pacific region, according to FedEx spokesman David Clarke. 'Whereas previously high value electronic goods used to be made in the region and sold to consumers in North America and Europe, now they are increasingly manufactured and sold in the region,' he said. As many of these goods are assembled from components manufactured in different parts of the region, this has fuelled the demand for intra-Asia traffic. So, electronic goods that are put together in the Philippines or Japan are flown to Hong Kong or Thailand for sale. Similarly, air freighters fly circuit boards that are made in China, the outer cases that are manufactured in Indonesia and the other components that are made in Taiwan to Manila or elsewhere for assembly. This huge logistical movement has not only created a demand for air-cargo hubs, transshipment centres where regional services feed into trans-oceanic routes, but has made the air freight business extremely competitive. Clear patterns have emerged highlighting the development of air cargo between Hong Kong and Taiwan; Hong Kong and Singapore; South Korea and Hong Kong; Japan and India and Japan to South Korea. DHL's study has shown that more hubs rather than a single large complex are needed. 'Preliminary findings indicate the need to further develop an Asia-Pacific air network operating through a multi-hub infrastructure with a twinning capability linked to other smaller airports,' Mr Kerr said. Other companies agree. FedEx, having created a hub in Subic Bay, the Philippines in 1995, is set to operate from a second transshipment centre at Taipei's international airport in the next few weeks. UPS will formally launch operations from its Taipei hub on April 22, according to Perry Chao, Hong Kong country manager. He said UPS was also looking at further expansion and would not rule out Clarke or Subic Bay in the Philippines or Chek Lap Kok as future hubs. 'Hong Kong can still be one of the hubs as a gateway to China.' Mr Chao said Hong Kong lost its chance to become a cargo centre because of delays in the opening of Chek Lap Kok, which will operate round-the-clock in virtually all weathers. 'The existing problems are that Kai Tak is not a 24-hour operation; there are not [enough] landing and take-off slots and there are no fifth-freedom rights,' he said. Fifth-freedom rights allow carriers to drop off and take on cargo en-route to their final destination. This flight advantage, together with other criteria including better Customs procedures, air traffic control and 24-hour cargo handling, is crucial to future air cargo development. 'Expansion is [about] much more than the latest pick-up and the earliest delivery times. It is now driven by the curfew hours [the period airports close], fifth-freedom rights and the ability to lock into North America and Europe,' Mr Kerr said. At least one cargo carrier is looking at the possibility of using Kimpo airport as a cargo centre once Seoul's replacement airport at Inchon becomes operational. Similarly, Malaysia's new airport at Sepang could become a cheaper and better cargo centre than Singapore, according to another source.