A row has broken out between the Airport Authority and Hong Kong Air Cargo Terminals Ltd (Hactl) over the airport's plan to launch an open public tender for the construction and operation of the new dedicated express cargo terminal at Chek Lap Kok. It is understood that Hactl is seeking a partial renegotiation of the terms of its franchise with the authority in exchange for its co-operation in allowing the development of the new express facility to go forward unchallenged. An industry source said Hactl had supported its position with the advice of legal counsel, 'which says that the authority's plans would break its franchise agreement'. 'It is their view that [an express cargo terminal] would damage Hactl's business,' the source said. The authority is understood to have completed the final draft of the tender document for the new terminal. But its commercial director, Hans Bakker, said last week 'there were some details to be finalised' before it launched the public tender. Hactl is not believed to have submitted an official objection to the authority over the new facility yet. But it is pushing for the authority to renegotiate some of the costs in its existing franchise to give it a better competitive position. It is believed that the authority, in one of its proposals, has offered to extend Hactl's franchise by 10 years with a lower profit-sharing formula. Hactl and a second cargo terminal operator, Singapore-controlled Asia Airfreight Terminal (AAT), were both awarded 20-year franchises to operate general air-cargo terminals at Chek Lap Kok in 1995, but also handle express cargo. Hactl's 500,000-square-foot express facility - which services DHL Worldwide Express, United Parcel Service and TNT - has a capacity for about 200,000 tonnes of cargo a year. Federal Express (FedEx) uses alternative 25,000 sq ft facilities at AAT. Tender offers from potential operators of the new express facility will hinge on their being offered a subsidised price for the land component of the project, given the present downturn in global trade, the source said. But if that were granted by the authority, then the cost structure of the new operator would be significantly lower than that of Hactl and AAT. 'This is a real conundrum at the moment for the authority. It knows there won't be any serious tenders if it does not discount the land but if it does, then the two present operators will cry foul,' the source said. Land cost is believed to represent about one-quarter of Hactl's HK$8 billion investment in its present facility. Customers, including DHL and FedEx, have long been vocal about the high price of using Chek Lap Kok facilities. A senior Hactl official acknowledged the talks with the authority but declined to comment, saying it was 'too premature to draw any conclusions from the discussions so far'. Hactl's legal position is believed to be based on its earlier objections last year to the airport's plans to bring in a third general cargo terminal operator. Covenants in its franchise agreement preclude the authority from going forward with that plan before 2008, or unless 75 per cent or more of existing capacity was being utilised. While the new facility is not, technically, a general air-cargo facility, Hactl is concerned that excess capacity in the early days of its life will be used by the operator for general air cargo to help cover costs. Hactl or AAT would also face the loss of one of the express cargo operators to the new facility.