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Toh Han Shih

Since Fedex Express opened its Asia-Pacific hub next to Guangzhou Baiyun International Airport on February 6, Baiyun Airport's mail throughput has grown at an astounding pace.
In January, reeling under the impact of the global financial crisis, the Guangdong provincial capital's airport suffered a 34.9 per cent year-on-year drop in cargo throughput, while its mail throughput rose 41.4 per cent year on year, according to data from Baiyun Airport, which is listed on the Shanghai stock market.
In February, when the United States logistics giant started operating its Asia-Pacific hub, Baiyun Airport's mail handling shot up 482 per cent year on year to 16,915 tonnes, while cargo exhibited 0.9 per cent growth. 
Since then, both numbers have been rising steadily. 
In July, mail going though Baiyun Airport soared 917 per cent to 26,136 tonnes, while cargo grew 5.3 per cent to 56,796 tonnes from a year ago. 
Baiyun Airport has given substantial discounts on cargo handling fees to Fedex, which uses the airport's runways to land its planes, according to a KGI Securities report by Stephen Wang. 
Every week, 136 flights land at Baiyun Airport to serve Fedex. 
Fedex's Guangzhou hub, which has a capital investment of US$150 million, has the capacity to sort 35,000 packages and mail documents per hour, three times the capacity of its previous Asia-Pacific hub at Subic Bay in the Philippines, which closed one day before the Guangzhou hub opened. 
The sorting process at Fedex's Guangzhou hub is so automated that  pre-recorded voice messages tell workers if they have put packages in the right place or not. Employees can even choose a male or female voice.
Fedex's Guangzhou hub is its second-largest logistics centre after its US headquarters in Memphis, Tennessee. 
'The Guangzhou hub is 63 hectares. There is lots of spare land for us to expand and duplicate these 63 hectares of land,' said Hou Dong, Fedex Asia-Pacific's managing director of hub operations.
'We chose Guangzhou because of its infrastructure, and there is room for expansion. We needed an airport infrastructure that had significant expansion capacity, and Guangzhou met that criterion,' said Dennice Wilson, the Fedex Asia-Pacific vice-president and project leader of the Guangzhou hub. 
Baiyun has two operational runways, while a third is being built and two more are planned, she said. 
'Our Asia-Pacific hub has the capacity to meet the growing demands for air express delivery service in the region for the next 30 years,' said Fedex Asia-Pacific president David Cunningham. 
The Asia-Pacific accounts for 45 per cent of the world's international air cargo, according to industry estimates. 
However, Cunningham admitted: 'The recent global downturn has impacted our business. The company has already taken actions to streamline our operations and reduce cost.' 
The New York Stock Exchange-listed company's third-quarter report stated that, globally, Fedex has reduced personnel and work hours and imposed a general hiring freeze. 
In April, Fedex Corp, the parent of Fedex Express, confirmed that its listed subsidiary had cut 1,000 jobs globally.
'Despite the challenging global economy, China is still a dynamic marketplace that will continue to provide opportunities for its logistics industry in the long term,' Cunningham said. 
China exported US$1.43 trillion of merchandise last year, while the trade in goods between China and the US exceeded US$378 billion, and China remains the European Union's second-largest trading partner behind the US, he said. 
According to Boeing's World Air Cargo Forecast, Asian air cargo market growth will continue to lead all global traffic routes, and for the domestic Chinese market it will grow at an annual 9.9 per cent over the next 20 years.
'Guangzhou and its airport will definitely be an important logistics hub of China, but the question is how important relative to other hubs. Guangzhou suffers diversion to Macau, Shenzhen and Hong Kong, so Guangzhou cannot match Beijing and Shanghai as a logistics hub,' said Orient Securities analyst Zhang Qi. 
Guangzhou faces stiff competition from Hong Kong and Shenzhen, which is trying to build up the importance of its own airport, Zhang said. 
'Guangdong is an affluent export-oriented province, so Guangzhou, being  in Guangdong, has big potential as a logistics hub. But Guangzhou has no hope of catching up with Hong Kong.'
Last year, Hong Kong was the second-busiest airport in the world in terms of cargo traffic, handling 3.66 million tonnes of cargo, followed by Shanghai in third place with 2.6 million tonnes, and Beijing in 18th place with 1.37 million tonnes, according to Airports Council International.
In comparison, Guangzhou ranked far behind in 26th place last year, with 685,868 tonnes of cargo handled. 
Memphis airport was the world's busiest in cargo traffic last year, handling 3.7 million tonnes of cargo. 
'Definitely, the Fedex centre will further Guangzhou's role as a logistics hub,' said a finance controller with a Guangdong logistics  company.
However, an executive with a logistics company in Guangzhou said not everyone in the industry was convinced by the idea of Fedex opening its Asia-Pacific hub in the city.
'In the foreseeable future, Guangzhou still cannot play such an important role as Shenzhen and Hong Kong,' the executive said. 
'Right now the central government's policy is to protect Hong Kong's position as an international airfreight hub.' 
'Hong Kong has more relaxed customs controls with less red tape, which is why a lot of airfreight goes through.  
'One reason for Hong Kong's easier customs controls is a policy by the central government to maintain Hong Kong's status as an international airfreight hub,' he said. 
'If the central government changes its customs policy, Guangzhou would be one of the biggest airfreight hubs in China. Customs matters a lot in logistics.'
The executive's company provides air and sea freight services. About 40 per cent of the airfreight it handles goes through Guangzhou, 30 per cent through Hong Kong and the remainder through Shenzhen.
'In terms of land and cost, Fedex locating its hub in Guangzhou is a good idea. Baiyun has lots of land that can be developed, while Hong Kong has limited land resources,' said the Guangzhou logistics executive.
Shifting freight
Fedex put US$150m into Guangzhou and closed its Philippines centre
Land covered by the Asia-Pacific hub near Baiyun Airport, in hectares: 63



Fedex hub may help Guangzhou take off