The concept of logistics originates from military logistics and traditional transport industries. It connects individual activities such as purchasing, warehousing, transportation and delivery among goods suppliers and buyers to form a supply chain of goods. The logistics industry has a wide scope of services, including sea, air and land transport, goods storage, information flow, use of capital, safety and security, etc. Seamless cooperation among organizations in public and private sectors within the supply chain brings about quality logistics services.

The Logistics industry emerged in the 1980s. Following the technological advancement, the traditional mode of transport has transformed into modern logistics operation. Nowadays, the efficiency and standard of service have become key indicators to assess the competitiveness of a country or area. Being a cosmopolis, Hong Kong has changed from a traditional transport centre to a large-scale modern logistics hub. In 2007, there were more than 210,000 employees in the logistics industry, which accounted for 6.2% of total workforce in Hong Kong. The logistics industry is one of the four mainstays of Hong Kong, contributing about 5.0% to the Hong Kong economy. With advantages like a unique geographic location as an international transport hub, a sound system for business operation, a sophisticated infrastructure and a global network of trading partners and clients, Hong Kong has become the major international trading centre in Asia. The advantages have also hastened the development of Hong Kong into a logistics hub to provide quality logistics services for large-scale international trading activities.

Hong Kong’s air cargo industry started in the 40’s. At that time, the passenger aircrafts had very small cargo capacity and the air cargo industry was not well established. Coming to the 70’s, Hong Kong’s light industry began to soar and produced high value-added goods for overseas buyers. The cargo increase had led to the specialization of the air cargo industry, which was followed by the emergence of freight forwarding industry, transportation industry and warehousing industry. The first specialized air cargo terminal commenced its operation at Kai Tak Airport in 1976. Following Mainland’s implementation of open economic policy, many Hong Kong manufacturers and overseas investors had set up factories in Southern China. As a result, Pearl River Delta (PRD) became the world’s industrial manufacturing centre and most of the goods produced were transshipped to different parts of the world via Hong Kong. At that time, if manufacturers chose to deliver their goods by air, Hong Kong’s air cargo service was almost the only choice. Coming to the mid 90’s, Hong Kong Kai Tak Airport’s cargo throughput had exceeded 1.5 million tonnes and ranked among other leading airports in the world in terms of cargo handling amount.

The demand for air cargo service has been growing with the persistent increase in Hong Kong’s international trade. The cargo facilities of the Kai Tak Airport were insufficient to cope with the demand. Owing to the geographical and environmental limitations of the urban areas, the Kai Tak Airport’s cargo facilities could not be further expanded and the operating hours could neither be lengthened. An effective solution was to construct a new airport. The Hong Kong International Airport (HKIA) was founded in 1998. It was built with two air cargo terminals that handled 3 million tonnes of cargo at the beginning and 5 million tonnes in 2007. HKIA and cargo operators have invested a lot of resources to develop Hong Kong’s superiority in air cargo service proactively and have added air cargo related facilities continuously. The airport has a regional express cargo handling centre that handles 440 tonnes of express cargo per day, which is top of similar centres in the region. Besides, HKIA was constructed with an air cargo terminal and a logistics centre, and later with a marine cargo terminal, cargo parking spaces and related taxiway facilities. Moreover, the construction work of HKIA’s third air cargo terminal has been confirmed in order to cope with the growing demand for cargo service. The announcement of the Master Plan of “Hong Kong International Airport 2025” has set direction for future cargo development blueprint. It is estimated that HKIA will handle 9 million tonnes of cargo per annum if this plan is fully implemented. HKIA’s cargo excellence has won international recognition. It has been awarded the Cargo Airport of the Year, the Most Friendly Airport for Cargo, and other prizes and awards. Recently, HKIA was awarded International Airport of the Year 2007 by Centre for Asia Pacific Aviation, and Air Cargo Award of Excellence 2007 and 2008 by Air Cargo World.

Apart from airport and air cargo terminals, air cargo industry’s work partners also include airlines, freight forwarders, apron service providers, logistics service providers and international express service providers. They are mainly responsible for work such as transportation, cargo handling, documentation and coordination so as to ensure that the goods are delivered to the hands of the consignee on time, accurately, safely and cost-effectively while providing suitable logistics value-added services at the same time. The active participation of Hong Kong’s air cargo and express industries in the construction and application of electronic network platform has brought about e-freight, which becomes a major development area for international air cargo industry in future.

Hong Kong is advantageously located right at the south gateway of China, the regional aviation hub of East Asia. Over half of the world’s population lived in areas within five hours’ flying time from Hong Kong. Hong Kong connects air cargo centres all over the world. In 2007, HKIA handled 3.772 million tonnes of international cargo, standing above other airports in the world.

The air cargo market will continue to grow steadily. According to the forecast of the International Air Transport Association (IATA), the world’s air cargo would grow by 4.8% per annum from 2007 to 2011 and Asia Pacific’s air cargo growth rate would even reach 6.3%. Besides, the Boeing Company had forecasted in the year 2004/2005 that the world’s air cargo would grow by about 6% per annum up to 2024. As estimated by HKIA, air cargo express industry would grow by about 13% per annum, and the cargo it handled would increase to 13% of Hong Kong’s total air cargo. It can be seen that air cargo industry and express industry have great potential and room for development.

One major factor contributing to Hong Kong’s decisive role in international air cargo industry is its excellent international connectivity, which is also an influential factor when airlines are considering which airport to use and designing flight paths. At present, more than 90 airlines are operating flights between Hong Kong and over 150 destinations worldwide. Hence, airlines choose Hong Kong’s airport as an entrepot for handling cargo flow between neighbouring PRD region and different parts of the world.

Hong Kong’s aviation industry developed earlier than Mainland and it has ample air cargo experience and superiority. In the international airfreight market of the 80’s and 90’s, Hong Kong airport was almost the only choice for international freight between the Mainland of China and other countries. However, following the founding of airports in the neighbouring countries in the Southeast Asia and Mainland and the development of their aviation services, Hong Kong’s air cargo industry was affected to a certain extent. According to the long-term forecast of the Civil Aviation Administration of China, the air traffic in Mainland would grow severely and cargo would grow by 10% per annum. Annual total cargo would reach 30 million tonnes up to 2020, and Mainland would start to export goods to other areas by direct flights, no longer via Hong Kong. How HKIA can keep on sourcing goods from Mainland and cooperate proactively with different airports to develop supply chain superiority becomes the main theme for exploring the development of Hong Kong logistics industry.

Apart from the change in traditional air cargo mode and the competition brought about by the aggressiveness of Mainland airports, Hong Kong also faces the challenges put forward by the airports in the Asia Pacific region. Many major airports in the Asia Pacific region strive to become a major hub airport in the region. For example, the Incheon Airport of South Korea plans to develop itself into a cargo gateway airport in the Northeast Asia in future. Singapore and Bangkok also strive to develop their air cargo entrepot market so as to attract sources of goods from Mainland and South Asia. Besides, the traditional air cargo mode of delivering goods by passenger aircrafts in the past gradually changed to delivery by pure freighters in recent years. At present, air cargo delivered by pure freighters account for 60% of total air cargo flow. The freighter fleets of airlines and air express companies develop very rapidly. Air cargo logistics proposals and specialized flight services are launched to the market proactively and quality service is provided to acquire market share.

To meet the logistics service industry’s requirements for high efficiency, high value-added and quality service and strong security, there must be talented people with professional knowledge as well as superior advanced information facilities, reliable and safe security system, and proactive realistic logistics proposals, so as to enable Hong Kong to maintain its position as an airfreight logistics centre. Streamlining manpower training, developing airfreight information platform, enhancing management mode, strengthening international collaboration, and continuous updating of standard to international level are all directions for developing Hong Kong airfreight logistics industry.

To enhance Hong Kong’s regional and international competitiveness in the air cargo industry, the Hong Kong SAR Government founded the Hong Kong Logistics Development Council in December 2001 to strengthen the communication and consultation work with the industry and to provide a forum for stakeholders to discuss and co-ordinate matters concerning logistics development in Hong Kong. Apart from the Government, Hong Kong air cargo industry must also strengthen its cooperation with other airports and enterprises to develop international flight network and increase flight destinations and frequency, so as to consolidate Hong Kong’s air cargo superiority. Hong Kong’s role as an entrepot for China market is subject to a number of limitations. For example, Mainland’s aviation control as a result of the air traffic congestion at northern Guangdong province has caused delays to Hong Kong’s flights. To strengthen Hong Kong’s position as an international air cargo hub, it brooks no delay to strengthen its cooperation with Mainland airports to resolve air traffic congestion problem. Hong Kong also needs to be proactive in connecting more flight destinations in Mainland, improve the transportation infrastructure facilities of PRD cities and HKIA, broaden the coverage of Hong Kong air cargo industry in Mainland market, attract more goods sources, and consolidate Hong Kong’s position as Mainland’s air cargo gateway.

Modern logistics industry is affected by e-commerce operation mode. Goods delivery time, transparency and the coverage of signal delivery are very critical factors of consideration. Air cargo concerns complicated logistics coordination. To consolidate Hong Kong’s position as Mainland’s air cargo hub, Hong Kong must enhance its e-freight system and develop its air-to-air and multi-modal transshipment by introducing advanced airfreight logistics software and systems for work partners in the supply chain. Hong Kong must also adopt advanced electronic technology for customs clearance and document delivery, and change traditional shipment procedures into electronic logistics.

After the implementation of the Mainland and Hong Kong Closer Economic Partnership Agreement (CEPA), Hong Kong service providers in the logistics and civil aviation industry are allowed to gain access to the Mainland market in the form of sole proprietorship. This strengthens the relationship between Hong Kong operators and Mainland market participants and brings about the more effective implementation of logistics proposals. Hong Kong’s airfreight logistics development is closely related to China’s “11th Five-Year Plan”. The “11th Five-Year Plan” stated that all provinces, cities, Autonomous Regions and Special Administrative Regions must work well on areas like connecting all kinds of transport, achieving collective efficiency and advantages, and streamlining civil airports; and they must start to arrange a rational distribution for macro logistics network. In the report and the proposed action agenda of the Economic Summit on “China’s 11th Five-Year Plan and the Development of Hong Kong”, the industry had put forward many strategic proposals related to logistics and infrastructure. For example, in respect of infrastructure, the industry proposed to build the third runway, streamline cross-boundary transportation network, and coordinate the development of neighbouring areas. As regards market development, the industry proposed to reduce operation cost, enhance logistics technology, strengthen manpower training, etc. to enhance Hong Kong’s position as an international airfreight and logistics centre. The Central Government also manifested its support for Hong Kong’s position as an international logistics centre in its policy documents. Hence, the Hong Kong Government and the industry should work and pull together, make contributions to China and cope with its development.

Hong Kong’s air cargo industry mainly comprises enterprises like airlines, airfreight terminals, express service providers and airfreight forwarders. Government statistics indicated that this industry employed over 55,000 employees in 2007, of whom over 20,000 were engaged in air express sector. In terms of job nature, the classifications are mainly administration and management, sales marketing, goods handling, documentation, technology and professional support, etc. In terms of ranking, the classifications are mainly management, supervision, operation and administrative support, etc. Overall speaking, all aspects of manpower training and development need to tally with the intellectual, high value-added and globalized social development. In face of the increasing competition, the logistics industry requires talented people to enhance its competitiveness, flexibility, and service quality. In this connection, the workers in the industry must be highly skilled, able to communicate effectively, be creative and possess a worldwide perspective. Only when the above qualities are integrated with other factors that Hong Kong can be turned into a world air cargo centre.