Incheon shifts into next expansion phase

  • July 30, 2013

The new man at the helm of Incheon International Airport Corp. (IIAC) is not wasting time. Chang-Soo Jung, who previously served as vice minister of land, transportation and maritime affairs in the South Korean government, started as president and CEO of IIAC in early June. In an exclusive interview with Air Cargo World, he outlines his vision for the airport’s future and imminent plans for development aimed at boosting its role as a key global gateway.

Taking stock of the airport’s progress so far, Jung notes that Incheon has fulfilled its objective to establish itself as Northeast Asia’s logistics hub, having claimed a top-two spot in the global airport rankings for the past seven years. It hosts 88 airlines with links to 184 destinations. A transshipment rate of 46 percent underscores its hub status, while it is also a strong O/D market, accounting for 20.5 percent of South Korea’s trade and 97 percent of the nation’s overall air cargo volume.

As far as Jung is concerned, this serves as a launch pad for the next stage of development.

“We feel that now is the right time to prepare for the next 20 years based on the last 20 years of growth we have accomplished,” he says.

The largest physical manifestation of this is the imminent construction of a second passenger terminal with a footprint of 4.1 million square feet (384,000 square meters), which is due to open before the 2018 Winter Olympics in Pyeongchang. This will push Incheon’s cargo capacity to 5.8 million tonnes.

Cargo development will concentrate on four key planks. The first of these is the development of new markets, notably routes to the Middle East that can create steady cargo volumes, and links to regional niche markets, notably in China, Russia and Japan.

At the same time, IAAC intends to strengthen its O/D traffic by attracting global manufacturers and high value-added businesses to Incheon’s free trade zone. Enhancing the investment environment through the development of differentiated incentives is another strategic focus, while a fourth key measure will be the establishment of dedicated facilities to handle special cargo in the freight terminal and logistics park. Ultimately this should produce the development of a new business model, Jung says.

“We expect the key trend in the airport industry to be that of facilities investment and taking the lead in future growth industries,” he says. In order to “proactively respond to future changes in the air cargo business,” IIAC will build a logistics center for special cargo, such as hazardous materials, fresh produce and pharmaceuticals, by 2015 as well as a dedicated express facility.

At this point, perishables and pharmaceuticals account for a small fraction of Incheon’s throughput (3 percent of the annual volume), but these segments are expected to become core battlegrounds in the competition for cargo down the road, Jung explains.

“Also, with the growth of the e-commerce market, international express cargo is showing an average yearly increase of 8.2 percent and 20 percent in the world and Korea respectively,” he adds.

These developments will be supported by improved electronic data flow capabilities.

“We have plans to integrate cargo information, including customs declarations and airport declarations, to reduce logistics and shipping companies’ time and cost, but we think it is necessary to discuss these with organizations like customs or airlines first because security is a very crucial factor,” Jung says.

This objective is part of a broader drive towards an advanced airport concept at IAAC. Jung and his management team see trends toward “smart” and green airports with cutting edge IT and green designs.

On the passenger side, this will lead to a cutting edge system that enables an automated arrival and departure system with elements like self check-in, a self-immigration clearance system and an auto departure gate using passport and biometric recognition technology.

Jung’s plans for cargo extend beyond pure air cargo aspects. One strategic plank there is the development of a multimodal system that links ports and surface transportation modes with an integrated IT platform. At this point, the primary focus is on sea-air traffic

“Incheon Airport is located very close to western China,” Jung says. “Companies such as Sony, Samsung, LG and Foxconn have their manufacturing bases in China, and they are able to optimize their supply chain management through using sea-air transportation via Incheon.”

His desire to reach beyond pure airfreight elements also comes into play with regard to its ultimate user base – shippers. Jung would like to see more of them set up shop in Incheon’s large FTZ.

“We are targeting global manufacturing industries such as semiconductor equipment, high-tech machine parts, pharmaceutical products, medical devices, etc.,” he says.

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