May 20 (Bloomberg) -- Changi Airport, Southeast Asia’s largest freight airfield, plans to attract more gold bars, tuna and vaccines to Singapore as it seeks to increase handling of high-value cargo to make up for slowing trade.
The airport may process 7 percent more cargo by volume for pharmaceutical products such as vaccine and test drugs, as well as perishable goods including tuna and meat this year, James Fong, assistant vice president of cargo and logistics development at Changi Airport Group (Singapore) Pte. Drugs are one of the three biggest items handled by value, he said.
“An underlying demand for these things is growing with the rise of the Asian middle class,” Fong said in a May 15 interview. “People want higher-value, higher-quality food. Demand in North Asia is growing fast.”
The airport is offering 50 percent rebates on landing fees since the start of the year to help cargo airlines struggling with lower demand amid sluggish economies in the U.S. and Europe. Changi is enticing carriers of high-yield cargo with a tax-free maximum-security vault to store valuable art, gold and gems, as well as Southeast Asia’s biggest refrigerated facilities for perishable goods.
Economic growth in the Asia-Pacific region will boost household incomes, increasing the need for higher-quality food and luxury items, Fong said. The size of the middle class may jump almost fivefold in 20 years, according to Airbus SAS.
Airlines haul about $5 trillion of cargo annually, accounting for a third of global trade by value, according to International Air Transport Association.
The global cargo market may increase 2.7 percent this year, benefiting Asian carriers the most as they are the biggest operators, according to IATA. The industry shrank 2 percent in 2012 for a second consecutive year, and airlines were filling less than half of their cargo capacity because of weak demand in the U.S. and Europe, according to the group.
Changi Airport handled 434,000 tons of cargo in the first quarter, 2.2 percent less than a year earlier. Air freight may recover next year, Fong said.
“With a more affluent population, cargo should pick up,” said Siyi Lim, an OCBC Investment Research analyst in Singapore. “The increase may not be pronounced yet because it takes time to ramp up. The factors are there but it ultimately comes down to costs. It depends on how competitive Changi wants to be.”
Singapore Freeport opened in 2010 as a free-trade zone and offers maximum-security storage services with direct access to Changi Airport for valuables including wines, fine arts, diamonds and gold. The facility will expand as all the space has been leased.
Full-year growth in handling such valuable goods is expected to reach about 16 percent, helped by a 55 percent surge in the first quarter, Fong said.
Changi Airport has the region’s biggest facility to handle all goods that require different temperatures, ranging from frozen meat to flowers and vaccines, Fong said.
Coolport@Changi, the 8,000 square-meter (86,000 square-foot) facility operated by ground handler SATS Ltd., has rooms with temperatures ranging from minus 28 degrees Celsius (minus 18 Fahrenheit) to plus 19 degrees. The area handles about 18,000 tons of goods a month. It is Southeast Asia’s only such facility certified under international standards.
SATS shares climbed as much as 0.9 percent, before closing unchanged at S$3.23 in Singapore.
A second temperature-controlled center run by Dnata, another ground handler at Changi Airport, is expected to open later this year, Fong said.
The ability to handle fresh produce at Changi Airport has helped attract business for transshipment of seafood and meat products from Australia and New Zealand to north Asia and Europe, Fong said. The airport mainly handles seafood from Indonesia that is flown to Japan and China, he said.
“A lot of tuna in Japan is shipped from Indonesia,” Fong said. “Those go to the famous fish market in Tokyo, they auction it and it comes back again at a higher price.”
Shipping lines including Maersk Line have won cargo business from airlines amid the global slowdown as customers sought to cut costs when transporting items such as notebooks, televisions and wine. There are signs that some shippers may be turning to airfreight as the industry tests new methods, Fong said.
“Speed is our biggest selling point,” IATA Director General Tony Tyler said in December. “But it comes with a price that is many times more expensive than shipping by sea.”
The airport is working with an unspecified airline and meat producers in New Zealand to ship meat by both air and sea to cut the transport time by about half, Fong said. Meat is now typically transported by ship alone and takes about a month from New Zealand to Europe, he said.
“For perishable goods, the longer you are in the mode of transport, the lesser value you’ll get by the time you get to the destination,” Fong said. The new offering is “something we’re quite excited about because we see more shift this way.”
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