This is Airsider.

31. March 2005

Despite rivals, Centrair eyes Japan's cargo hub status

When Centrair airport near Nagoya opens this month, it will instantly become one of Japan’s biggest airports. Cargo will become a vital pillar of Centrair’s business, writes Payload Asia's editor Nol van Fenema.

In fact, Japan’s two other international airports, Narita and Kansai will face increased cargo competition from the new airport in central Japan, which officially starts operations this month.

Compared to its rivals, Central Japan International Airport – or Centrair – will not only cater to the huge industrial area around Nagoya, it is, despite attempts by airport officials to play down the rivalry, clearly aiming to attract significant amounts of cargo away from both Narita and Kansai.

Nevertheless, general manager of Centrair’s Tokyo office, Koji Matsuura, stresses that the core market for the new airport, 35 kilometres south of Nagoya, is the bustling Chubu region of Japan, which is an important manufacturing centre for automotive and IT industries. Toyota, Suzuki, Toshiba, Sony and Sharp are just a few of the leading companies that are based in or near the Chubu region and are all likely to use the brand new cargo facilities of Centrair.

Statistics compiled by Nagoya and Osaka Customs show that in 2003 the majority of air cargo to and from the central region – some 598,000 tonnes - was basically shipped through either Narita or Osaka. In fact, of the 365,000 tonnes of export cargo, 61 percent was shipped through Narita, 26 percent through Kansai and just 12 percent via Nagoya airport.

Koji Matsuura (right) and Koji Tsukamoto

Similarly, of the 232,000 tonnes of import cargo, 53 percent went through Narita, 21 percent through Kansai and 25 percent came in via Nagoya airport.

Centrair officials admit that the relatively low cargo volumes through the old Nagoya airport – some 180,000 tonnes - were in part caused by limited cargo facilities, a night curfew, and a 2,740-metre runway, which restricted the use of large freighters.

Tokyo’s Narita airport at the moment is physically saturated, due to just one and a half runway, severely restricted on-airport cargo handling, and basically no available slots for the more than 35 new entrants, or for that matter, existing carriers that want to increase their flights.

Osaka’s Kansai, which like Centrair is built on a man-made island and has a 24-hour operation, is facing sharp decreases in domestic flights, which has reduced connectivity to international services, while the current restriction of having just one runway has prompted several carriers to reassess their schedules.

And although Narita remains the nation’s major gateway and may one day be able to extend its second runway, and despite the fact that Kansai recently received approval to construct a second runway, Centrair has been quick to size the opportunity and capitalise on the woes of its neighbouring rivals.

Matsuura, for instance, points out that the more than 100 daily domestic flights to about 30 cities in Japan will be entirely transferred on February 16 from the current Nagoya airport to one combined and spacious terminal at Centrair.

But as far as air cargo potential is concerned, Centrair is clearly aiming at securing a much larger slice of the earlier mentioned 598,000 tonnes that the Central Region generated in imports and exports in 2003.

This figure, officials admit, will dramatically increase because of strong economic growth projected for the Central Region, where in the past ten years GDP has increased 14 percent to 5 trillion yen, or about US$50 billion. In comparison, the neighbouring Osaka Prefecture posted a growth rate of just 3 percent to 2 trillion yen.

Centrair is built on a 580-hectare man-made island
and is linked with the mainland by expressways,
railways and high-speed ferries.

Matsuura points out that another factor contributing to the Central Region’s future growth, is spectacular increase in exports and imports from China. In 2003 figures from the Nagoya Customs House, the mainland alone accounted for 18.3 percent of the total air cargo imports and exports of the Central Region with an annual volume of 112,928 tonnes, second only to the US, which had a total volume of 127,649 tonnes.

Asked what kind tonnage Centrair hopes to handle in the next few years, Matsuura says that the new cargo facilities, which have a designed throughput capacity of 360,000 tonnes annually, would only be able to accommodate about 50 percent of total air cargo volume of the Central Region. “

Demand has already been increasing since the figures were compiled in 2003, so there is no need to take cargo away from other airports. At the moment, there is enough demand for our facilities,” he says.

Based on estimates of continued growth, Matsuura says that by 2025, “we estimate that we will be handling 440,000 tonnes per year. We will deal with this increase by building additional facilities in the cargo area.”

But before building new terminals, the airport will first explore optimisation possibilities of the existing facilities as a way to increase the throughput.

This optimisation, says Matsuura, will be realised through the flexible use of the available handing space. “If, for instance, we experience a slack period in imports, but exports are rising, then we will utilise the import handling space for exports, and vice versa.”

The total costs for the airport construction and the man-made island were originally set at 768 billion yen. However, Matsuura says, that the airport has managed to reduce that budget by 100 billion yen through cost reductions, making it the first airport project in the world that actually reduced its budget rather than exceeding it.

Aerial picture of the cargo area of Centrair with in the middle the large warehouse 1 (blue roof) and at the far end of the runway, warehouse 2.

In addition, the entire project, which started in 2000, is also on time. “It is a rather exceptional case in Japan,” agrees Matsuura, adding that there are plans in the pipeline to reduce the budget even more. He says that the land reclamation costs will probably end up lower than projected.

Built on a 580-hectare man-made island in Ise Bay, Centrair is connected to the mainland by a comprehensive combination of expressways, railways and high-speed ferry links from the cities if Tsu and Toba across Ise Bay.

The airport has a 3,500-metre runway and yes, the current airport management realises that if passenger and cargo business will expand as predicted, it may soon have to start thinking about adding a second runway.

The shallow and firm conditions of the seabed on which the island airport has been built – the so-called Tokoname layer – allow for a big enough extension of the island to construct the second runway, says Matsuura.

He explains that the shape of the layer also protects Centrair from being hit by a tsunami, while all airport buildings are earthquake-proof and conform to the even stricter construction regulations, which the government introduced following the 1995 Kobe earthquake.

Moreover, thanks to the strong conditions of the Tokoname layer, the airport authorities of Centrair are not overly concerned about major differences in the soil conditions of the site on which the airport has been built.

Compared with Kansai airport, which as previously predicted, has been sinking by up to 2 metres, the settling of the soil at Centrair will result in just a few centimetres, according to Matsuura.

Centrair boast a cargo area of 270,000 m2, which is operated by the Central Japan International Airport Company (CJIAC). It houses three main cargo terminals, one for domestic cargo and two for international freight, offering an annual throughput of 360,000 tonnes, plus domestic and international warehouses and bonded areas for forwarders with an estimated handling capacity of 270,000 tonnes a year. The area also provides space for ULD and ground support equipment storage.

FedEx is the first integrator that has leased space in
Warehouse 2, which has ramp access. The facility
has in-house Customs clearance.

Matsuura says the facilities are let as is to the airline tenants and the carriers decide what sort of automatic or semi-automatic handling equipment and other fixtures are installed.

Likewise, the installation of freezers or chillers for fresh fruit, seafood, flowers and other perishables and pharmaceuticals are the responsibility of the airlines. The airport only leases out the facility structure.

Adjacent to the cargo area is the development site of the Aichi Prefecture (in which Centrair is located), which is designated as the airport’s logistics area.

Koji Tsukamoto, Centrair’s senior manager of the cargo business group, says that in co-operation with the Aichi Public Enterprise Bureau, the airport has applied for Integrated Bonded Area status. “This will allow forwarders to move goods without Customs duties in the area and is aimed at making the Centrair cargo area and the logistics area an integrated distribution base for efficient logistics.”

Leading Japanese logistics and forwarding companies, which start operations at Centrair this month, include among others, Kintetsu, Yusen and Nippon Express. All in all, some 25 forwarders had taken up warehouse space at Centrair by the middle of January.

However, Tsukamoto predicts that once the airport is in full swing, many other forwarders, including foreign companies, will decide to open warehouse facilities in the cargo area, which has plenty of room for expansion.

Tsukamoto confirms that the Centrair passenger terminal has two gates that will be able to handle the Airbus A380 Superjumbo, while on the airside of the cargo terminals, five apron positions have been exclusively reserved for full freighters. One position has been earmarked for the A380 freighter in case FedEx or UPS would start service with this aircraft to Centrair.

FedEx is the first express company that has an airside facility.

Picture shows cargo warehouse 1 (left) and
domestic agents' facility. In the background
is the airport cargo office.

Apart from a host of passenger services, Centrair has managed to attract several leading cargo carriers to start freighter service to the new airport. As of last month, Japan Airlines (five B747F flights a week), Nippon Cargo Airlines (four B747Fs and two B767Fs a week), All Nippon Airways (five B767Fs a week) and Federal Express (five MD-11Fs a week) catered for the bulk of the full freighter services.

In addition, MASkargo and Korean Air Cargo will each operate one B747F service a week and Asiana one MD-11F a week, while China Eastern and SIA Cargo will respective operate two MD-11Fs and B747Fs a week.

In June, US-based Evergreen Airlines will start a five-weekly B747 all-cargo service between Columbus, Ohio and Nagoya, while Air Hong Kong is expected to introduce an A300-600 freighter service in November.

Altogether, cargo boss Tsukamoto expects about 40 freighter flights a week by the end of 2005, but he cautiously adds that this is “an optimistic view”.

With Japan’s reputation of having the most expensive airports in the world, it is not surprising that CJIAC and the International Air Transport Association have remained at odds during their negotiations to set the landing fees at Centrair.

Although the issue has not been satisfactorily solved, at least for IATA, Centrair has meanwhile set its landing fees at 656,000 yen for a Boeing 747-400 on an international route.

NCA is one the cargo airlines that will operate
scheduled freighter services to Centrair.

The charge is lower than the earlier announced charge of 695,200 yen. It is also distinctly lower than a comparable fee of 948,000 yen at Narita airport and 825,600 yen at Kansai, but twice as high as fees at South Korea’s Incheon airport, a possible rival to Centrair.

Add to these landing charges, the so-called fuel facility charge, which compared with Narita and Kansai, is also lower at Centrair and it is not surprising that the officials at the new airport are quite confident that Centrair’s cargo challenge will be easily met in the coming years.

Meanwhile, the authorities have decided that the old Nagoya airport will remain open, despite the fact that most of the airline services, including the domestic ones, will move to Centrair.

What will remain are airlines or charters that operate aircraft with less than 60 seats, plus the adjacent Komaki Air Base where the 1st Air Transport Squadron of the Japan Air Self Defence Force is headquartered, which among others, operates C-130 Hercules military transport aircraft.

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Copyright for texts and pictures: Payload Asia, Singapore. This report is brought to you in partnership with Payload Asia, the air cargo/express magazine for the Asia-Pacific and Middle East regions. To learn more about Payload Asia, please visit their website.