At first glance, Hong Kong's strength as an airfreight hub for China is remarkable. To go through the city, most of its traffic, goods from mainland China, must clear customs twice. Yet Hong Kong International Airport not only overcomes that disadvantage; it is now also the world's largest freight airport, handling 3.98 million metric tons in 2011, just ahead of Memphis (Tenn.) International Airport's 3.92 million tons. And that was before capacity at Hong Kong grew by half this year, with the opening of a third giant terminal for Cathay Pacific Airways.
With that new terminal fully operational since last month, the freight business at Hong Kong looks ripe for a price war. It has enormous overcapacity and three competitors, each with high fixed costs and little product differentiation. Hactl, the largest airfreight-handling company at Hong Kong, is determined not to be the first to drive prices lower, however. Instead, it aims to differentiate itself by service standards. That may not be easy. While Chief Executive Mark Whitehead is looking for a unique selling point, neither Hactl nor Cathay Pacific nor Asia Airfreight Terminal (AAT), the third player, has much room to move from the consistently high service quality for which Hong Kong is known.