The Shanghai Pudong International Airport Cargo Terminal (PVG), PACTL for short, is a Sino-German joint venture that has grown into one of the world’s top cargo terminals since it was founded in 1999. This year will see the air cargo terminal operator celebrate its 25th anniversary, so CargoForwarder Global spoke to its Deputy General Manager and VP Sales & Marketing and Production, Carsten Hernig, to learn more about what has happened in those 25 years.
Three shareholders: SAA Logistics Development Co., Ltd. (51%), Lufthansa Cargo AG (29%) and JHJ Logistics Management Co., Ltd. (20%), stand behind the now well-established cargo terminal operator. While Lufthansa Cargo was one of PACTL’s first customers from the outset and the two enjoy a strong partnership, having developed PVG as the cargo airline’s largest and busiest station in Asia-Pacific (it operates 21 passenger, 11 cargo and up to 14 other scheduled flights each week), PACTL prides itself as being a neutral service provider. “It is part of PACTL’s DNA that PACTL is a neutral service provider, and our credo is that we treat every customer as individually as possible,” Hernig emphasizes. The company also distinguishes between customer and shareholder roles, and has this to say about the shareholders: “The combination of Airport-, Airline- and logistic know-how in this shareholder combination has been the recipe for PACTL’s success.”
PACTL’s 25th Birthday and the years leading up to it
The second half of this year will see PACTL invite customers and partners to celebrate its milestone, Hernig reveals. CFG asks about PACTL’s development over the years. “From a moderate start in 1999 with 10,000 tons in one terminal building, PACTL has continuously developed and is able to handle, in total, over 2 million tons per year in a multiple terminal system,” he says, listing other milestones in the company’s history. These include the opening of a second PACTL cargo handling terminal in Pudong, in 2005, to offer domestic cargo and certain international customer airlines. A decade later, in 2016, PACTL took a share in the cargo handling terminal in Nantong airport (also a combination of domestic and international flights, and with a strong potential for e-commerce and charter operations). Then, just two years ago, PACTL took over the operation of one international and one domestic freight terminal in Hongqiao, Shanghai’s second airport. Overall, PACTL today serves around 70 airline customers, including around 20 freighter or combination airline customers.
The effect of the pandemic
“Obviously the pandemic has had a steep influence,” Hernig responds to CFG. “From 1.8 million tons in 2019, we dropped to 1.3 million tons in 2022 – the lowest in PVG. Operational restrictions made processes significantly longer and more labor intensive. Literally nothing could be processed in the way it had been done before. Every process had to be redesigned according to the health regulations in place. I think our team is proud that PVG – and, in particular, PACTL – has kept many supply chains of the globe up and running, while many other transportation alternatives had collapsed. One of our customers wrote very nicely to us: ‘You kept the world alive’”.
Last year, PACTL managed a slightly higher than 50% market share in PVG; also redeeming part of the tonnage lost during the pandemic. Hernig reported a figure of 1.5 million tons of cargo for Pudong Airport and reasoned that the increasing trend was mainly driven by the upswing in the second half of the year. And the outlook for this year? “Operations are now back to normal. During 2024, we expect that also the number of passenger flights will get back to pre-covid levels. In terms of quality level, we are proud to say that, despite increased volumes, we have reached a historically high performance which is also reflected in the best-ever value of our customer satisfaction index,” he says.
The biggest challenges/learnings during that time?
The logistics behind the logistics were challenging during the pandemic, with a detrimental economic effect. Given that passenger business had been suspended, much-needed belly capacity simply disappeared. From an operational point of view, the many health management restrictions complicated cargo handling processes and time. “Our team members had to stay in long quarantine periods after work and the teams had to work in so called bubbles in order to minimize potentially infectious contacts among people. A lot of infrastructure needed to be set up, such as testing and quarantine facilities, etc.,” Hernig details. But aside from the challenges, there was also the positive shift in airport mindset: “Before, many airports mainly focused on passenger business but, during the pandemic situation, the focus had clearly shifted on cargo activities. In consequence, many other airports in China have developed cargo development strategies. This is leading to a competitive situation among several airports, which encourages and motivates our team to be better than our competition. The pandemic has proven that with a strong team, we can handle any challenge,” he comments.
And touching on that strong team, CFG asks if PACTL has any issues when sourcing new staff? Hernig underlines that while a candidate’s education degree, former employer, position, etc., are of interest, along with related industrial backgrounds, there is a scarcity of people with air cargo experience. Because of that challenge, he points out: “Now, we decided to expand our vision. After all, there’re a lot of excellent candidates in other industries and even other countries. Some positions are not limited to cargo industry, for example, finance, IT, procurement, etc. We welcome candidates from different industrial backgrounds. One can learn the air cargo business if one’s mindset is right.”
Partners, Digitalization and…
PACTL continues to grow its services. One such example is the strategic cooperation agreement with Jettainer, signed in NOV23, detailing the intention to open a new hub for the lease&fly ULD leasing service at Shanghai Pudong International Airport (PVG). “The operation has started and Jettainer is able to lease equipment to their customers in Pudong. Similarly other ULD providers are operational at PACTL. For us as a handling terminal, this is an important value addition, as our airline and forwarder customers can flexibly lease additional standard or special equipment according to their needs, under one roof,” Hernig reports. On digitalization, he reveals the intention to follow IATA’s ONE record initiative: “…in China, where digitalization has reached a higher degree than in many other countries, PACTL is further developing its operation system, Easy Cargo, for export and import. The aim is to digitize the entire documentation. During the current Easy Cargo Phase 2 project, additional functionalities are being added, in order to further facilitate and streamline the paperless data exchange along the supply chain.”
…Sustainability
Digitalization is already a lever for greater sustainability and is thus part of PACTL’s strategy. “We have managed to reduce paper by more than 25%, already – that is a success, but there is a way to go,” Hernig states, going on to list other green measures: “Since 2013, we are pushing forward our e-driven forklifts project and have replaced 80% own-used diesel forklifts with electric ones. Since 2021, we are introducing energy-saving lamps, expecting to reduce electricity consumption by more than 15%. Solar Power is being collected on the roof of the handling facility in order to generate green energy. China has developed a very eager path to achieve significant improvements of CO2 emissions. Consequently, we are actively motivated to further improve.”
CfG: Where do you see PACTL in 5 years’ time? And what is your outlook on the air cargo industry in general for the future?
“Of course, we all don’t have a crystal ball, but I feel that the outlook over the next five years for air cargo in China will be rather positive. The Chinese government has launched a series of activities to promote the economic growth and competitiveness. These measures will certainly show some positive effect and will in total overcompensate for the tonnage reduction, which is resulting from global dual-sourcing strategies. At the same time, the global economy faces a number of challenges, such as inflation, conflicts etc., which will have some kind of a counter effect. Overall, we do however foresee a rather positive outlook.”
Hernig says that the main short-term growth driver is the return of international passenger flights, which leads to increased tonnage. e-commerce is another great potential, which will continue to grow. “In our expectation, we have a chance in Shanghai to over proportionally grow in this segment, due to the fact that this commodity has a high growth rate by itself, but moreover, the airports in the south of China, where the majority of the production sites are located, are saturated, and this cargo will find ways to other airports. We have an excellent cross-border-e-commerce terminal facility, which allows our customers to rapidly deliver e-commerce shipments in fully customs-compliant manner. Being the Chinese airport with the best global connectivity makes Pudong an attractive gateway for these volumes.”
Teaming up with international partners will help to expand services related to e-commerce demands, and substantially improve the time-to-market. PACTL has identified many levers to optimize and accelerate the customer experience and shipment journey, and is continuously working to increase the attractivity of PACTL and PVG. It plans to implement transit possibilities domestic/international and international/international, to transform PACTL to a transit hub. Remote cargo acceptance terminals in industrial hubs, are being established to facilitate cargo delivery and better integrate the Yangtse River Delta economic region. “The first one has already opened in Suzhou, and more are to follow.”
“In order to prepare for the future, we will be significantly upgrading PACTL West. Part of this upgrade will be a new and even better e-commerce terminal as well as a cool center in order to specifically promote the two growing market segments,” Hernig concludes.
Thank you for the update, Carsten Hernig, and Happy 25th Anniversary year.
