May 13, 2008, issued by: IIAC
Information Memorandum
Incheon International Airport FTZ : A True World-Class Logistics Hub
New Air Cargo Service to ICN Request for Expression of Interest
Table of Contents
1 Purpose of the Information Memorandum ___________________________ 1
2 Introduction of Incheon International Airport_________________________ 2
2.1 Excellent Geographical Location & Network _____________________________________ 2
2.2 Incheon Int’l Airport Free Trade Zone __________________________________________ 6
2.3 Airport LogisPark(ALP) __________________________________________________ 10
2.4 Cargo Terminal Area (CTA) _________________________________________________ 15
3 Incentives ____________________________________________________ 16
4 Response Form_________________________________________________ 4
5 Contact Information ____________________________________________ 19
Appendices
1. Current & Future Market Analysis _________________________________ 21
2. Voice of the Airlines _____________________________________________ 4
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New Air Cargo Service to ICN Request for Expression of Interest
1. Purpose of this Information Memorandum
The purpose of this Information Memorandum is to provide you the information about Incheon Int’l
Airport Free Trade Zone, which gives the most convenient and competitive business environment to
you.
Airport LogisPark (ALP)
Disclaimer
This Information Memorandum is issued solely for information and planning purposes and
does not constitute a formal invitation to bid, nor is it binding on either party. Responses to
the RFEOI will not be returned. Please note that IIAC cannot reimburse any expenses
incurred in responding to this RFEOI.
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New Air Cargo Service to ICN Request for Expression of Interest
2. Introduction to Incheon International Airport
2.1 Excellent Geographical Location and Network
Incheon International Airport(hereinafter, ICN) is the gateway of Northeast Asia, located in the
Republic of Korea. Strategically located between China and Japan, ICN lies at the center of a giant
market that has 1.5 billion people and 61 cities with population over a million people within 3 hours’
flight from ICN. Furthermore, the Northeast Asian region accounts for 20% of world GDP and 27% of
the world logistics volume. Korea’s economy has a prominent role in the region, with a GDP which is
currently 12th largest in the world.
Free Trade Agreement (FTA) between the USA and Korea, concluded in April 2007, will eliminate
tariffs and other barriers to trade, promote economic growth, and strengthen economic ties between
the two countries. Ties with EU market will also be fortified with additional FTA between EU and Korea,
which is under negotiation now.
Figure 1: A potential market of 1.5 billion people (Source: IIAC)
• World’s 2nd largest cargo airport
• 2005, 2006 & 2007’s winner of
the ACI Service Excellence
Award as “The Best Airport
Worldwide”
• The Best Connectivity in North
Asia : 70 airlines Connect 167
cities
• Non-stop service to North
America
• Key Gateway to & from China
with high service and labor
quality guaranteed
• Bridge between North Asia &
South Asia
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New Air Cargo Service to ICN Request for Expression of Interest
Although it only began operations in 2001, ICN has experienced rapid growth: passenger and cargo
volume have increased with a cumulative annual growth rate of 8% and 9% respectively, while aircraft
movements have seen an average annual growth of 16%. It offers currently the best global network in
Asia, connecting 169 cities including Latin America with 69 airlines.(As of August 2008)
Japan26 cities
China35 cities
Europe26 cities
Asia32 cities
MiddleEast
8 CitiesAfrica2 Cities
NorthAmerica24 Cities
Austrailia5 Cities
Figure 2: ICN global network (Passenger and cargo flights) (Source: IIAC, Dec. 2007)
Figure 3: Number of Cities served(compared with Hong Kong/Singapore/Shanghai Airport)
49
24
34
26
35
58
11109
36
79
912417
28
911
17
41
0
20
40
60
80
100
120
140
160
180
ICN HKG SIN PVG
China
Japan
Europe
North America
Others
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New Air Cargo Service to ICN Request for Expression of Interest
There are 25 dedicated cargo airlines such as FedEx Express, UPS, DHL, Polar and Atlas Air serving
at ICN.
Figure 4: Major cargo airlines operating at ICN.
ICN the 2nd largest international cargo airport by tonnage. ICN’s cargo transshipment rate
has steadily increased and currently reached 50.6%. Its facilities rank 1st in terms of service levels,
winning ACI Service Excellence Award as “The Best Airport Worldwide” for 3 subsequent years ; 2005,
2006 and 2007.
22000055
22000066
“Best Airport Worldwide” in ASQ Servey by ACI
§ Best Airport Worldwide
§ Best Airport Asia Pacific
§ Best Airport over 25 million passengers
§ Most Improved Airport “Best Airport Worldwide” in ASQ
“Award of Excellence” by ATRS
“Readers Travel Choice Awards” by Time Magazine
“Airport of the Year” by CAPA (Center for Asia Pacific Aviation)
22000077
“Best Airport Worldwide” in ASQ (3 consecutive yrs)
“World Best Airport” by OAG (Official Airline Guide)
“World Best Airport” by Global Travel Magazine
“World Best Airport” by Global Travel Magazine
22000088 “Eagle Award” by IATA
“Best Airport Worldwide” in ASQ (4 consecutive yrs)
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New Air Cargo Service to ICN Request for Expression of Interest
Korea has “Open Sky” agreements with 28 countries including China, Japan, India, USA, Germany,
Vietnam and Malaysia and bilateral agreements with many others. Korea also plans to reach
liberalization with the EU, Russia, Philippines and other countries with sufficient air transport demands
in order to secure the status that benefits the world’s 8th largest air transport country.
Figure 5: ICN has the best connectivity to Japan and China
Table 1 : Cargo Capacity of ICN
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New Air Cargo Service to ICN Request for Expression of Interest
2.2 ICN Free Trade Zone
IIAC is operating Free Trade Zone, which consists of Cargo Terminal Area(CTA) and Airport
Logispark(ALP). Total area of FTZ is 2.1 million ㎡. IIAC wants to invite promising value added
companies in the manufacturing and logistics industries to FTZ. With the state-of-the-art facilities and
networks, IIAC is ready to support the dynamic needs of companies and to enhance competitiveness,
quality and customer service level and to reduce cost.
Figure 6: ICN Free Trade Zone consists of Cargo Terminal Area (CTA) and Airport LogisPark (ALP)
Figure 3: Airport layout (Source: IIAC)
Traffic Statistics
IInntteerrnnaattiioonnaall PPaasssseennggeerrss aanndd CCaarrggoo,, WWoorrlldd NNoo..1100 aanndd NNoo..22 ((22000077))
31 million int’l PAX, 2.6 million tons of int’l Cargo
211 thousand int’l flights operations
Highest transshipment rate in the region (50.1%)
Operating Free Trade Zone comprised of Cargo Terminal and Airport LogisPark
475 2 5 3 5 5
5 96 3
69 7 1
0
20
40
60
80
2001 2002 2003 2004 2005 2006 2007 2008
0
500
1000
1500
2000
2500
3000
3500
2001 2002 2003 2004 2005 2006 2007
PA
X(X
10
,00
0)
PAXCargo
Number of airlines Operating at ICN PAX & Cargo
Occupied
Unoccupied
Cargo (X1,000 tons)
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New Air Cargo Service to ICN Request for Expression of Interest
2.2.1 Advantages of Airport Logispark (ALP)
Fast & Easy Customs Clearance
• ICN customs office operates a 24 hour customs clearance system called UNI-PASS. This system
can handle all types of customs clearance procedure automatically in a singe window.
• It takes less than one hour to clear imported goods. This system is the fastest among 169 members
of the World Customs Organization.
Figure 7 : The fastest customs clearance system among the 169 members of the World Customs Organization
Table 2 : Customs Clearance Systems od Major Countries
Simplified Int’l to Int’l Re-export Customs Procedure
The required time for customs clearance for by-passing cargoes is considerably short for the
manufacture’s hub operation. Bill of Lading (B/L) split & mergence for re-export, especially required
for Bonded Warehouse Transaction, are removed, and improved for 3PLs to paperless clear the
goods to be re-exported followed by “Use and Consumption Declaration”
a b A B C
Order
(a, A, B)
B/L
a A B
Re-export Declaration(paperless)
+Load & Ship
Time Taken
1.5 hrs
Use/Consumption
Declaration
Inventory Repackaging
B/L (1)
B/L (2)
a b A B C
Order
(a, A, B)
Split &
Combine
B/Ls
B/L (3)
a A B
Re-exportDeclaration
(Document Submission & inspection)
Load
&
Ship
Time Taken
Approx. 4 hrs
Inventory Repackaging
As-Is
As-Was
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New Air Cargo Service to ICN Request for Expression of Interest
Comprehensive multimodal transport system
• ICN is the center of the comprehensive multimodal transportation system. ICN is able to provide
intermodal transportation system between China and Korea, such as Sea& Air and Air& Sea with
the combination of Incheon Port.
• In case of China, cargo from and to ICN can be delivered via Road Feeder Service (RFS)
Truck
TransportationLoad
truck &
car ferry
Truck Transportation
Move to
Destination
Airport
Capable of providing two-way service between Korea-China, China-Korea.
Truck
TransportationLoad
truck &
car ferry
Truck Transportation
Move to
Destination
Airport
Capable of providing two-way service between Korea-China, China-Korea.
Reasonable Operating Cost
Incheon Airport provides the lowest operating charges.
Figure 8 : Operating costsat Major Airports
(1) Based on 1 full cycle processing (unload – terminal processing – load) of 100 tons of cargo
(2) Total charge paid by airlines for a 3 hour turn-around flight of B747-400
(3) Assumption that airport usage fee is equivalent to Shanghai; data unavailable for Beijing
(4) Ground handling fee includes USD 15,000 that is transferred to the shipper
Source: Booz Allen Hamilton (Ground Handling Fee), IATA (Airport and Air Navigation Charges), IIAC (Airport Usage Fee, 2007),
Asahi newspaper
6,155
ICN PEK (3) NRT HKG (4) KIX PVG
Ground Handling Fee (1) Airport Usage Fee (2)
USD
6156
7,568 9,959
17,354 17,249 23,300
4,266 6,043
9,126
4,791 8,892
6,043
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
11,834 12,198
19,085
22,145
26,141
29,343
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New Air Cargo Service to ICN Request for Expression of Interest
Excellent workforce and supporting IT infrastructure
• Korea’s workforce is highly productive, highly educated (97% possesses college education or
vocational training background) and very job-committed, more skilled than China and more cost
competitive than Japan. In addition, Korea is backed by a superior telecommunication and IT
infrastructure which has become a global benchmark.
Firm vision, mission and commitment of central government and ICN
• Incheon Airport established a long-term logistics roadmap to develop into a true world- class
logistics hub, bolstered by strong determination of government.
-Thomas Held, former CEO of Schenker
ICN PVG SIN HKG
Ground
Rental Cost
(/sqm/year)
USD 7 USD 8 USD
15.97
N/A
Distance to
Airport
Inside
the
28km
to PVG
Inside
the
N/A
Process
Efficiency
High Low High High
Costs in case of 5,000m2, 30,000 tons
during slack season for a year
(thousand
HKG SIN
* Assumption that ICN’s air tansport charge is
USD 3 for 1 kg.
0
9,000
11,000
ICN
112,520
97,200+
100
13,000
: Ground Rental
:Air Transport Charge
90,0
Estimate
5 54 80
Air Transport Charge(Direct Flight to LA)
PVG
Figure 9 : Operating Costs at Airport LogisPark
Ground Rental Fee for Transfer Cargo
ICN PVG SIN HKG
To LA 100 140 N/A 113
To Frankfurt 100 132 125 127
* Assuming Incheon as 100 in 2007.
* No direct flight from SIN to LA.
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New Air Cargo Service to ICN Request for Expression of Interest
2.3 Airport Logispark (ALP)
Figure 11 : Airport LogisPark
Lot No. Size (m2) Company
A2,A2-1 25,303 Pantos
A3 38,347 Korean Duty-Free Association
B1 79,083 Incheon Int’l Logistics Center
B2 8,892 Samsung Logitec
B3 9,052 K.W.E. Korea
C1 5,363 Britestone
C4 6,986 Hyundai Logistics
D1~D6 52,695 Neo Semitech
F1~F4 65,706 AMB Property
G1, G7 21,608 Daewoo Logistics
G2 6,973 Haewoo Logistics
G3 10,000 Schenker Korea
G4 6,531 Hanaro T.N.S.
G5 9,580 Incheon Air Cargo Center
G6 9,464 Baekma Cargo
Total 355,583 (Occupancy ratio: 76%)
G4 G5
G3
E2(16,743)
E3(19,246)
E1(16,604)
C7(16,322)
C5(6,685)
C3(9,545)
C2(6,711)
A2-1
G6 G7
G1
F1 F2
F3 F4
D1D2 D3
D4
B9 D5
B1
B3 B2
A2
A3
G2
C6(13,799)
PublicFacilities
C8
D5(16,368)
D6(9,640)
C4(6,986
)
Leased out
To be leased
A1
C1(5,363)
Lot No. Size (m2) Company
A2,A2-1 25,303 Pantos
A3 38,347 Korean Duty-Free Association
B1 79,083 Incheon Int’l Logistics Center
B2 8,892 Samsung Logitec
B3 9,052 K.W.E. Korea
C1 5,363 Britestone
C4 6,986 Hyundai Logistics
D1~D6 52,695 Neo Semitech
F1~F4 65,706 AMB Property
G1, G7 21,608 Daewoo Logistics
G2 6,973 Haewoo Logistics
G3 10,000 Schenker Korea
G4 6,531 Hanaro T.N.S.
G5 9,580 Incheon Air Cargo Center
G6 9,464 Baekma Cargo
Total 355,583 (Occupancy ratio: 76%)
G4 G5
G3
E2(16,743)
E3(19,246)
E1(16,604)
C7(16,322)
C5(6,685)
C3(9,545)
C2(6,711)
A2-1
G6 G7
G1
F1 F2
F3 F4
D1D2 D3
D4
B9 D5
B1
B3 B2
A2
A3
G2
C6(13,799)
PublicFacilities
C8
D5(16,368)
D6(9,640)
C4(6,986
)
Leased out
To be leased
A1
C1(5,363)
ALP was established and started operating in March 2006. It is located in the FTZ, on the east side of
the two runways and cargo terminal area. Total area of ALP is 992,000 m2 and 636,417 m2 is to be
leased out. IIAC owns and lease the land to companies for their business implementation. Currently,
the occupied rate of ALP is 76% (355,583m2).
Table 3 : Airport LogisPark Leasing Specification
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New Air Cargo Service to ICN Request for Expression of Interest
l Space: 8,907sqm
l Height: 14.5m
l Located at Terminal Area
IIAC WarehouseIIAC Warehouse
l AMB : Global top 3 Investment and Leasing Company
l Space: 36,000sqm
l Height: 12.4m
A M BA M B
l Kintetsu World Express
l Space : 8,877 sqm (F1~F2)
l Schenker : Global top 2 Air Logistics Company
l Space: 19,946 sqm (B1~4FL)
l Height: over 10m
K W EK W E
SchenkerSchenker
l Pantos : Korea’s Top Air Logistics Company
l Space: 7,162sqm
l Height: 15m
PantosPantos
Table 4 : Warehouse Facilities in Airport LogisPark
2.3.1 Business Models for the investors (logistics companies) With the exemplified businesses below, right in the heart of the emerging Northeast Asia economy,
you can create new values and revenues in response to customer’s needs, which enables you to
enhance business competitiveness and customer service level in terms of cost, quality and speed.
Logistics business
• Global sourcing center : You can optimize your supply chain and by establishing global
sourcing center at ICN along with competitive multi-vendor, for instance, sourcing general parts
from China, and cutting-edge parts from Korea & Japan. In case of this, you can also reduce the
cost and add value by using the advantages of FTA.
• Global distribution center : Transport whole products from production site (located in China,
Vietnam etc.) to ICN global distribution center, perform total inventory management and distribute to
overseas dealer at the point of order, without any loss that can be generated from quick price
change.
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New Air Cargo Service to ICN Request for Expression of Interest
• Value-added logistics : You can perform item sorting, light assembling, labeling, packaging and
other value-adding activities in addition to traditional distribution activities.
Manufacturing business
• Postponed manufacturing : In order to reduce inventory cost and improve efficiency of total supply
chain, you can postpone production or distribution at ICN, corresponding to an instant demand and
need, with ICN’s minute transportation network, swift customs clearance and customized logistics
system.
• Light Manufacturing : Airport is the best place for products which demand quick distribution. You can
perform light manufacturing (eg. assemble modules to end product)at ICN and transport in/out
Korea in no time. Additional heavy manufacturing, however, is also possible as long as swift
distribution is required.
• Convergence of IT, BT, NT : With backgrounds of Korea’s diversified industries, high-educated work
force and world best IT power, you can develop convergence of your cutting-edge technologies with
other brand-new IT, BT, NTs.
• Point-working by partnership : In Korea, as home of corporate giants, you can easily find your
business partners with least efforts and interchange high technologies backed by thorough
protection of intellectual property.
Case Study ) ASML’s Asia Distribution Center in Incheon
About ASML
Headquartered in Veldhoven, the Netherlands, ASML is the world’s leading provider of lithography
systems for the semiconductor industry, manufacturing complex machines that are critical to the
production of integrated circuits or microchips.
Hub Operation Plan
Currently, ASML’s spare parts warehouses are situated in Singapore and Taiwan. However, they
have planed to operate a kind of consolidation warehouse and surveyed to seek a right place in the
Asia since August, 2007.
- Candidate Countries: ROK, Singapore, Hong Kong, Taiwan, China
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New Air Cargo Service to ICN Request for Expression of Interest
Requirements of Hubbing Operation
v Existence of big customers in Korea ○
vExistence of global 3PLs in Korea (or Incheon FTZ) ○
vCustoms procedures for Int’l to Int’l trade
- Item (peaces)-based clearance
- A bulk license of Compliance Program for strategic goods
Ⅹ
vExcellent aviation connectivity (for minimizing lead time) ○
vAccessibility to ASML’s customers ○
vNon-taxation on a DC operating firm under foreign jurisdiction who uses 3PLs in Korea
Ⅹ
Incheon Airport
ASML’s requirement was like above. Incheon has big customers like Sansung and Hynix, and
Global 3PLs in the Airport Logispark. And Incheon was at the center of Giant Northeast Asian semi
conductor market. Below is the distance analysis of ASML
Incheon (INC)
Product Transport Route
Tokyo (TYO)
1,190kmShanghai (PVG)
851km
Beijing (PEK)
946km
Kuala Lumpur
(KUL) 4,590km
Taipei (TPE)
1,470km
: Customer PlaceNote : Supply form HQ is not
considered in this case.
Incheon (INC)
Product Transport Route
Tokyo (TYO)
1,190kmShanghai (PVG)
851km
Beijing (PEK)
946km
Kuala Lumpur
(KUL) 4,590km
Taipei (TPE)
1,470km
: Customer PlaceNote : Supply form HQ is not
considered in this case.
3,421 3,5213,759
4,178
6,198
3,401 3,422 3,691 4,038
5,784
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
ICN PVG TPE HKG SIN
3,421 3,5213,759
4,178
6,198
3,401 3,422 3,691 4,038
5,784
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
ICN PVG TPE HKG SIN
Figure 10 : Total Distances from each airports in Asia
- Destination : Incheon, Shanghai, Beijing,
Taipei, Tokyo, Kuala Lumpur
Arithmetic Average Transport-weighted Average
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New Air Cargo Service to ICN Request for Expression of Interest
Incheon met almost every requirement of ASML but failed to meet 2 conditions. First, it needed
shorter customs clearance time and simplified procedures for the int’l to Int’l re-export. So Incheon
Airport Corporation’s dediated team negotiated with the National Customs Authority and finally
removed Bill of Lading (B/L) split & mergence for re-export, especially required for Bonded
Warehouse Transaction.
a b A B C
Order
(a, A, B)
B/L
a A B
Re-export Declaration(paperless)
+Load & Ship
Time Taken
1.5 hrs
Use/Consumption
Declaration
Inventory Repackaging
B/L (1)
B/L (2)
a b A B C
Order
(a, A, B)
Split &
Combine
B/Ls
B/L (3)
a A B
Re-exportDeclaration
(Document Submission & inspection)
Load
&
Ship
Time Taken
Approx. 4 hrs
Inventory Repackaging
As-Is
As-Was
ASML’s second requirement was “Non taxation on DC operating firm under foreign jurisdiction who
uses 3PL in Korea. So Incheon Airport team met “Ministry of Strategy and Finance” to solve this
problem and finally got the progressive ruling by MOSF
üWas a taxpayer as
regarded their 3PL
warehouse as their fixed
business facility.
üNo taxation bilateral
agreement between ROK
and HK
As - IsAs - Was
cooperation with National Tax Service,
etc.
üNot a taxpayer if they uses
3PLs in Korea only for simple
warehousing, repackaging,
and delivering the goods they
have imported and exported.
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New Air Cargo Service to ICN Request for Expression of Interest
2.4 Cargo Terminal Area (CTA)
The CTA is located in the FTZ, east of the 3 runways. It consists of 5 cargo terminals and provides
ample space with 36 cargo aprons. It currently covers a total land area of 1.10 million m2 (to be
expanded to 2.15 km2 by 2015.
Table 4 : Cargo Terminal Area specifications
Company Size (m2) Capacity (ton)
Korean Air Cargo 54,600 1,200,000
Asiana Cargo 50,400 1,110,000
Foreign airlines 77,700 780,000
AACT(Atlas Air Cargo Terminal) 11,250 200,000
International Post 29,724 350,000
American Army Post 1,516 20,000
DHL 9,454 220,000
Air cargo warehouse 16,180 120,000
Total 250,824 4,000,000
The CTA provide logistics companies with an excellent environment to operate in:
• Superior cargo handling service level: in order to provide the fastest and most predictable cargo
handling service, ICN introduced a continuous service improvement program, ensuring a better
service quality than those of other leading airports.
Table5: Cargo Performance Index
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3. Incentive Programs
a) Tax Incentives
If you invest over USD 10 million as a manufacturing-based company or over USD 5 million as a
logistics / SOC company, the following incentives will be granted.
b) Land lease incentives
Below are the prevailing land lease incentives based upon investment capital:
c) Others
- Goods can be used or consumed in the FTZ without having to pay customs duty
- Supply of goods or services within the FTZ is exempted from imposition of value-added tax
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New Air Cargo Service to ICN Request for Expression of Interest
4. Response format
Those who received this Information Memorandum are invited to submit an expression of interest
(EOI) for:
• Leasing of the unoccupied land plot(s) at the ALP, as indicated in Figure 6, stating the land plot
number(s) or the ground surface area they would like to lease as well as the desired land use
period.
And/or
• Leasing of the unoccupied building property owned by AMB, including the desired property use
period.
In addition, you are requested to submit EOI materials that illustrate your company’s strength,
competence, and experience in the manufacturing, assembly or logistics industry.
All EOIs will be received by Incheon International Airport Corporation(IIAC) and IIAC will respond with
all the support for companies to start business at ICN.
It is recommended to make a site visit before submitting the EOI. IIAC could offer a site invitation at
the stage of finalizing the lease agreement.
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New Air Cargo Service to ICN Request for Expression of Interest
Table 6 : Example of response format
General information
Company
Industry Revenue
Name
Title
Division
Address:_____________________________________________________________________
City:_______________________________ State/Province:_____________________________
Country:____________________________ ZIP: _____________________________________
Tel
Fax
E-mail address
Expression of interest
Degree of interest □ We are considering on long-term basis.
□ We are comparing with other candidates.
□ We want to start business now.
Planned business □ Manufacturing □ Whole Sale/Retail □ Logistics □ Others
Planned activities □ Global sourcing center □ Global distribution center
□ Integrated service hub □ Value-added logistics
□ Postponed manufacturing □ Light manufacturing
(if others, describe activities please)
Investment type □ Land lease (construction of your own facility)
□ Building lease (use of AMB owned property)
□ Use of logistics tenants in Free Trade Zone
□ Others
Investment amount
Land plot number
(*in case of land lease)
Use period
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New Air Cargo Service to ICN Request for Expression of Interest
5. Contact Information
Responses to this Information Memorandum are to be submitted, either by e-mail or post, to:
Gene Kim
Logistics Team/Hub Strategy Division
2850 Unseo-dong, Jung-gu, Incheon
400-700, Republic of Korea
TEL +82 32 741 2277
FAX +82 32 741 2329
e-mail [email protected]
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New Air Cargo Service to ICN Request for Expression of Interest
Appendices
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New Air Cargo Service to ICN Request for Expression of Interest
1. Current & Future Market Analysis
Figure 8 depicts the worldwide cargo traffic growth rates for 2005-2025. Growth of cargo traffic from
and to Asia outstrips growth of cargo flows between other regions. Obviously, China plays an
important role in realizing this growth in cargo traffic. ICN is located right next to this enormous market
and offers more connections to China than any other airport. (Hong Kong International Airport has the
largest number of connections, but does not have the advantage of connecting to China for non-
Chinese airlines due to absence of cabotage). As such, ICN can serve as a consolidating point for
traffic in the Asian region, thereby neutralizing the imbalance in inbound and outbound traffic volume.
6.9%
8.6%
5.3%
5.0%
5.4%
3.8%
7.1%
5.6%
Intra
Asi
a
North America
IntraIntra
Europe
Europe-Asia
Asia - North America
Europe -North America
North America -Latin America
Europe –Africa
ICN
6.9%
8.6%
5.3%
5.0%
5.4%
3.8%
7.1%
5.6%
Intra
Asi
a
North America
IntraIntra
Europe
Europe-Asia
Asia - North America
Europe -North America
North America -Latin America
Europe –Africa
ICN
Figure 11: Average worldwide annual air cargo traffic growth rate for 2005-2025 (Source: Boeing Air Cargo Market Forecast
2006-2007)
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New Air Cargo Service to ICN Request for Expression of Interest
Figure 12: ICN as a consolidating point for air cargo
The growth in cargo volume has been mainly driven by steady increase of both imports into Korea as
well as transit cargo (see also appendix II.c). Main transit cargo regions are the Americas (30.5%) and
China (22.7%). Although exports have slightly decreased in 2006, Korea itself provides plenty of back-
haul market opportunities as an exporter of high value products such as semiconductors, flat-panel
TV screens and cell phones.
Japan
12.9%
China
22.7%
Southeast
Asia
17.7%
Americas
30.5%
Europe
13.4%
Oceania
1.2%
Other
1.5%
Figure 4: Transit cargo volume specified by region for 2006.
Rationale for Northeast Asia Consolidating Point
• Cargo flow to/from secondary regions in China will continue
to grow at around 20~30%
• May be inefficient to serve secondary regions directly from
the US/EU and intra Asia hubs
• Today Chinese logistics operations lack infrastructure and
reliable operations practices
• Chinese regions prefer to ship outside of China, rather than
via points within China
Advantages
• Using consolidating point can neutralize significant
imbalance in inbound and outbound flow of air freight volume
• Can increase flight frequency and load factor
ICN as a consolidating point for air cargo
China ICN
Europe
US
Intra Asia Hub
23
New Air Cargo Service to ICN Request for Expression of Interest
2. Voice of Logistics Companies
“Most industry observers agree that Asia will continue to outpace the rest of the world in the growth of
new air cargo traffic. Incheon is a critical hub for transpacific and intra-Asian air cargo traffic, and it is
a frequent gateway of [Atlas sister] Polar Air Cargo and other air carriers for air cargo service to Hong
Kong, Shanghai and Beijing.” William Flynn, President and CEO Atlas Holdings. June 2007
“Our commitment to South Korea is largely driven by customer needs arising from a steady flow of
trade volumes into and out of South Korea. We are confident that our robust network infrastructure, as
well as our upgraded facilities, will not only serve the increasingly sophisticated needs of our
customers, but will enable us to actively enhance our role as a trade facilitator to improve trade links
between South Korea and the rest of the world.” Scott Price, CEO DHL Express Asia Pacific.
November 2006
“The dynamics [in this region] will continue to provide good demand for widebody introduction,”
William Flynn, President and CEO Atlas Holdings. June 2007
"The decision to add new frequencies is evidence of our commitment to the Korean market and
demonstrates our confidence in a revival of the Korea economy. FedEx will continue to provide the
most reliable and fastest express service to our customers in Korea." David L. Cunningham,
President FedEx Asia Pacific. January 2004
“Our new nonstop flight to Seoul will expand Delta’s service to Asia and support the establishment of
Incheon as one of Asia’s premier hub airports. The added freight capacity to and from the U.S. will
also benefit freight forwarders and cargo shippers around the world.” Glen Hauenstein, Executive
Vice President of Network and Revenue Management Delta Airlines. June 2007
Shanghai is full. Seoul is a better option for regional hub status. As a hub, Korea definitely plays an
important role, […] pointing to the presence of strong air and ocean carriers, a well-developed
infrastructure and its location. We use Korea very much as a hub. We have a lot of cargo from
Southeast Asia going through Incheon." Charles Kaufmann, Director DHL Global Forwarding
North Asia. April 2006