Achim Pluecker, Managing Director of ICCS – International Cargo Center Shenzhen – gives CFG an exclusive insight into how he, his family and his team have experienced the COVID-19 shutdown and changes over the past 3 months.
Setting the scene in Shenzhen
My family and I have been living in Shenzhen for 2 years now. Located in southeastern China between Guangzhou and Hongkong, Shenzhen transformed from a fishing village into a mega-city of more than 20 million inhabitants within the space of just 35 years. It is an ultra-modern metropolis which also offers high living standards. National and international bars and restaurants, amusement-parks, cultural highlights, and an astonishing number of green parks can be found in this city. Traces of the old China are rare.
The Shenzhen Bao’an airport located on the east bank of the Pearl River, belongs to the top 30 airports worldwide when it comes to number of passengers.
I am the Managing Director for ICCS (International Cargo Center Shenzhen). The last years were determined by two-digit growth rates for ICCS. Companies like HUAWEI, XIAOMI or other technology companies exporting from Shenzhen are the basis for this boom. We also experienced an increase in the number of international routings for passenger and freighter flights, underlining the growing interest of airlines, forwarders, and passengers in using Shenzhen as their preferred gateway to the world.
The impact of Covid-19 on daily life
Since the outbreak of Covid-19 the world has changed, also for us.
The social life experienced a strict lock-down. Restaurants, schools, sports fields, and cultural events closed at the beginning of February. The Chinese New Year holidays were extended to two weeks instead of one. Passenger flight connections were limited to a small number of destinations and even stopped totally at a later stage. Over time, the travel restrictions increased significantly and even the nearby border to Hongkong closed. The travel records of each person here in Shenzhen were recorded in an app to identify people coming from infected areas.
The recent gradual easing of the restrictions allows us to slowly come back to so-called ‘normality’.
Restaurants, at least those which survived, reopened, sport activities are restarting and life on the streets is recovering. Schools will open in the next weeks, starting with the high schools. The closure will by then have lasted for more than 3 months for the students. The online school here in Shenzhen is working quite well for the students as technical equipment such as mobiles, laptops or tablets is widely spread in the home city of HUAWEI. The major app used here in China is WeChat. WeChat is a multi-purpose messaging, social media, and payment app by Tencent. It goes without saying that Tencent is a Shenzhen-based company, as this is China’s Silicon Valley. WeChat has over 1 billion active users and is replacing the buddy to buddy communication even more during these times. Even business correspondence is carried out via this app.
Air freight and Aviation challenges during Covid-19
Work did not stop at ICCS. We initially had less business due to Chinese New Year, and for many workers who had left Shenzhen during that time to visit their families, it was not possible for them to come back because of national travel restrictions. Otherwise, the daily way to work was no problem.
Strict COVID-19 rules were implemented and controlled by the government, such as the mandatory wearing of masks. At the beginning of the crisis we had to import masks as there were not enough masks available, so we imported masks from Germany. After about 4 weeks masks were available in Shenzhen. Also, we had to list all our employees’ national and international travels, and when they had returned to Shenzhen. Depending on the results, staff had to stay at home for 14 days, in quarantine.
Learnings and opportunities
Within just a few weeks, we went from a peak time to almost no cargo and now to a peak again. It is very difficult to ensure enough capacity and resources for the peak and to control the costs during the downturn. Flexibility and risk management are key. Another learning is that forecasts during these times are nice but pure speculations. We even hired highly qualified supplier staff during the downturn to ensure that they would not leave us. We were already well-prepared for crisis management as we had previously faced peaks which led us to and above our capacity limits, causing the need for truck traffic control and intensive supply chain management. However, we had not experienced a downturn crisis during the recent years.
Overall, such a crisis shows you how well your team performs. You find out on whom you can rely. Particularly for Shenzhen airport this crisis is a huge opportunity as many new airlines are at least temporarily considering installing a routing to Shenzhen. Traffic to Hongkong is still limited and Shenzhen is therefore an interesting alternative.
A dramatic shift in business
The actual business situation here in Shenzhen and especially for our company has significantly changed. To give a rough personal estimate: production in Shenzhen is now back to 80-90%, yet international demand is heavily decreasing, leading to a reduced need for transportation capacity for technical goods. In parallel, we fortunately see an enormous increase of medical aid goods transportations. So, there has been a shift from a high degree of high-tech shipment transportation to transportations of masks, Covid-19 test kits, and mask production machines.
Whereas the majority traffic in the past was airline business passenger and freighter line flights, it is now a huge number of charter flights which dominate our daily business. We even see many passenger aircraft used for cargo transportation only. The demand for daily freight capacity is enormous and is comparable to the peak we had mid-January, before the Chinese New Year. Some of our cargo charter flights even made it onto the international news, such as a Shenzhen- Boston charter which was operated by the New England Patriots aircraft donated by the football club to support the city of Boston with 1.2 million N95 masks on board.
Outlook for the future
We know that this freight boom will pass by as soon as the need for masks decreases either because of an end of the Covid-19 crisis or because of own mask production in other countries. The question for us then will be how fast can the worldwide economy recover? We must find the right balance between cost cutting programs and enabling growth. Thanks to my brilliant team of ICCS we will be prepared!
We hope that life around the world will gradually improve again and cross our fingers that Covid-19 disappears soon.
Stay healthy! Together we will manage this crisis.
CFG thanks Achim Pluecker for his guest contribution!
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