South Korea's Incheon airport ready for opening

A worker checks bags in a test of Incheon's luggage system

In this story: Startup hassles Air freight first opportunity FedEx, UPS consider adding capacity A money-earner? RELATED STORIES, SITES

By Alex Frew McMillan
CNN.com senior writer

SEOUL, South Korea -- Last-minute work is underway in Incheon, South Korea, where officials are scheduled to inagurate the country's first 24-hour airport Thursday.

President Kim Dae-Jung is slated to open the $5.5 billion facility, which expects its first commercial flights on March 29.

Seoul's Incheon Airport was built in time for the 2002 soccer World Cup, taking over as one of the country's gateways for international flights from the existing Gimpo Airport.

While authorities expect much from their new airport, analysts believe the facility's biggest impact will be on trade. It remains to be seen whether Incheon takes off as a passenger hub.

"All the major airports that we've seen open around the world have been a disaster," said Peter Negline, regional airline analyst with J.P. Morgan in Hong Kong.

With international traffic set to transfer overnight from Gimpo, Negline and others say a lot can go wrong.

Startup hassles

Incheon is 32 miles (52 kilometers) from downtown Seoul, or equivalent to an hour and a half's drive in traffic.

That distance, as well as any repeat of the problems when airports opened in Hong Kong and Kuala Lumpur, may mean Incheon gets off to a slow start.

Critics expect the new facility to be hit with similar teething problems as Hong Kong's Chek Lap Kok airport and Kuala Lumpur International Airport in Sepang, Malaysia, both of which opened in 1998.

Baggage systems may not be ready. A recent test reportedly backfired. The ground transportation is unwieldy, critics say, with roads not ready to use. A rail line won't be ready until 2005.

Korean airport officials admitted Wednesday there were bound to be glitches. But they said Incheon's staff of 30,000 is ready to fix them.

The airport expects 27 million passengers to fly through Incheon each year. That's 10 million more than Gimpo's capacity. Gimpo had a curfew barring nighttime flights, from 11 p.m. to 6 a.m., unlike Incheon.

But infrastructure problems and the airport's proximity to Seoul may mean it takes a while for Incheon Airport to catch on with passengers.

"I'm sure it will be bright and shiny and new, and all those things Gimpo isn't," said Timothy Ross, head of regional transport research with UBS Warburg. "But if you're having to overnight somewhere and the choice is Seoul and Hong Kong, or even Taipei, it's a no-brainer."

Air freight first opportunity

But industry observers believe Incheon will be popular with shippers, because it offers a good alternative to Japan's overloaded airports in Tokyo and Osaka.

"The most profound impact Incheon will have at first is on freight," Ross said. "Cargo doesn't matter how many times it's offloaded."

The airport expects freight volume to grow 47 percent, to 2.5 million metric tons, from what was shipped through Gimpo. Aside from Japan, Incheon also hopes to steal business from Hong Kong and Shanghai.

Prospects are good for that business to catch on immediately.

"Seoul itself, or Korea, is very neatly positioned geographically to access the polar route from the U.S. and Europe," said Peter Harbison, managing director of the Centre for Asia Pacific Aviation.

Incheon can ship well to and from China, which is underserved by capacity at its airports, and even as far as Southeast Asia.

"It's very well placed to pick up all that traffic," Harbison said.

But Japan offers the biggest opportunity. Flights at Tokyo's Narita International Airport are at capacity -- "slot constrained," in industry terms. Osaka is the same at peak times.

That means shippers can't get in. It is also 50 percent to 60 percent cheaper to land and operate airplanes at Incheon, compared with Japan's airports.

FedEx, UPS consider adding capacity

Korean Air, the second-largest international cargo carrier after Lufthansa, will dominate flights out of Incheon. It will have 338 flights a week to the airport, a third of the total, from 48 airlines.

Incheon airport could also get an added boost from U.S. courier Federal Express, which is thinking about adding capacity in Korea.

FedEx, the world's largest air shipper thanks mainly to U.S. traffic, will have 13 flights a week to Incheon. Its operations there will be able to handle twice the capacity that it processed at the old Seoul airport.

"We'll certainly begin looking at our operations in the north Pacific," said David Cunningham, president of Federal Express Asia Pacific. He said other carriers would follow suit. "You have to look to places like Korea."

FedEx won't move its hub from Subic Bay in the Philippines. All its packages into and out of Asia head there first, but it could use Korea as a transfer station, adding extra capacity there instead of in Japan, Cunningham said.

The company is considering serving not just Korea but also nearby north Asian countries such as Japan out of Incheon because Korea has the geography, lower costs and the infrastructure, Cunningham said.

Another U.S. courier, United Parcel Service will also boost capacity by as much as 50 percent more capcacity at Incheon.

"That gives us a lot more room to expand in the future," said Steven Chang, director of industrial engineering for greater China.

He said a UPS team is looking to add to operations at Incheon, though UPS is not yet adding more flights. Being able to operate at night gives UPS the flexibility to route extra flights there, he said.

A money-earner?

The airport hopes to draw more business like that. According to Korean government estimates, the airport will pump $537 billion, or 696 trillion won, into the Korean economy through 2010.

That's an average of $30 billion a year since construction started in 1992. An international business complex is expected to open in phases, starting in 2003. It will ultimately include six office buildings, two hotels and a shopping mall.

From the initial 30,000 at the airport, the Korean government expects the knock-on effect to lead to 255,000 jobs in 2010.

But Asia's economic slowdown isn't likely to help Incheon get off the ground. South Korea's economy ended the year 2000 on a bad note and is likely already in recession.

The country's technology-heavy industrial base also means it is bearing the brunt of a slump in the U.S, so Incheon is likely to see a slow start.

With the exception of routes to Japan, its capacity is not necessary now, Harbison said. And now it's up to the airport, literally, to deliver.

"The big issue is how competitive it can be with other hubs," he said. "As long as the services are well-placed, it should work."

CNN Seoul Bureau Chief Sohn Jie-Ae contributed to this report.

Korea joins Japan in economic doldrums
Problems reported as South Korea races to open airport

Incheon International Airport
Centre for Asia Pacific Aviation

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