Operators focus on intra-regional flows
The 747-400 freighter fleet of Singapore Airlines (SIA), a key plank of the carrier’s longhaul network, is showing up increasingly at airports around Asia.
SIA’s shifting focus from longhaul to intra-Asian routes reflects the rise in volumes moving within the region. The carrier’s activity mirrors that of other airlines, which are increasingly investing in transshipment efforts.
In early April, Southeast Asia’s leading carrier added Penang, Malaysia, to its freighter network as a stop in a weekly 747-400F run from its home base to Hong Kong. This came just more than a week after the resumption of SIA freighter flights to Kolkata, India, which had been suspended in 2009. The weekly Kolkata freighter supplements the airline’s four weekly passenger services on the route.
SIA Cargo has recently established freighter links to Taipei, Taiwan; Bangkok and Osaka, Japan. Two flights a week operate on a Singapore-Bangkok-Tokyo route, and three others serve the Japanese capital over Taipei. In mid-May, a twice-weekly 747-400F service to Osaka began.
SIA’s freighter presence in Asia receieved a significant boost in June with the arrival of a 747-400BCF; a second plane will join the fleet in September.
“With the increase in our fleet size, we are planning more regional flights, such as the recent introduction of Osaka flights and increasing Shanghai flights,” according to a company spokesman. Taipei, Narita and Shanghai are possible destinations for the new freighters.
Another indication of the shift from longhaul flights is the decision of Air Hong Kong, the joint venture between DHL Express and Cathay Pacific, to take three 747-400BCFs from Cathay. These were then deployed on trunk routes in DHL’s regional network centered on Hong Kong, which has so far been served with A300-600 freighters. The first 747-400BCF went into action at the end of May on the Hong Kong-Singapore sector.
The pull of China is a major driver in this realignment, the SIA spokesman observes.
“The main export markets for Southeast Asia have so far been mainly the USA and Europe, with commodities like garments, shoes, electronics and hard-disk drives. However, with increasing trade between China and Southeast Asian countries — especially with Thailand, Vietnam, Cambodia and the Philippines — intra-Asia cargo movements are on the increase, especially with the migration of lower-end manufacturing from China to some of these countries,” he says. The spokesman adds that the base exports from Thailand are electronics and car parts to China and Japan, although perishable exports are on the rise. Exports coming from Thailand and Indonesia include seafood and fruit.
Like the airlines, forwarders are also stepping up their capabilities to serve intra-regional business. “Increased importance is being attached to the intra-Asia and transpacific trades,” declares a spokesperson for Kuehne + Nagel with regard to the company’s plans in the region for the next 18 months.
Dian Mulia Freightravel, one of Indonesia’s top-10 cargo agents, historically concentrated on longhaul traffic, with exports to Europe and North America dominated by garments, footwear and furniture. Electronics exports have boomed in the wake of the opening of factories in Indonesia for the likes of Panasonic and LG, Dian Mulia’s managing director, Franky Frans, says.
The company has recently concentrated on developing perishables traffic in response to a rising demand for Indonesian fruits and vegetables in markets like Thailand and Singapore. “This is high-yield cargo. It generates more revenue for us,” Frans says.
For all the emphasis on intra-Asian trade, Dian Mulia Freightravel has not turned its back on expanding overseas business. The forwarder is now in the early stage of developing traffic to South Africa and Latin America, Frans says.
Like SIA Cargo, MASkargo is also gearing up its freighter operations for more activities within the region. Its current lineup of six B747 freighters, which includes four leased 747-200Fs, will be changed to a mix of 747 and A330-200 all-cargo aircraft. Two A330Fs are scheduled for delivery in September, and MAS has two more of these aircraft on order. MASkargo management has indicated that the aircraft will be used chiefly on intra-Asian routes, especially to China.
Besides the fleet renewal, MASkargo intends to spend $327 million during the next three years on an upgrade of its cargo center in Kuala Lumpur, which will boost capacity by 40 percent to 1 million tonnes and introduce dynamic tracking.
Thai Airways, on the other hand, seems to be going for 747 freighters. It plans to convert two 747-400s into all-cargo configurations. The conversions should be completed next spring, which is when a block-space deal with lessor Southern Air for two B777 freighters is due to expire.
Thai’s belly capacity is poised to grow in the coming years. At the turn of the year, the airline’s board approved plans to acquire 12 A330, eight B777 and six A380 passenger planes.
Indonesian flag carrier Garuda is reportedly on the verge of placing an order for 25 narrowbody aircraft earmarked for an expansion of flights on Asian routes. The airline’s top management has indicated that it has no intention of boosting European flights beyond its current service to Amsterdam in the near future. For some time, Garuda has expressed interest in mounting freighter operations, but there has not been any movement on that side. Forwarders would welcome such a step, but there is no immediate need for additional capacity outside the peak season, Frans says.
Overall capacity in Southeast Asia has kept pace with demand, and finding lift is no serous problem, forwarders report. “By and large, capacity across the region is adequate, and carriers are maintaining the fine balance on pricing, especially with both volume and fuel uncertainties prevailing to some extent,” comments Madhav Thapar, senior vice president for airfreight, Africa and South Asia Pacific, at DHL Global Forwarding.
In terms of longhaul sectors, Vietnam has seen the strongest increase in freighter services in the region, the latest addition being two weekly flights to Hanoi by Air France-KLM, which commenced in June. In the first quarter, the Vietnamese capital saw new freighter operations by Qatar Airways and Jade Cargo. FedEx launched four weekly flights to Hanoi in November, boosting its footprint in Vietnam to 10 flights a week.
Moreover, the country has seen strong growth in recent years. Canon, HP, Sony, Nokia and LG have moved into Vietman, not to mention a $2 billion production facility for Intel. Plus, Nokia is planning to open a mobile phone factory in the Hanoi area next year.
At this point, however, the growth in capacity has created a buyers’ market. “Adding new capacity to the current Vietnam environment causes oversupply and consequently tremendous pressure on rates. From a forwarders’ perspective, retaining business under these conditions can be quite challenging, as customers do expect getting long-term commitments based on the ad-hoc rates available in the market right now,” says Christian Hein, vice president for airfreight, Asia-Pacific, at DB Schenker.
The moves by airlines in Southeast Asia to step up freighter activities within the region suggest that this sector is faring better than the longhaul arena, but these airlines are facing growing competition from another corner. The rise of regional trucking operations, which has been pushed aggressively by large, multinational logistics operators like Schenker, DGF and TNT, will offer some intense competition.
In February, CEVA Logistics launched an integrated trucking service from Singapore through Malaysia, Thailand and Vietnam to China. The company expects to carry about 72,000 tonnes on the service in the first 12 months. A year earlier, DGF introduced both bonded and non-bonded door-to-door trucking services between Singapore, Malaysia and Thailand.
Like CEVA, DB Schenker is offering cross-border trucking solutions all the way from Singapore to China. Complementary to pure airfreight solutions, the company recently implemented a new route from Kuala Lumpur to Bangkok. In addition, DB Schenker is offering trucking from southern China to Laos via Vietnam and has registered rising demand for road transportation between Thailand and southern China, Hein notes.
For the airlines, competition from the road has been exacerbated by the high price of kerosene and the corresponding fuel surcharges, says the SIA spokesman. The outlook for carriers has darkened in the wake of rising fuel prices and the calamity that struck Japan. After a $151 million operating profit in 2010, SIA Cargo is bracing itself for a challenging next few years, the spokesman says.
“SIA Cargo will remain nimble and disciplined in the deployment of its resources and continue to be vigilant on cost management,” he declares.
The airline’s home base is seeing some fresh investment at the moment. FedEx recently announced that it would establish a regional hub at Singapore Changi International Airport, which is scheduled for completion in the second half of next year. Covering 26,264 square meters, it will be the integrator’s second-largest operations facility in the Asia-Pacific region. The move makes FedEx the anchor tenant in the new Air Cargo Express Hub at the airport.
Changi, which clocked up an 11.7 percent rise in throughput last year to 1.66 million metric tonnes, underscored its role as the region’s leading gateway for pharmaceutical and life sciences traffic in December with the opening of Coolport, a 14,000-square-meter perishables facility designed to handle up to 250,000 tonnes per year. With multi-tiered temperature zones ranging from -28 degrees Celsius to 19 degrees Celsius, it is designed to handle a range of fresh produce as well as pharmaceutical and biomedical products.
Kuehne + Nagel also recently strengthened its footprint in this space with the opening of a temperature-controlled warehouse in Singapore that targets pharmaceutical and healthcare industries. DB Schenker recently opened a new warehouse in Indonesia and has two new facilities under construction in Malaysia, with plans for additional facilities across the Asia-Pacific region in the pipeline.