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Carriers searching for untapped traffic flows in Central Asia

By Hpanchal on March 1, 2012

Korean Air wasted no time pursuing Chinese production of electronics made for export to the country’s interior. In September, the airline mounted twice-weekly B747 freighter service to Chengdu, and plans are afoot to enter other up-and-coming production centers in central China, according to Brandon Yoon, assistant manager of the airline’s cargo strategy and alliance team.

At the same time, the carrier has been blazing a trail to the emerging markets in the interior of Asia, under the arc of the trade lanes between China and Europe. Expanding the network to rising new markets is part of KAL Cargo’s strategy of navigating through the turbulence that has hit its trunk routes to North America and Europe.
Its push into Central Asia is concentrating on Navoi airport in Uzbekistan. Like Almaty, Karagandy and Astana in neighboring Kazakhstan, the airport has been vying for freighter traffic stopping for fuel between northeastern Asia and Europe. Its fuel storage tank that was completed in 2010 can feed 27 747-400 freighters.

For most operators that was all they need. “All these points make good tech stops, but what are you going to load there? There is no demand for export capacity,” said Dirk Steiger, managing director of Frankfurt-based airfreight research and consulting firm Aviainform. Some carriers eschew a Central Asia transit altogether. Cathay Pacific prefers to route its European freighters over India and the Middle East to boost cargo loads and revenues.

KAL’s engagement at Navoi started off with transits for freighters serving Brussels and Milan, but management signaled early on that it was envisaging a regional hub operation at the airport. A key piece in these plans was the cargo terminal equipped with refrigerated storage area, a vault and quarantine stations that KAL parent Hanjin Group opened in 2010. Modeled on KAL’s cargo facilities at Seoul, it can handle 100,000 tonnes a year, which can be expanded to 500,000 tonnes.

Aside from the long-haul freighters that it slots through Navoi, KAL has inaugurated regional all-cargo service with A300-600 freighters. At this point, the A300s serve nine Asian points, including Delhi, Mumbai, Istanbul and Dubai. Yoon remarked that a number of other routes are under consideration, such as Moscow, Almaty, Shanghai and Guangzhou.

Stan Wraight, managing partner  of the Hong Kong-based consulting firm Strategic Aviation Solutions International, sees good potential for cargo growth in Central Asia. Above all, he pointed to the oil and gas sector and mining, adding that the governments in the region have shown a desire to diversify their economies, which should fuel investment and cargo flows.

The Uzbek government has established a free-trade zone at Navoi, bestowing a range of benefits on companies that set up export-oriented facilities there. For these efforts to turn Navoi into a regional hub to bear fruit, one additional step is necessary, though, commented Larry Coyne, chief executive of Coyne Airways. “Navoi as a hub only makes sense if airlines are allowed to fly in with open skies,” he said.

So far, the Uzbek authorities have shown little inclination to embrace such a policy. KAL has circumnavigated the issue by dry leasing its two A300 freighters to Uzbekistan Airways, which interlines traffic with the Korean partner at Navoi.

A second plank in the Korean hub plans for Navoi is a multimodal perspective. Rather than rely purely on airfreight, the Hanjin Group is developing surface routes to truck cargo within the region as well as to Russia, Belarus, Ukraine and Turkey.

On the air cargo side, the KAL-Uzbekistan Airways tandem faces competition; last November, recently launched Uzbekistan-based all-cargo carrier Silk Road Cargo Business took to the skies with an A300-600 freighter.

Another contender for airfreight in Central Asia is Silk Way Airlines. The carrier from Azerbaijan recently teamed up with World Airways to provide lift for outsize cargo. World Airways joins a string of carriers like Cargolux and Lufthansa Cargo that have been interlining freight with Silk Way. In addition to a clutch of IL-76 and AN-12 aircraft, Silk Way has been operating two 747-400Fs and three AN-12s. Last year, it underlined its ambitions in the longer-haul segment with the launch of flights to Hong Kong, which go east over its Baku home base to Istanbul and Milan.

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