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Forwarders pursue pockets of growth in Southeast Asia

By Staff Reports on September 30, 2013

Singapore’s Changi Airport is trying to make freighters feel welcome. In March, Southeast Asia’s preeminent gateway extended financial incentives to freighter airlines that it had first unveiled the year before. These offer a 50 percent rebate on the landing fee for scheduled freighter flights, which will be changed to 30 percent in the first quarter of 2014. In addition, the airport has offered tenants in its Changi Airfreight Centre rebates of up to 20 percent off their rentals, based on freight tonnage handled on the premises.

Such rebates have usually been deployed by small airports trying to establish themselves as alternatives to crowded gateways, not by the large hubs themselves. Changi announced the fresh round of incentives after an 8.9 percent drop in throughput in February.

Tonnage has since improved somewhat. July saw a 1.1 percent rise in volume, bringing the airport’s total for the first seven months of the year to 1,056,002 tonnes, 1.3 percent more than in the same period in 2012. In terms of attracting freighters, though, Changi’s efforts have not borne significant fruit.

The national carrier itself has cut back its freighter activities. In June, Singapore Airlines Cargo took a second B747 cargo plane out of service in an effort to shore up yields. Management plans to keep the aircraft parked for a year, holding its freighter line-up at 11 747s for the time being. SIA’s cargo traffic was down 9.1 percent in July, while capacity had been cut back 6.7 percent.

As in most other parts of the world, yields have been under pressure by the familiar convergence of lackluster demand, overcapacity and high fuel costs. Also, there has been a considerable push by shippers to convert traffic to other modes, from ocean and sea-air to truck and rail, notes Thomas Lehmann, senior vice president, airfreight, South Asia region of Kuehne + Nagel.

This is not to say that there has been no growth. “Overall we have seen net growth, despite the slowdown elsewhere in the market. We have still been growing across all countries in the region, particularly strong in the Philippines, Vietnam and the smaller Indochinese countries,” reports Yasmin Aladad Khan, senior vice president, Southeast Asia at DHL Express.

She adds that DHL recorded growth both on the inbound and outbound side, and both with long-haul and intra-regional flows. The latter stand to receive a significant boost in 2015, when regional economic integration among countries in the Association of Southeast Asian Nations is supposed to kick in, she says.

Some markets have not shown much momentum overall, but instead displayed strength in specific segments, Lehmann says. He points to Singapore, where Kuehne + Nagel’s pharmaceutical logistics business has done well.

“Life sciences and pharmaceutical traffic has really been growing,” Khan says. She adds that other sectors showing growth include the automotive industry, aerospace and the garment sector, which has been well entrenched in the region. Mining, oil and gas have also shown strong momentum. To capture these engines of growth, DHL has set up “centers of excellence” in the region – health care in Singapore, oil and gas in Malaysia and Indonesia, mining in Indonesia and automotive in Thailand.

Geographically, the latest focal point for expansion is Myanmar. Lehmann reckons that some low-end production such as garment or footwear manufacturing will likely move there in the initial phase. Kuehne + Nagel established a full legal entity there this year.

Bee Logistics, a Vietnam-based forwarder, has also pushed into Myanmar, but initially airfreight will not be a priority. “We focus more on ocean now. There is high demand for that,” company president Henry Dinh Huu Thanh says.

He reckons that air cargo will take off in Myanmar in about two years. At this point, demand is low and the passenger airlines that serve this market fill about 20 percent of their capacity, he says.

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