Facing the challenge The Asian logistics market has not been immune to the effects of the global economic slowdown.


Every player in this emerging market – large and small – has had to take steps to maximise efficiency and capitalise on opportunities in the face of challenging conditions


A


ccording to Byeok Jin Kim, general manager, cargo product marketing team at flag-carrier Korean Air: “Recently, the overall air cargo industry has faced dif- ficulties, (especially) due to increasing fuel prices and excess supply (of capacity) with the introduction of


medium and large freighters of Chinese carriers from Asia.” The airline’s second-quarter financial results included an 11.1


percent year-on-year improvement in consolidated operating income and a return to operating profit. But additional costs meant a loss was suffered in its net income. Cargo nevertheless accounted for just over a quarter of the carrier’s operating rev- enue. Kim highlighted: “It is a difficult time for Korean Air Cargo


in comparison to the previous year. Overall, in the second quar- ter of 2012, Korean Air Cargo experienced a 12 percent decrease in freighter capacity and traffic compared to last year. Also, cargo traffic from Korea showed a 9 percent decrease in comparison to last year.” Long-haul routes to the US and Europe account for a high


proportion of Korean Air Cargo’s revenue and, in the case of long-haul routes, the fluctuation of fuel prices has a big effect on profitability, he observed. “American routes exhibited the biggest decline, followed by


European routes, in terms of cargo revenue in the second quarter of the year,” Kim lamented. “Overall cargo demand decreased on various routes, but demand especially from America, Europe and South-east Asia decreased in a higher proportion,” he observed. “The financial crisis in Europe, China’s economic slowdown


since last year, lack of global IT demand and increased numbers of production plants overseas manufacturing important Korean export commodities such as cellular phones, led to declining air cargo traffic compared to last year,” Kim pointed out. What is more, he is not forecasting any imminent recovery.


“Korean Air Cargo is expecting to carry slightly less freight this month (September) compared to the previous year.” The carrier nevertheless continues to invest in its cargo offer-


ing. “This year, we launched four fuel-efficient, as well as environmentally-friendly, freighters – B747-8F and B777F air- craft – to optimise fleet management from the point of view of efficiency and productivity,” he stated. “The new freighters are now operating on various routes,


depending on the scale of demand. For example, B747-8Fs are operating in big markets such as Los Angeles and San Francisco to maximise revenue, while B777Fs are Europe-bound, where carbon emission is the main environmental issue.” Further changes in network are to be made. Following the


launch of B777-200 passenger service to São Paulo in Brazil three times a week in 2008, Korean Air Cargo began operating week- ly scheduled charter B747 freighter services to São Paulo as well


as Lima in Peru in April this year. With this strengthened net- work, “Korean Air is seeking to develop the burgeoning South American market,” Kim noted. “In June, Korean Air introduced A330-200 passenger aircraft


to Nairobi. Korean Air was the first Asian air carrier to launch non-stop flights from Incheon, Korea, to Nairobi, Kenya, a gate- way to East Africa. This new route has cut flying time between these destinations from 25 hours to just 13 hours. From this new service, Korean Air is hoping to facilitate new business opportu- nities in Africa,” he outlined. Lastly in terms of network and equipment changes, Korean


Air has increased cargo capacity to Russia, switching to ‘freight- friendly’ B777-200 aircraft instead of B737-900ER (Extended Range) aircraft on the Incheon to Vladivostok routeing. The equipment switch having taken place on 1 September, cargo


capacity from Seoul to the Russian city has increased to 10 tons per flight, 70 tons weekly. In other measures to be introduced to cope with the declining


demand, Korean Air is planning various new sales strategies. For example, it is strengthening sales efforts in emerging markets such as South America and Africa. The carrier is striving not only to meet increased demand for air freight capacity bound for those markets, but also for the rising demand for space on the return legs to Korea. Furthermore, Korean Air is developing dedicated services


designed specifically for higher valued products, shipments of which are becoming more common. The airline is “upgrading its service by communicating with customers to bring suitable ser- vice that customers are looking for in the air market,” Kim explained.


Changi suffers small decline


Singapore Changi Interna- tional airport handled 146,400 tonnes of cargo in August, throughput falling by 4.4 percent compared to the same month of 2011. This was despite Singa-


pore Airlines Cargo starting up a new weekly freighter service to São Paulo Viraco- pos on 16 August,


1 October 2012


Singapore’s first connection to Latin America. The January - August fig-


ure of 1.2 million tonnes was down by 1.9 percent year- on-year. As of 1 September, Chan-


gi was handling more than 100 carriers, offering connec- tions to over 230 cities around the world.


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