KOREAREVIEW F E A T U R E An eye on the market: Korea


FORECASTS predict this will be the year South Korean powerhouse Samsung final- ly supersedes Apple as the lead provider of digital mobile devices.


The electronics manufacturer will be releasing its latest Galaxy handset, the Galaxy S4 (right) in the summer months. So fierce is the Asian supremos compe- tition, that Apple has brought forward the release of its new iPhone 5s, less than a year after launching its previous model, to, by all accounts, disappointing sales. But while Samsung itself prospers, the country’s success as a manufacturing powerhouse may be waning.


Figures from January show that not only did it miss an expected 2.2 percent rise in industrial production, it actually dropped by 1.5 percent; the country’s first contrac- tion for five months.


AirAsia’s low-cost, high-speed success


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How this will affect Korea’s air cargo business is uncertain, but an impact of some sort is certain. However, IATA figures suggest Asian-Pa- cific carriers, which hauled nearly 40 percent of global air cargo, saw rising January volumes. IATA cites increased de- mand for South Korean goods as having a key impact on this result.


irAsia’s exploits in Korea are progress- ing at a pleasing pace, says its head of cargo, Sathis Manoharen. On average the low-cost carrier is seeing load fac- tors of 90 percent out of the country.


This represents close to a 30 percent increase on load factors out of its home hub in Kuala Lumpur. “On a blended basis we are at approxiamtely 77 to


80 percent total load factor,” says Manoharen. But, from the outset, operating in Korea wasn’t simple. At the point of market inception, the carrier came up against resistance from shippers sceptical of using a budget carrier. “Naturally, shippers were hesitant to engage in change and to the somewhat unconventional way of sending cargo we employ,” he says. He refers to the fast loading times the carrier has accomplished, managing an impressive 22 minutes compared with the more usual 45 to 60 minutes of other airlines. That speed has meant resistance didn’t last long, with the carrier proving over time that it averages 94 percent on-time delivery. “This has allowed us to prove ourselves as a reli- able and worthy alternative cargo capacity provider. We have given ourselves every chance in the market to be broadly engaged with shippers,” he continues. “On the upside, revenue generation is certainly


healthy, margins have been encouraging and our brand-value has been enhanced through big-name shippers using our services,” Manoharen adds. When it comes to operations in Korea, Manoha-


ren admires the country’s efficiency levels. However, that comes at a price: “If I had one


request, I would love to see Korea lower its handling costs. Rationally, a lower cost bucket will encour- age a more healthy volume of business as Korea


MANO- HAREN AirAsia’s 90 percent load factors


already has the key ingredients for success in place: operational efficiency, speed, transparency and manufacturing output, from the likes of Samsung and LG,” he says. Manoharen cites over-capacity as an issue in need of tackling, especially with the demand lagging behind this capacity supply. “This, among other micro-economic factors, is causing a downward pressure on yields. AirAsia is working on streamlining costs to, at the very least, maintain yields at a level we believe possible to achieve,” he says. This, alongside improving efficiency and building


a more broad-based branding programme, will be the primary concerns for the carrier over the course of the next 12 months. As to his beliefs on the future of the Korean mar-


ket, Manoharen believes it will continue to lead, just behind China, in terms of manufacturing output, and that having the infrastructure in place behind it, it will see economic growth as well as airfreight growth.


Korean Air: looking for growth in a stalled market


THE Korea Development Bank has fore- cast a slow recovery, at 2.1 percent, for the country’s air cargo industry. Korean Air’s team leader, cargo product marketing team, Byeok Jin Kim, agrees that this could impact the carrier: “Our profitability is expected to go up, as the won increases in value. However, with a weak Japanese yen, cargo demand is ex- pected to decrease as exports slow and industry relocates.” Korean Air Cargo has yet to pick up after last year’s poor result, although econom- ic growth and stabilisation in Europe, the US and China, are expected to help lift the carrier’s performance. “For us, slow global economic recovery,


excess capacity and high fuel prices are our biggest hinderances. In order to over- come this, we have controlled capacity by utilising [more of] our passenger opera- tion’s belly-hold capacity,” continues Kim. The carrier will spend the next 12 months, and beyond, focusing on the South American market. “We have been increasing our cargo frequency to Sao Paulo and Lima, up from once a week to twice-weekly since January,”says Kim. “We have also deployed our 777-300 fleet there.”


Aside from South America, Korean will also be looking towards developing the Central Asian market, alongside the Mid- dle East.


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ACW 18 MARCH 2013


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