Payload Asia | February - March 2022

THE TRADE MAGAZINE FOR THE ASIA-PACIFIC AND MIDDLE EAST REGION VOL 38, NO. 2 FEB/MAR 2022

CHINA AIRLINES

BETS BIG ON CARGO

MCI (P) 002/07/2016 ISSN 2010-4227

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Payload Asia

EDITOR’S NOTE

EDITORIAL/PUBLISHER

Raymond Wong Publishing Director raymond@harvest-info.com

Dear reader, This issue of Payload Asia takes a look at how the role of general sales service agents or GSSAs have evolved amidst the pandemic, supply chain disruptions, digital transformation and everything in between. Find out what ECS Group and a Hong Kong-based GSA are doing to succeed in cargo and turn to page 18 for the special feature.

In our C-Suite section, we got a chance to talk to Scan Global Logistics, together with its CEO for Asia Rickard Ingvarsson, as he outlined the forwarder’s plans in the region and talked about the company’s growing team and sense of culture.

We also reached out to China Airlines after an outstanding 2021 for its cargo business where it recorded over US$4 billion in revenue. Hear more about its new cargo-centric strategy by flipping over to our cover story on page 26.

To make the issue more interesting, we’ve compiled interviews with leading carriers Finnair and Saudia Cargo to know more about their plans in Asia Pacific. There’s also an exclusive with former Liege Airport commercial director Steven Verhasselt at a quarantine hotel.

Of course the magazine won’t be complete without the latest and insights from our newsmakers. Enjoy this bimonthly issue for February and March and we look forward to sharing more stories on air cargo and logistics in April and May.

Keen Whye Lee Publisher admi@harvest-info.com Giullian Navarra PLA Editor editor-pla@harvest-info.com

OPERATIONS

Mari Vergara Head of Operations mari@asiantvawards.com

MARKETING

Franco Rafael Marketing Manager mktg@harvest-info.com

SALES

Simon Lee Hong Kong, Europe and Middle East sales@harvest-info.com Chua Chew Huat Asia Pacific sales-sg@harvest-info.com Matt Weidner North America mtw@weidcom.com

Giullian Navarra Chief Editor

TECHNICAL SUPPORT Michael Magsalin tech@harvest-info.com

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CONTENT PAGE

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FEATURE: Finnair sees positive outlook for cargo heading towards summer

16

C-SUITE: Scan Global Logistics is having more fun at work and here’s wh

NEWS

14

INSIGHTS: FedEx Asia Pacific on digital-readiness, e-commerce and reimagining logistics

FEATURE

05 Qatar Airways makes record

12 Finnair sees positive outlook

22 Saudia to add more capacity

06 SITA takes over CHAMP

14 Dachser talks about charter

24 FedEx Asia Pacific on digital-

order for Boeing’s newest freighter Cargosystems

07 Polar Air Cargo extends WFS contract in Los Angeles

warehouse facility at Brisbane airport

09 Toll Group opens office in the Philippines

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for cargo heading towards summer capacity, Asia Pacific and what’s ahead

18 GSSAs share trade secrets to winning cargo contracts

08 Geodis to open new

CDB Aviation to deliver China’s first A330-300P2F this year

C-SUITE 16 Scan Global Logistics is having fun at work and here’s why

with electronic air waybills

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for e-commerce on ChinaSaudi lane

readiness, e-commerce and reimagining logistics

COVER STORY 26 Why China Airlines is

11 Lufthansa will only fly cargo

2

INSIGHTS

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‘prioritising cargo over passengers’ for now

WELCOME TO MIAMI

B O O K N O W A N D S AV E !

Early Bird until 30 November 2021

November 08–10, 2022 Miami, Florida, USA

A M E R I CAS

www.aircargoforum.org www.tl-americas.org

supply chain forum

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NEWS - CARRIERS Texel Air launches first 737-800BCF in the Middle East Bahrain-based private airline and MRO company Texel Air has launched the latest addition to its growing fleet with the arrival of its very first 737800 Boeing Converted Freighter.

This full freighter aircraft, the first of the type to be operated in the region, is set to add more capacity on Texel’s network as it looks to serve the growing e-commerce and express demand across its network in the Middle East, India, Turkey and East Africa.

The airline’s fleet now stands at four 737 freighters, including two flex combis. A second 737-800BCF is set to be inducted in May this year and delivered in September.

ANA moves cargo flights to Narita on new schedule ANA plans to maximize its revenue by operating freighters and passenger aircraft for cargo operations amidst strong and continued demand, as the airline shifts some of its US routes from Haneda to Narita. The company plans to use its fleet of 11 freighters to operate charter flights and additional flights apart from the regular schedule.

“ANA aims to accommodate demand for connections between AsiaNorth America while simultaneously maximizing the revenue per flight from both passenger and cargo operations,” the airline said in a statement.

From March 27 to October 29, the airline will use its 777F on the routes connecting Narita to Chicago, Los Angeles, Frankfurt and Shanghai, whilst the 767F aircraft will be deployed on the cargo flights to Hong Kong, Taipei, Seoul, Shanghai and Beijing and other Chinese cities, including Dalian, Qingdao, Xiamen and Guangzhou.

Starlux welcomes first widebody A330-900

Taiwan’s STARLUX Airlines has taken delivery of its first widebody A330-900 aircraft. This is the first of 26 Airbus widebody jets to join the airline’s fleet, comprising eight A330neo and another 18 A350s.

The airline has 17 A350s on direct order with Airbus, and the remaining A330neo aircraft and one A350 will be acquired on lease from aircraft lessor ALC. The new-generation widebody, which can accommodate up to 33 LD3 containers underfloor, joins an existing fleet of seven single-aisle A321neo at the airline. This will enhance its network on regional routes from Taiwan to the wider Asia Pacific.

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NEWS - CARRIERS Qatar Airways makes record order for Boeing’s newest freighter Boeing on 31 January confirmed the newest addition to its 777X aircraft family as it launched the 777-8 freighter with an order for up to 50 aircraft from launch customer Qatar Airways.

The Doha-based carrier, who will be the launch customer of the new jet, has expressed a firm order for 34 cargo jets and options for 16 more, an estimated US$20 billion dea and the largest freighter commitment in Boeing’s history by value As part of the agreement, Qatar Airways will convert 20 of its 60 777X family orders to the 777-8 freighter, which has maximum structural payload of 118 tonnes, allowing fewer stops on long-haul routes. Whilst the first delivery of the 777X freighter is expected in 5 years, the airline is also ordering two Boeing 777 freighters to meet the current demand.

Air India reunited with original owner Tata Group India’s national carrier, Air India, has been officially handed over to salt-to-steel conglomerate Tata Group, closing its initial purchase of the debt-ridden airline

which started in October 2021. with around $2.4 billion (1.7 billion euros) after the terms of the debt The Tatas, who founded the airline were made less onerous for the in 1932 before it was taken over buyer. by the government in 1953, settled Despite racking up losses, the airline has attracted buyers for several valuable assets it owns. These include prized slots at London’s Heathrow airport, a fleet of more than 130 planes and thousands of trained pilots and crew.

Tata Group will now control Air India’s domestic and international landing and parking slots, including 900 slots at airports overseas. The aviation ministry estimated the airline’s fixed assets in March last year at more than US$6 billion or 450 billion rupees. More than twothirds of its revenues come from its international operations.

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NEWS - AIRPORTS Shanghai airports hit record cargo volume in 2021

Shanghai’s airports are doing roaring Hongqiao (SHA), was up 8.47 percent business despite the COVID-19 from the previous year with China’s pandemic, as it set a record volume of main air cargo hub, Shanghai Pudong 4.36 million tonnes last year.

International Airport, accounting for Total air cargo volume from the two 93.7 percent of the total volume that Shanghai airports, Pudong (PVG) and passed through Shanghai last year.

The previous record of 4.23 million tonnes was set in 2017. The airport said 42 domestic and foreign airlines carried out passenger-to-cargo transport’ business at Pudong last year, with over 100 such flights on average departing from and landing at Pudong Airport daily.

SITA takes over CHAMP Cargosystems Air transport communications and IT service provider SITA or Société Internationale de Télécommunication Aéronautique is now the sole owner of CHAMP Cargosystems after it acquired the remaining 49 percent stake held by former partner Cargolux.

new partner, a close competitor to CHAMP. The deal was closed on 21 December but was not announced, and the group said CEO Chris McDermott will retain his post.

Observers added that the rift between Cargolux and CHAMP may have been ‘drawn up’ as early as Observers say the transaction comes 2019 right after the airline decided to as no surprise after Cargolux chose bring the non-air cargo applications IBS Software in December as its provided by the IT provider in house.

Hong Kong’s air cargo volume up 12.5% in 2021

19.8 percent to an all-time record of 82,935 flights with shipment on board.

Strong cargo volume reached a new monthly high in November, the airport noted, which carried into December Hong Kong airport’s latest figures despite flight reductions due to showed resilient cargo performance Omicron cases. over the last year as volume jumped 12.5 percent year on year to 5 million HKIA recorded 477,000 tonnes of tonnes. cargo in December, inching up 8.6 percent over the same period last This exceeded the 4.8m tonnes year, on the back transshipments up recorded in 2019 as the airport saw 18 percent and imports and exports the number of cargo flights increase which jumped 7 percent year on year.

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NEWS - CARGO HANDLING dnata to set up automated warehouse at Amsterdam cargo city

including two separate automated storage and retrieval systems for import and export with 12 stacker cranes, which can accommodate up to dnata will be investing over €200 2,500 pallets. million for a fully automated cargo centre at Amsterdam Airport Schiphol Separate storage for ULDs will be (AMS), which is scheduled to start serviced by four elevating transport vehicles, including automated guided operations in 2024. vehicles to enable ULD transport Describing it as one of the largest and within the terminal. Other automated most advanced facilities of its kind, features in the terminal include smart dnata said the 61,000-sqm facility, with gates, which can record the volume 19,000 sqm of warehouse space, will and weight of incoming consignments be equipped with unique technologies, by scanning them in 3D.

Polar Air Cargo extends WFS contract in Los Angeles Worldwide Flight Services (WFS) and Polar Air Cargo have expanded their partnership in North America with a new long-term contract at Los Angeles International Airport (LAX).

WFS expects to handle more than five million kilos of each month carried by Polar’s all-Boeing freighter fleet exLAX. This includes scheduled and adhoc freighter service from the US west coast city.

Polar Air Cargo, a joint venture of Atlas Air and DHL Express, has significantly grown its footprint at LAX after expanding with a second warehouse that covers more than 230,000 sqft. WFS, owned by private equity firm Cerberus Capital management, bought LA’s largest cargo handler Mercury Air Cargo in December in what some would describe as a ‘monopoly’ move.

Siemens Logistics agrees to sell postal unit for US$1.3b Siemens Logistics has agreed to sell its mail and parcels business to German technology group Koerber for 1.15 billion euros ($1.31 billion).

Insider report about the sale of its logistics unit’s postal business, which recorded annual revenue of half a billion euros, circulated earlier in November of last year. The remaining airport logistics unit of Siemens will remain, the company said. The deal with Koerber is expected to be completed this year. .

Körber says the parcel unit, given its strong presence in North America and foothold in the Chinese market, will complement its existing supply chain offerings and solutions, including automation, software, SAP consulting, voice, robotics, and material handling.

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NEWS - FREIGHT FORWARDERS Dachser extends charter service between HKG and LGG

Dachser is shoring up its charter programme on the Hong Kong–Liège route with a long-term contract to offer ‘reliable’ air capacity until March 2024. The forwarder will operate scheduled services using a dedicated Boeing 747-400F on the route, with payload of up to 100 metric tonnes each way.

The air and sea logistics unit is trying to avoid dispatch bottlenecks by operating at smaller airports like Liège (LGG) in Belgium, which is well connected to its overland transport network. In 2021 alone, the logistics provider handled 175 charter flights involving 12 regular dispatch locations and 15 destinations. This year Dachser will rely on its air freight network to offer capacity on key cargo routes between Europe, Asia and the US.

Geodis to open new warehouse facility at Brisbane airport French forwarding company Geodis is set to enhance its import and export services in Australia, including customs brokerage, as it plans to operate a new purpose-built facility at Brisbane Airport.

as well as catering, wholesaling, and storage facilities, located 14 km from the central business district, and 22 km from the Port of Brisbane. The new facility will serve both sea and air freight.

The planned 4,500-sqm warehouse facility is due to start operations in the second half of 2022. The warehouse will be strategically positioned at Brisbane Airport’s export park, a precinct for warehousing, freight handling, and distribution centres,

The new site will feature 4,000 pallet locations, 1,500 sqm of bulk space, and a cool room for perishable goods supply for marine and hospitality logistics customers, particularly cruise lines.

Kuehne+Nagel offers charter capacity on transpacific with B747-8F

Kuehne+Nagel has inked a long-term charter agreement with Atlas Air to operate the last two nose-loading Boeing 747-8Fs to be produced by Airbus.

The Swiss freight forwarder will charter the entire capacity of these widebody freighters starting the third and fourth quarter of this year. The aircraft will fly volatile trade lanes, such as transpacific routes, it noted.

Operating the world’s largest fleet of 747, Atlas Air ordered the last four production freighter versions of the Queen to capitalise on strong demand. It earlier inked a longterm lease deal with Alibaba logistics unit for the B747-8F to add more capacity from China to the Americas.

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NEWS - LOGISTICS Nippon Express facility gets GDP certified at Brussels airport Nippon Express Belgium obtained the good distribution practice (GDP) certification for its air and ground forwarding operations at Brussels Airport.

The new accreditation includes inventory control at the forwarders’s

facility in the airport’s cargo area, showcasing compliance with GDP standards for the proper distribution of pharma products.

The forwarder also signed a partnership agreement with pharma logistics specialist Medexi. It obtained GDP certification for its operations at a Medexi-owned temperaturecontrolled 2,000-sqm facility that can accommodate both refrigerated (2℃8℃) and constant-temperature (15℃25℃) storage.

Toll Group opens office in the Philippines Australian logistics giant Toll Group is expanding its footprint across Asia with a newly opened local office in the Philippines, as it forecasts high double-digit growth in the next five years.

Toll will focus on providing logistics services to key verticals in the industrial, retail, technology, and automotive sectors to tap opportunities beyond the archipelago, including regional manufacturing value chains.

Many freight forwarders in the Philippines operate through a partnerbased model and do not own a global or regional supply chain network, which creates challenges in visibility and quality control. From a business perspective, the Philippine office positions the Japan Post subsidiary for growth, as Southeast Asia transforms into a key node for global value and supply chains, particularly in e-commerce.

Lufthansa joins carrier MSC in bid for Italian airline Mediterranean Shipping Co. plans to own a controlling stake in new Italian flag carrier ITA Airways in an estimated US$1.4 billion deal that would include Lufthansa. The German airline would act as an industrial partner and possibly consider up to 40 percent equity involvement, but some analysts think it is unlikely to make an immediate investment.

ITA, the successor to defunct Alitalia, is attractive for the synergies it would bring in both the cargo and passenger business, MSC noted, citing the ability to fly passengers to cruise ships.

The container shipping, logistics and cruise line group, owned by the Italian Aponte family, had already offered to buy the African transport and logistics business of Bollore SA for 5.7 billion euros in December 2021.

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NEWS - LEASING Astral Aviation set to fly world’s first A320P2F Astral Aviation is set to be the launch operator of ST Engineering’s A320 passenger-to-freighter (P2F) programme after the latter signed an agreement to lease up to five Airbus A320 cargo conversions to UAE-based lessor group Vaayu.

The cargo airline, based in Nairobi, will sub-lease the first two of the five A320P2F aircraft, which are being converted by ST Engineering.

The first A320 converted freighter is expected to be placed on lease in the second quarter, becoming the first aircraft of the type to go into operation. Astral said this will be the first Airbus in its fleet of 14 freighters.

The airline is also considering future orders for the A321, A330-300 and A350 freighter variants.

US-based lessor ATSG extends partnership with DHL leases for five B767 freighters with CAM, and the crew, maintenance and insurance agreement (CMI) with ABX Air. The CMI agreement will include two more 767 freighters, ATSG noted, bringing the total operated aircraft under this agreement to 12.

Air Transport Services Group is extending its partnership with DHL Network Operations (USA) through its existing dry lease and CMI agreements withATSG subsidiaries

DHL in May 2021 agreed to lease four more 767 freighters from CAM with one delivered in 2021. The remaining Cargo Aircraft Management (CAM) three will be delivered in 2022, two and ABX Air. of which will be operated under the Part of the agreement include a six- CMI agreement. This will bring DHL’s year extension until April 2028 of dry total leased 767 jets from CAM to 15.

CDB Aviation to deliver China’s first A330-300P2F this year Irish aircraft lessor CDB Aviation is on pace to launch the very first A330-300P2F converted freighter in China this year. The company, a wholly owned Irish subsidiary of China Development Bank Financial Leasing (CDB Leasing), has secured lease commitments from Chinese carriers Sichuan Airlines and Jiangxi Cargo Airlines and has ordered 12

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more conversions of the A330-300 delivered in late 2022 and the middle with EFW. of 2023. Jiangxi Cargo Airlines, a startup cargo airline formed through Chengdu-based Sichuan Airlines, a joint venture between the provincial which has three A330-200F jets in government and Hongyuan Group, its fleet, has leased two of the A330- has leased one A330-300P2F to be 300 converted freighters, set to be delivered in early 2023.

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NEWS - SUSTAINABILITY Singapore Airlines to purchase blended SAF for pilot trials Singapore is starting a pilot on the use of sustainable aviation fuel as the Civil Aviation Authority of Singapore (CAAS), Singapore Airlines, and investment firm Temasek selected ExxonMobil as supplier.

Under the pilot, SIA will purchase blended SAF from ExxonMobil, comprising 1.25 million litres of neat SAF. The fuel, produced from used cooking oil and waste animal fats, will

be supplied by Neste, and blended with refined jet fuel at ExxonMobil’s facilities in Singapore.

This blended fuel will be delivered to Changi Airport by the end of July, and all Singapore Airlines and Scoot flights will use this fuel from the third quarter over a 1-year period.

The use of SAF over the 1-year pilot is expected to reduce about 2,500 tonnes of carbon dioxide emissions.

Boeing buys 2 million gallons of sustainable aviation fuel Boeing has ordered 2 million gallons (7.5 million liters) of blended SAF with EPIC Fuels to power its commercial operations in Washington state and South Carolina this year.

The agreement marks the largest SAF procurement announced by any airframer, Boeing said, citing the company’s commitment to decarbonizing aviation. The purchase will enable broader use of SAF for commercial production, as well test, ferry, Dreamlifter

transporter and customer flights at its facilities in the US. Boeing’s ecoDemonstrator in 2018 conducted the industry’s first commercial test flight with 100 percent SAF on a 777 freighter in partnership with FedEx. In 2019, the plane maker started offering the option to power commercial delivery flights with SAF to demonstrate commitment to reducing CO2 and further spur the use of cleaner fuel.

Lufthansa will only fly cargo with electronic air waybills for the use of electronic air waybills is in place. If local regulations in a country require the presentation of a paper AWB, Lufthansa Cargo will re-produce the AWB and it will accompany the shipment on the flight.

Lufthansa Cargo has taken a major step towards paperless shipments, as beginning the summer schedule on 27 March 2022, only an electronic air waybill or eAWB will be accepted

for shipments, feasible lanes.

particularly

on

Routes that are eAWB-feasible are those for which the regulatory basis

The airline is also introducing a ‘paper-to-eAWB’ service, through which the few remaining paperbased AWBs will be digitized at shipment acceptance and then continue to accompany the shipment as an eAWB. Lufthansa’s initiative is in line with IATA’s call to all air way bills electronic by the end of 2022.

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FEATURE

Finnair sees positive outlook for cargo heading towards summer Finnair specialises in connecting Asia and Europe via the short, fuel-efficient northern route.

We currently operate to around 70 destinations, and our longhaul passenger routes for the winter season are from Helsinki to Shanghai, Hong Kong, Seoul, Tokyo, Delhi, Bangkok, Phuket, New York, Chicago, Los Angeles and Miami; and from Stockholm Arlanda to Bangkok, Phuket, New York and Los Angeles. In summer 2022, we intend to serve nearly 100 destinations, Can you give us an overview of including 20 long-haul routes. For your network? What makes this the cargo side, the most important route between Europe and North new route launches are Dallas and Seattle.

Asia important?

Finnair specialises in passenger and cargo traffic between Asia and Europe, and last year the network airline’s cargo revenue was up by as much as 88.3 percent year on year. In December it had a record month in terms of cargo revenue.

Payload Asia talks to Fredrik Wildtgrube, Finnair’s cargo head, to see how business is doing amidst supply chain disruptions, digital transformation and everything in between.

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How has the pandemic changed the influence of cargo towards the airline’s overall direction in the near term and long haul?

Cargo’s role in Finnair revenue has increased considerably, as passenger traffic has been limited by travel restrictions.

When passenger flights were brought to a halt in spring 2020, we immediately ramped up cargo-only flights to serve our cargo customers’ needs.

On the cargo side, I have seen a lot of significant development, both internally and within the entire logistics and transportation industry, as people, partners and

FEATURE businesses have come together to support shippers and consignees in finding solutions in their logistics environment. This has manifested as great team performance, amazing value-chain cooperation and fantastic resilience from all parties. I hope to see such good collaboration continue in the future.

What have been the challenges in your operations during peak season, if any? How were you able to ensure that space and containers were available as needed?

The biggest challenges during the peak season relate to the same difficulties that have also been seen in passenger side operations, namely the difficulty to estimate how different restrictions change on a weekly basis. Additionally, resourcing has been challenging at times due to increased sick leave absences both in our own operations and with our partners in various destinations around the world. We have focused on tackling such challenges to ensure that we have the capacity available to fulfil our commitments and to deliver the promise we make to our customers.

After recently launching your own online booking system, what are your thoughts on digitisation?

Where else in the supply chain do we need more automation to move things faster?

Digitalization has in many circumstances been perceived as an efficiency enhancer, which it correctly is. Providing more accurate information between the parties within the transport chain, bringing accuracy and speed to operations planning and transmitting relevant

and current information to customers are all areas where digitalization and automation can contribute to an improved customer experience throughout the value and supply chain. Digitalization has not perhaps yet been discussed as a sustainability topic, and now I’m not referring to the removal of paperwork (i.e. physical AWBs and other documents) from the supply chain, even if that is important too. I’m turning my attention to collaboration between the parties across the value chain and the avoidance of supply chain disruption as well as unwise usage of resources. Unused inventory of supplies, in any regard, is a waste element that impacts the productivity of any company, the same goes for aircraft capacity when unused.

The requirements from different authorities are constantly getting stricter and the increased need for automized data sharing is getting higher.

different authorities are constantly getting stricter and the increased need for automized data sharing is getting higher. Our customers and our stakeholders need more transparent, visible and more detailed information of shipment data, and the only way to offer this is by going further with digitalization.

The IATA ONE Record initiative is a good example on how our industry is answering to the demand and Finnair has been at the forefront in E-mails and phone calls are pushing ONE Record development simply too slow and only provide forward. information point-to-point. Air cargo is an ultra-dynamic industry Where are you seeing the demand with changes occurring within for air freight charters or cargothe booking window, which puts only flights? stakeholders across the value Current travel restrictions in most chain in a challenging situation. Asian countries and challenges with Digital cooperation will allow more sea freight continuing, suggest a information to move faster to the continued demand for air cargo. right decision-makers, allowing Finnair Cargo is aiming to support better value creation and leaving with transport solutions so that less emphasis on guesswork and customers can meet the global forecasting. supply chain challenges, may the solutions be with scheduled Digital tools will enable improved passenger flights or cargo-only. communication capabilities and, rightly used, they create benefits for What’s the most outrageous thing the business and the environment you’ve transported over the last around us.

23 months?

I would not call it outrageous Thinking about cargo operations, but perhaps one traditionally digitalization is vital for the whole uncommon type of cargo we spotted industry. The requirements from recently was breakfast cereals.

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FEATURE

Dachser talks about charter capacity, Asia Pacific and what’s ahead cargo contribute to the company’s bottom line?

Dachser Asia Pacific air freight network is robust with a wide coverage under our own branches setup plus some reliable agencies’ support. On top of our preferred and strategic airline partnership, Dachser´s air freight network consisting of regular charter connections, keeps running stably and continuously out of HKG and PVG to Germany since the COVID-19 outbreak to cope with the dynamic Can you tell us more about and challenging market situation.

Dachser’s air freight network in Also, plenty of ad-hoc charters Asia Pacific? How much does air have been scheduled every month This year freight forwarders Dachser is relying on its air freight network to offer capacity on key cargo routes between Europe, Asia and the US, as travel curbs and safety measures continue to affect the flow of shipments across the globe. In this interview, Endy Chan, head of air freight air & sea logistics for Asia Pacific at Dachser shares his insights on current trends amidst the industry wide space capacity shortage.

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in APAC especially in China to provide solutions to our important customers with instant demand, from PPEs to Covid test kits.

What are the key trade routes for Dachser and which industries are you primarily serving in the region?

For Dachser in Asia Pacific, the key trade lanes are Far East Westbound and Far East Eastbound between Asia Pacific and the EMEA region, particularly between China/HK and Germany. The biggest industries we are serving are various covering automobiles, electronics, fashion, sports, manufacturing and e-commerce.

FEATURE In normal times, let’s say sans Covid, was there need for dedicated air cargo capacity at all times, or was it only during peaks? How has this changed to now?

In pre-COVID years, the majority demand for dedicated air cargo capacity (so called Dachser Air Charters) are mainly required in Q4 and/or before CNY during peak seasons. Now, the Dachser Air Charters program is expanded to a more long-term perspective with a stable weekly charter schedule out of HKG and PVG to Germany since COVID outbreak, in order to cater a reliable, cost-effective and large-lot of own controlled capacity on hand under overall capacity shortage market situation.

How has the lack of capacity and rising air freight rates affected the company’s strategy and business operations particularly in Asia Pacific?

The lack of capacity and rising air freight rates in general drive us to operate more Dachser Air Charters in Asia Pacific and worldwide, on

top of our core allocations with key carriers. It also boosts our interlocking—seamless connectivity between DACHSER Air and Sea Logistics and the DACHSER European Logistics overland transportation network—through the European import gateway setup at Frankfurt.

In this scenario, Dachser Asia Pacific air freight export cargo can be distributed efficiently and effectively via our own Frankfurt import gateway to enjoy the last mile European transportation and logistics network covering 37 countries in Europe. This kind of close integration definitely provides a high quality end-to-end solution and good experience to our end customers throughout the long supply chain.

End customers simply require a faster switch between ocean and air conversion than in the past, when facing the supply chain disruption commonly seen nowadays.

the similar capacity crunch under continuous COVID-19 impact, therefore they pursue the strategy of owning more assets, which means more space on hand for air or sea. In the end, the end customers simply require a faster switch between ocean and air conversion than in the past, when facing the supply chain disruption which is commonly seen What can you say about the recent nowadays. move of major shipping lines into air cargo? Do you expect this kind What else can we expect in 2022? of trend to continue?

What’s the next move for Dachser?

No doubt, this kind of vertical From my personal perspective, expansion by major shipping lines 2022 will still be a dynamic and into the air cargo industry will unpredictable year for most of continue in the near future. Both the time. It is highly dependent on ocean and air freight are facing the pandemic development and individual government quarantine/ travel policy worldwide to open/close the border. Dachser in Asia Pacific will keep on monitoring the market development cautiously and reacts swiftly to the right side, at the same time aligning the long-term strategy implementation like digitization, upgrading structure and continuous air product development led and supported by the top management.

Talking about 2022, speed, quality and resilience are always the key words for success.

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C-SUITE

Rickard Ingvarsson, CEO Asia, Scan Global Logistics

Scan Global Logistics is having way more fun at work and here’s why Here’s a must-read interview with Scan Global Logistics, together with its CEO for Asia Rickard Ingvarsson, as we learn more about the forwarder’s goal to uncomplicate the world of transport and logistics.

Can you give us a brief background of your air freight network in Asia Pacific? Which country is your biggest market and what are your major plans to expand in the region?

Scan Global Logistics (SGL) has a very strong and expansive presence across Asia Pacific, with its own offices in 11 countries in Asia and 3 countries in the Pacific region. Asia Pacific is in our company split in two, with Pacific currently consisting of Australia, New Zealand, and Japan, while the Asia region stretches from Greater China in the East to Bangladesh in the West and all the countries across Southeast Asia. Greater China (including Hong Kong and Taiwan) is by far the biggest market with 16 locations and counting! In fact, SGL is organically growing across all our markets, whilst we also continue to look for new locations to open in thru M&As or as green fields, some of which will happen during early/mid-2022, so stay tuned!

With lack of belly capacity in ex-China and the region, how does SGL manage to secure the capacity to transport urgent cargo? Is a multimodal approach

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the way to go when it comes to avoiding port and other disruptions (and reducing costs)?

We have a very powerful and innovative airfreight team with strong carrier relationships, allowing us to have indepth, creative, and fun discussions with our vendors.

Furthermore, I am a strong believer in empowerment, so each person is responsible and accountable for their own actions and decision making within its authorization. I find this culture drives the positive behaviors, such as speed in the decision-making process but also fairness in the discussions with suppliers and customers for that matter, which ultimately allows SGL to secure the needed support in a heartbeat!

Multimodal is for sure a necessary tool in finding new creative ways for our customers to overcome the constant disruptions we have seen since the outbreak of the pandemic, thus offsetting against shortages of capacity and constant price fluctuations. Sea-air, airsea, land-air etcetera are here to stay but you need to manage them well and set the right expectations.

Were there any instances when you had to work with a new partner (airline or lessor) to deliver much needed capacity? How important are connections in our industry?

C-SUITE Our industry is still a people’s business, and we consider our vendors ‘partners’, this mentality has fared us well as we ride the highs and lows alongside of our suppliers which demonstrates to them, we are in this together! Who you know is important but who knows you is essential!

Maintaining good relationships and approaching carriers with trust and respect at the forefront of the relationship will always mean you are pushing on an open door in the future when it comes to new opportunities. Like many others, we also have a pool of core carriers, but we are also not inflexible, we need to be true to our entrepreneurial DNA and find new partners and solutions to serve our customers. At SGL, we have successfully served various UN organizations for decades, just because of our out of box thinking and never say no to a challenge. For the last 2 years plus, we have distributed COVAX and PPE supplies to hundreds of countries, a lot to emerging markets with scarce or no solutions at first sight, and those challenges we like to take on!

SGL went on a buying spree last year and established quite a service for sea and air. Are there any plans for a major acquisition in Asia?

As suggested earlier, we are constantly looking for new customers, new verticals and markets to enter, fully embracing our pioneering spirit. Entrepreneurship is as said in our veins (DNA) and as one of four companies’ virtues (others are Respect, Integrity and Fun). We have a few white spots in Asia that we are intending to fill during 2022 and ahead, but the potential companies that we intend to buy or markets we plan to start in needs to match or add an ingredient to the SGL culture and DNA. We spend a great deal of time getting to know our future colleagues, understanding their values and respect of the culture—and if there’s a spark and a match, the whole integration process will go much smoother.

What can you say about the recent move of major shipping lines and forwarders into air cargo and lastmile? Do you expect this trend to continue?

It’s not the first time carriers buy forwarders and forwarders act as carriers, and these hybrid models can often lead to an uneasy feeling between partners.

It’s for sure an interesting and dynamic time we live in, and we simply must wait and see how successful this trend is, but there’s plenty of room for everyone in this market. We respect our suppliers and peers’ strategies

At the end of the day M&A in an asset-light industry like ours must focus on the people and culture as a priority.

and we have ours that works for us and like everything over the last couple of years, SGL must be adaptable to change and manage accordingly. At SGL, we live by the motto, to uncomplicate the world and by making the world a little less complicated for our customers.

Can you share more about what’s unique behind Scan Global’s company culture and DNA? How does the company help with the transition of absorbed staff (from the acquisitions) into this new culture?

What’s your advice to the next generation of freight and logistics professionals?

The culture & DNA of Scan Global Logistics is not something that happened overnight, it took us years to mold to stand before us today. Empowering people across our business, whilst adding a pinch of entrepreneurialism and a drop of fun has driven Scan Global Logistics to new heights and will continue to do so. The agile and nimble nature means that we can engage with customers and tailor solutions around their needs, rather than provide a ‘one size fits all’ approach. Some of our most successful products have been built around customers!

The fact that we have a very healthy due diligence process where culture is put at the top of the agenda in terms of a business match often means that when integrating new staff is a lot easier because what has already made their existing company a success means that they can continue to do what they do best in Scan Global Logistics! At the end of the day M&A in an asset light industry like ours must focus on the people and culture as a priority. Of course, after seven acquisitions last year, we have managed to build a bespoke and unique internal team that deals with all aspects of the process, including the on-boarding process of our new colleagues.

My advice for the next generation of freight forwarders would be to act like a sponge and absorb everything!

Every day is a learning day in our industry, and I continue to learn new things even though I’ve spent half of my career on this side of the aisle. I also think it’s imperative to understand different cultures and embrace diversity, as that makes your life much more interesting and fun!

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17

SPECIAL FEATURE

Leading GSSAs share their winning form to achieving cargo success “To each his own” an old saying goes, and this rings true for every business model across the myriad of airlines and aircraft operators across the globe. For GSSAs, the need to customize and be flexible with their clientele’s needs come along with the ever-changing rules and regulations that could have an impact on the flow of cargo and the continuity of supply chains. If you want to know the overview of the air cargo in a specific territory, you can ask a GSSA and they will tell you.

Constantly evolving Alvin Tam, commercial vice president for TAM Wing Kun Holdings (TAM) believes the role of GSAs will constantly evolve and become more critical given the ever-changing needs of the cargo industry. The Hong Kong-based group, established in 1977, has an established network of offices with key presence in China, Philippines, Malaysia, North America and Chile. Most recently, it partnered with Saudi Cargo to represent the airline in the mainland.

“Today, only filling capacity is not enough. Our role has expanded

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to contributing in various areas, including providing better service levels, optimizing the airlines’ network, market intelligence, efficient ground handling, seamless and related operations and, most importantly, reducing operating costs while focusing on sales and profitability to maximize ROI,” Tam added.

Rethinking its business model to address these issues, leading GSA, ECS Group, last year introduced an ‘augmented’ concept built on four pillars: commercial, new abilities, technology, and sustainability. Earlier in February the company launched a new set of à-la-carte products, accessible to all, with or without an existing GSA contract. Our abilities are a prime example of our ability to respond to these new paradigms,” Adrian Thominet, chief of ECS Group.

“They are ten unique products that have been specifically designed in-house to meet the needs of our customers, whether they are regular or occasional needs,” he noted.

Digitalisation and sustainability As keen observers of the aviation and transport industry, successful cargo agents are sharing the same vision with their partner airlines, particularly

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when it comes to digitalisation and sustainability. Thominet, chief of ECS Group, said awareness and adopting any new technology have been the biggest challenge amongst various stakeholders.

“With changing times, it becomes important for stakeholders to invest in adopting and upgrading technologies to make them smarter and efficient. There is also a growing interest in the ability to innovate, to think of new services and solutions to respond to paradigm shifts that are sometimes sudden but with a strong touch of sustainability concern.”

At Tam Holdings, the company is preparing for the future by constantly evaluating how it can better represent the interest of its partner airlines, particularly because expectations have changed.

Previously, an airline would seek a partner with local expertise, experience, professionalism and reliability, but given a more competitive landscape, Tam says airlines are looking for a partner who can fill the cargo capacity and provide end-to-end services, including customs, regulations, safety, security, quality, network,

SPECIAL FEATURE promotions, pricing and revenue management; in other words, all the principal activities of the airline.

“The ongoing global pandemic crisis has fastened the speed of the digitalization, technology and automation across all industries including aviation and logistic industries. Hence, the airlines will prefer a partner who can adapt quickly Hong Kong-based Tam Wing Kun staff recently welcomed Saudia at its headquarters to digitalization, technology and automation, as well as social media and digital marketing,” Tam added. “There is disruption in logistics in their network to the Asian market Asia in general. The strict measures through acquisitions and self-setin China and Hong Kong have a direct up. I consider this a positive trend as Asia Pacific This holds true for Asia Pacific, impact on operations and capacity… this competition would ensure that where e-commerce has accelerated But at the same time, congestion GSAs will need to constantly improve the need for more capacity and and delays are currently occurring and evolve which will benefit digital tools to optimize networks in central and southern China. We the industry,” Alvin Tam noted. and operations to ensure efficient can observe the multiplication of supply chains.“Agility in terms of blank sailing from the main Chinese The ‘e-commerce effect’ network and aircraft deployment ports on the flows to Europe and According to Thominet, what is clear will also play a key role.” Tam said. North America. This is currently is that the demand for air logistics will “Carriers need to optimize their fleet causing delays, ranging from 1 to 3 remain strong (just like in the maritime to ensure they have the right kind of weeks, associated with the lack of sector), supported by growing aircraft to cater to the kind of cargo equipment that persists. This leads demand in e-commerce. And ECS is and market they want to cater to.” to the conversion of sea freight to air responding with investments in tech freight, although capacity is limited. and digital transformation to create TAM Wing Kun is currently selling new multiple services and offerings. the freighter capacity of Saudia, “In India and Bangladesh, the space including five weekly passenger- and container crisis is continuing “More globally, logistics will be more freighters added to the schedule for sea freight, leading to a shift focused on e-commerce needs. from Q3 of last year to meet strong to air freight, so that demand is We must be ready to meet the e-commerce demand.

Given greatly exceeding available capacity. ever-increasing needs that follow the current environment of high This demand is reinforced by the this exponential growth: reduced demand and low supply, ECS Group’s disruption of handling solutions and complete transport time, last mile Thominet predicts a very strong the difficulty of accessing the Chinese delivery, in particular by being in direct explained Thominet. increase in yields in Asia Pacific. market,” contact with shippers,” he noted.

Toughening the competition ECS said it has made agreements with e-commerce players on certain routes, and in Asia Pacific the company is eyeing major exporter Vietnam in Southeast Asia and the Indian sub-continent for expansion.

Tam Wing Kun, who represents Chinese airlines and pure cargo carriers based in Turkey and the UK, considers the entry of overseas GSAs as a positive sign that will ultimately benefit the cargo sales industry.

Adrian Thominet, chairman and CEO of ECS Group based in France

“The GSA/GSSA market in Asia is already rather competitive given the increase in number in the region. We also witness a trend of global/overseas GSAs expanding

In TAM, the team is working on its digital presence and now represents (Saudi Post) in the Chinese market to cater to this growth. “Saudi Arabia is the key e-commerce hub in the Middle East and is now focused on infrastructure projects aiming at diversifying the economy beyond oil and positioning the kingdom as a global hub for investment and logistics projects,” Alvin said.

When asked what airlines consider if they want to be successful in cargo, Tam said: “airlines will also need to ensure a high service level.

On-time performance is as critical in cargo as on the passenger side.”

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EXCLUSIVE

Former commercial director exits Liege and now helps airports ramp up on cargo “You know 15 years is a long time,” mused Steven Verhasselt, who not too long ago led Liege Airport to record cargo volumes not seen until the pandemic. When we did the interview, the former commercial director of LGG was in isolation at a hotel in Hong Kong.

“We did great things in Liege and we are doing great things there. There was a lot in the pipeline, but business development wise, it will not be as good and spectacular anymore as it has been over the last 10 years because we did so much.”

Following the steps of his close predecessors who left the company over the last 2 years, Mr Verhasselt is

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now on his own mission to help other I have one in the Middle East, which airports carry out their own cargo I cannot disclose either and then I’m strategy. cooperating closely with airports of Thailand specially for the setup in Transforming air hubs Bangkok and Phuket.”

Naming a new consultancy venture after his two feline buddies, Frankie Aside from following the same ideas and Bennie, Steven set out to do and philosophy about cargo, Steven’s just about that. With cargo being the plan is to have these airports only revenue stream for most of the cooperate, maybe, in a network at airports, his idea is to help them do a second phase. But it doesn’t stop something long term for cargo that there. would also help benefit the air freight industry, and the plan is to have one Digitisation in every continent.

Venturing into uncharted territory like other renaissance men, Steven “I already have one in Pittsburgh in has also started an IT company the US. I already have one in Europe, last year called Wavelength— an IT one that I cannot disclose yet, but it’s company made up of an operations a big one, it’s in the top 10 in Europe. guy based in Belgium and IT guys

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EXCLUSIVE from Thailand, with headquarters in Singapore.

“I’m not an IT guy, but everybody is talking about digitization and automation and the need for it because in our industry there are still a lot of hours wasted on relatively simple issues that are simply done the way they’ve been done for the last 20 years. but there’s a lot of things to win by automating and coming up with new products The team is coming up with small things within the chain that can help the industry to digitize, and the first product, nearly ready to launch, is an automated weight and balanced program developed for the 747400 freighters. The next step is 767 freighters and triple seven freighters on the portfolio.

“It would help to increase payloads and to actually optimize the weight and balance in a digital way, which would lead to an optimal way. It would lead to two to 3% fuel savings,

which is very good for the finance of the company, but also sustainability wise as we are all looking into making our industry greener. If we can save on fuel burn, that’s a big difference.”

urgent, you’re not gonna wait for a boat either. I think island nations are an excellent launch market for drones,” Steven suggested.

Looking ahead Whilst most experts forecast healthy air cargo demand throughout the year, airport and airline operators do have quite a few to think about, including the increase in tax duties on e-commerce shipments. This issue somehow slipped through the attention because the demand is still huge, given the lack of capacity in any mode.

Drones, island nations With two big projects, Steven still has time to share his expertise on the advisory board of two highly innovative and forward-thinking companies that are elevating air cargo into new heights. The two socalled smaller projects, he would describe, are with Dronamics and Astral Aviation, two companies that are leading the way when it comes “This new tax has shifted a lot of to cargo drone operations. e-commerce that used to be from B to C directly, is now being shipped B “My advice to Dronamics is to to B in Europe and then to C. It means deploy them first in places where that you’re going to take more time road transportation is not available in Europe to clear it to store it.” or very hard. For example, the Philippines is an excellent market “Are you still going to send it by air? for it. You’re not going to fly with a Is it still really necessary? Or are you 737 freighter that can take 15 or 18 going to go for cheaper solutions tonnes if you only have 500 kilos to like rail? In my opinion, as a cargo transport. But if these 500 kilos are airport, only relying on air freight is a risk. That’s why at Liege we have started the transformation from cargo airport to multimodal logistics hub where trains from China are arriving at the airport as well.”

Steven Verhasselt has definitely left his imprint at Liege Airport and he will now oversee his own ventures: consultancy firm FB Cargo Strategies and air frieght-centric IT company Wavelength

“For the freight forwarders, the guys who control the flows, it’s very interesting to know that there is more than one option to reach a certain destination so that’s a shift that is happening. I’m sure the capacity issue will be solved and the issues at airports will be solved, but the tax shift and the potential modal shift that comes with it, that is something that is there to stay.”

Something air hubs need to consider and see how to manage it.

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21

INSIGHTS

Saudia Cargo to add more capacity for e-commerce on China-Saudi lane Can you give us a rundown of the China-Saudi trade lane? What goods has Saudia been moving by plane?

Airfreight between China and KSA is currently witnessing double-digit growth. The nature of products varies from Industrial Materials, With a mix of passenger and project cargo to consumer goods in freighter aircraft, flag carrier Saudia both B2B & B2C mode.

Cargo has been operating this route with increased focus carrying At Saudia Cargo, we offer a variety of industrial materials, project cargo products in our portfolio of services, and consumer goods for both B2B tailor-made for almost any type of cargo. From face masks and Covid and B2C clients. test kits, to commodities such as Vikram Vohra, Regional Director for e-commerce materials and general Asia Pacific at Saudia Cargo, walks cargo for industrial purposes, all us through the airline’s operations such products are carried on our on this route, as it looks to add freighters and passenger services more capacity on the back of strong connecting HKG and China to KSA and beyond. demand for air freight.

The boom in e-commerce has spread across regions, and in the Middle East, Saudi Arabia has emerged as a key hub for the movement of goods from China to the Arab region, with major infrastructure projects being developed to help facilitate trade.

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Lately, we are seeing high demand to KSA in the e-commerce segment, as well as global sporting and media/ cultural events, where we provide dedicated lift to support all of these verticals.

What are the new developments that are having a positive impact on your operations on this route?

Saudia Cargo has been agile and quick to react to the market requirements and customers’ needs.

In Hong Kong, for example, we

Clients are seeking an early end to uncertainty, so that long-term plans can once again be defined and executed.

INSIGHTS supplemented our freighter capacity with five additional pax-freighters per week from Q3, in order to meet growing client demand.

Likewise, in Shanghai and Guangzhou, we have successfully deployed additional freighters and pax-freighters (preighters) at short notice as we felt the need to augment our existing capacity to KSA and beyond. We also opened new stations in our APAC region in Q3, which have all stemmed from client demand.

These incremental operations have had a positive impact on our revenues as well as market share. But more importantly, they have allowed us to become a more dominant player in the global airfreight business.

Is there sufficient capacity to meet the demand for shipments between China and the US? What can you say about competition in the Middle East market?

from-home guidelines, and each employee remained connected using various technology platforms.

We also re-routed certain operating lanes away from high-risk countries with a view to place crew-safety as Competition in the Middle East our top priority. market has always been prevalent.

However, our focus remains on HK With lack of belly-hold capacity, and China to KSA where we have how long do you expect cargo in invested in upgrading our services cabin flights to continue? What in the air and on the ground, and is the airline doing to add much this gives us our leadership position needed capacity? in this prime lane. We will continue Cargo in cabin flights was an to expand this lane, with additional innovative way to substitute the frequencies being added from the belly-hold cancellations. Saudia Cargo also operated several such SU22 schedule. flights (we still do), but only in the How has the company dealt with staff lower deck. shortages in your cargo operations?

First and foremost, we are proud This mode has played its part in to state that our company has keeping airfreight running through strictly adhered to all regulatory the pandemic, but may not be compliances that were put in place economically sustainable for the long-term, once passenger services by various authorities globally. start to recommence globally. There Internally, we set up our own are also safety concerns on loading staggered work hours and work- all types of cargo in the cabin.

We have opted not to serve the China-US market directly, as operating this route via KSA does not give us, or other stakeholders, an optimum result.

Based on your conversations with customers, what stands out as a key improvement that they would like to see?

Our clients have expressed concerns on two major issues. First is the availability of long-term reliable capacity, so that space contracts are honored.

Vikram Vohra, Regional Director for Asia Pacific at Saudia Cargo

The second concern is related to rates—as there is high fluctuation at short notice, there is uncertainty from shippers on whether they will ship or cancel orders completely.

In summary, the clients are seeking an early end to uncertainty, so that long-term plans can once again be defined and executed.

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23

INSIGHTS

FedEx is investing in robotics and artificial intelligence to power supply chains, including this sorting robot at an e-commerce sorting center in Guangzhou

FedEx Asia Pacific on digital-readiness, e-commerce and reimagining logistics The rapid rise in e-commerce has led to higher customer demand for timeliness and flexibility in logistics services, creating new challenges and opportunities for the entire industry.

The speed with which a parcel can be picked up and delivered to doorsteps has become a ‘considering factor’ for integrators like FedEx to test and develop new advancements and technologies like sorting robots in warehouses and unmanned delivery vehicles in urban cities.

In this interview, Payload Asia talks to Kawal Preet, president and CEO for FedEx Asia Pacific, as she shares her insights on current industry trends, as well as the company’s newly launched digital products.

Having just delivered on a strong peak season, what are some of the expectations that FedEx has observed from clients and customers, particularly in e-commerce?

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We are proud of our 600,000 team members who worked tirelessly to deliver the best possible service worldwide this holiday season. In Asia Pacific, a region that accounts for more than 60% of online retail sales, demand for e-commerce is set to grow in 2022. Meanwhile, consumers’ expectations for speedy, convenient and personalized delivery experiences are rising. On average, consumers expect goods to be delivered within 2 to 3 days. Most consumers expect to know when exactly and how their items will be delivered before making any purchase decision.

We continue to strengthen our capabilities to support businesses. For example, we recently launched a new service option—FedEx International Priority® Express (IPE)—that offers customers who ship internationally the flexibility to schedule delivery by 10:30 am or noon to select destinations worldwide. With the addition of this new service, businesses across

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the region can now select the right delivery option that suits their needs with expanded choices giving them enhanced convenience and flexibility.

We also continue to strengthen our e-commerce capabilities by bringing more advanced solutions such as FedEx Delivery Manager International (FDMi) that allows e-tailers to provide added convenience to end customers with more visibility and customization options on delivery services. As we move into a new world of expanded e-commerce, we will continue to develop innovative solutions to meet the demand.

Why is there a heightened focus on SMEs particularly for logistics players? Is there big business from small businesses?

FedEx has long been a strong advocate for SMEs and supports the small and medium business community; we believe they are the growth engine of any economy. In

INSIGHTS Asia Pacific, SMEs comprise over 97% of enterprises across the region.

Throughout the pandemic, SMEs have been disproportionally affected by the coronavirus, being hit the hardest. But it’s encouraging to see resilience in SMEs and how agile they have been in shifting their business models, digitizing and pivoting to e-commerce to boost growth. In fact, nearly 70% of SMEs in the region are stepping up digital transformation.

With digital maturity, SMEs could contribute approximately US$3.1 trillion to the region’s GDP by 2024. At FedEx, we continue to tailor solutions that will empower SMBs to compete and win in the dynamic e-commerce marketplace. Our latest Compatible Solutions Provider program is designed to enable SMEs shifting to an online business model to gain instant access to enhanced and affordable shipping solutions, allowing them to sell effortlessly on e-commerce platforms.

we have made significant moves in expanding our Asia Pacific network.

Last August, we launched six new flights enhancing connectivity and service reliability to the US and Europe, adding nearly 2,700 tons in capacity each week. In 2022, we’ll continue to optimize our network to cater to customers’ increased demand for express delivery services when expanding overseas. Our recent strategic alliance with Delhivery, a leading logistics and supply chain services provider in India, highlights our commitment to constantly innovate our services in emerging markets, and better support customers in local markets such as India who are looking to expand their footprint in the global marketplace.

What are the new technologies that can help logistics players keep up with the e-commerce demand and when do you see these technologies being brought into the market?

I see two technologies powered by big For FedEx, is there still room to grow data analytics and machine learning in Asia Pacific? How important are that can boost the supply chain ‘digitallocal players when expanding into readiness’. new territories?

The Asia Pacific logistics market is the Robotics: Rising demand for on-demand world’s largest and represents US$3.9 services during the pandemic has trillion in business. The pandemic has triggered a wider adoption of service further accelerated the demand for robots. Robots have gone from obscure reliable logistics services while cargo and experimental tech to mainstream capacity remains strained due to stalwarts of the service industry. unending waves of restrictions and The global delivery robots market is lockdowns. Against this backdrop, expected to grow at a CAGR of 30.3% from 2021 to 2030. At FedEx, we’re always modernizing our operations to stay ahead of the curve. To drive sustainable and intelligent logistics, we started testing an unmanned delivery vehicle in China through collaboration with Neolix, a leading company in autonomous technology. This is just the starting point of reimagining the future of logistics.

Kawal Preet, president and CEO for Asia Pacific at FedEx

Artificial intelligence: Already being implemented in many parts of the supply chain, AI will show its full potential in digitizing supply chains in the future. As global supply chains are increasing in complexity, the

It’s encouraging to see resilience in SMEs and how agile they have been in shifting their business models, digitizing and pivoting to e-commerce to boost growth. margin for error is rapidly shrinking.

AI-powered supply chains can help businesses predict uncertainties while maximizing profitability.

Solutions like FedEx Surround will help companies drive breakthrough real-time inventory tracking and logistics management through data analytics, thereby achieving optimized operation. Through an “Intelligent” system, we can also monitor and flag issues or delays with shipments so we can resolve, minimize or prevent issues before they happen!

Have you seen other types of cargo that are not usually flown, now requiring air transport? What will be the trends that will drive air cargo growth in Asia Pacific?

As businesses seek to circumvent supply chain bottlenecks on sea freight, we continue to see strong demand for the movement of high-value goods via air cargo in our Express network. This trend is in line with the latest findings from the Association of Asia Pacific Airlines: freight capacity in Asia Pacific saw 20% YoY growth thanks to solid e-commerce orders for consumer goods and industrial components ahead of the holiday season. As the world navigates new COVID-19 variants, healthcare shipments will also be a key driver behind cargo growth. With nearly half of the world’s population still uninoculated, coupled with new demand for additional booster shots in many developed countries, we are ready to flex our network and leverage our time-definite delivery solutions, which will be so important in accommodating timecritical shipments, including critical medical supplies, in the year ahead.

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25

COVER STORY

Will China Airlines put cargo ahead of passengers for the long haul?

Due to sharp drop in passenger numbers and jump in cargo demand, China Airlines has switched over to ‘prioritize cargo over passengers.’ In 2020, the COVID-19 pandemic sent the global passenger market into a free fall. The Taiwanese carrier did not escape unscathed with a massive shift between its passenger and cargo businesses. Though passenger revenues plummeted by 78.7 percent, the global airline industry suffered total losses of more than US$100 billion in 2020. The airline relied on its moderate size, geographic environment and the world’s largest fleet of 747-400F freighters to help buck the trend.

from the passenger business. The air cargo team stepped into the breach and adopted a flexible “prioritize cargo over passengers” business strategy. The belly hold on passenger aircraft is being used to supplement the freighter network while resources such as passenger/freighter fleets, routes and networks are also being integrated. Multiple initiatives were adopted simultaneously to compete for cargo opportunities to help China Airlines through a very difficult year.

Cargo’s outstanding performance resulted in an 88% jump in revenue in 2020, and it became the main source of revenue for China Airlines from March 2020 onwards and now accounts for over 90% of total The Taiwanese carrier has focused all revenues. Cargo revenues in 2021 of its efforts on expanding its cargo amounted to TW$124.5 billion, an portfolio to compensate for losses increase of 52% year on year.

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All-in-one air support China Airlines operates the largest 747-400F freighter fleet in the world and a surge in air cargo demand during COVID-19 meant these freighters were kept busy. During the pandemic, the carrier started taking delivery of 777F freighters that were on order. Its whole freighter fleet of eighteen 747-400Fs and three 777Fs were fully utilized during the course of 2021.

Additional passenger aircraft for carrying cargo were introduced on long-haul routes such as San Francisco, Los Angeles, Amsterdam, and Frankfurt. To compete for increased business, the belly holds of passenger aircraft on cross-strait and regional routes in Asia were also made available for cargo services.

COVER STORY Passenger aircraft were dispatched as necessary to support cargo demand and boost the scale of the argo business. Strong global demand meant that passenger aircraft flew over 1,000 cargo-only services each month, on average. The US West Coast saw a particularly strong demand for cargo. China Airlines was operating up to six or seven flights to Los Angeles per day during the peak season.

West Coast (LA) route where demand was highest.

Competing for new business During the COVID-19 pandemic, China Airlines focused on strengthening Taiwan’s position as a transshipping hub and established itself in promising markets and made full use of air rights and freighter capacity.

During the course of 2021, the airline increased its scheduled services by “We began assigning passenger 23% and flew additional flights in aircraft to cargo missions from response to market demand, flying March 2020 onwards. Flights were up to 130 flights each week. considered worthwhile if revenues from the belly hold covered variable It also prioritized higher-value costs such as fuel, airport fees and American routes, such as Chicago and labor. The increase in cargo revenue Los Angeles, significantly boosting helped the company cope with the cargo revenues and strengthening liquidity pressures at the start of the capacity on cross-strait and Southeast pandemic,” the airline said.

Asia routes. “This not only allowed us In addition to the belly hold, China to handle Taiwan’s border inspection Airlines used the cabins to carry and quarantine requirements but cargo as needed. Taiwan’s CAA gave also to improve freighter capacity its approval for certain types of through optimized dispatching of goods to be carried in the cabin of crews,” the carrier noted. passenger aircraft, boosting their carrying capacity even more. The use China Airlines says it will continue to of cabins to carry cargo was mainly focus on the development of highutilized by China Airlines on the US value cargo such as e-commerce,

Flights were considered worthwhile if revenues from the belly hold covered variable costs such as fuel, airport fees and labor. precision machinery, and cold-chain products to boost profits. “The bidding system for hold space will also be promoted to increase unit revenues by prioritizing high-value sources such as urgent and project cargo. Medium- and long-term aircraft or hold charter opportunities will be actively sought out to maintain flight load-factors and revenues,” the airline added.

In addition to bidding for the vaccine transport market and to transporting vaccines purchased by Taiwan on a number of occasions, the airline generated new revenue sources by successfully carrying out vaccine transshipment missions to other countries in Asia and Oceania, with its

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COVER STORY is increasing and the shift from sea to air freight continues to pay dividends. Other factors such as an imbalance in supply and demand and low inventory levels are also having an effect. Strong demand for export hold space has kept cargo load factor high resulting in high shipping rates.

As a result, overall cargo revenue has continued to grow year on year.

Accumulated cargo revenues have exceeded TWD100 billion in 2021.

The pandemic is showing signs of easing in Southeast Asia and production in China is back on track.

Sea freight remains congested but is creating a strong demand for cold-chain logistics business growing and market movements against the several-fold. aircraft replacement schedule. The airline began taking delivery of six From auto parts, semiconductor 777F freighters in December 2020. chips to actual vehicles and high- Three have been delivered so far with precision wafer machinery, China two more slated for 2022 and one Airlines found revenue to ensure its more lined-up in 2023; delivery of the survival, generating cargo revenues four newly ordered 777F freighters in excess of TW$100 billion in 2021. will commence in 2023 and be completed in 2024.

“Shortages in sea cargo capacity meant that e-commerce, textile and For domestic or short-haul routes, other industries that traditionally China Airlines introduced two went by sea now relied upon air cargo A321neos at the end of last year, as well. COVID-19 spurred the rapid which will add further belly capacity. growth of the stay-at-home economy Equipped with cargo loading systems, and a jump in online shopping. the narrowbody aircraft’s bellyhold Fitness equipment, vacuum cleaners, can be configured for bulk cargo gaming consoles, boutique handbag as well depending on local airport brands, and even machines for requirements, adding 10% to 20% mining digital currency are just some more capacity in line with its current of the goods carried aboard cargo cargo-centric operations. The airline charters,” it noted. expects eight of the Airbus narrowbody jet to be delivered throughout 2022, Fleet programme which will see the retirement of three China Airlines is the fifth largest air 737-800s from its fleet. cargo carrier in the world. Its ongoing fleet acquisition program is expected Plans for future growth to boost operating performance by As the global economy continues to balancing network development recover, the demand for air freight

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FEBRUARY-MARCH 2022 |

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Port congestion is expected to continue throughout the first half of 2022 so air cargo rates should stay high. export hold space. There continues to be high demand for the transport of high-tech goods, auto parts, semiconductors and e-commerce goods. Intense competition for hold space to Europe and the Americas has spurred higher prices on American and Chinese routes.

“The European, American and Australian markets are now entering their traditional peak season. Western countries are also beginning to relax their border restrictions. Demand is therefore expected to remain strong and sea freight will continue to be diverted to air cargo. Port congestion is expected to continue throughout the first half of 2022 so air cargo rates should stay high,” China Airlines said.

COUNTRY REPORT

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