While their respective planes touch down in these two far-flung parts of Vietnam and with different frequency, the representatives of Air France Cargo and Cathay Pacific Cargo share the same optimistic view of Vietnam’s air cargo market. It’s a view being coloured by the very promising growth in volumes ofelectronic products being exported.
For years, exports from Vietnam used to be mainly garments, textiles and footwear but since late last year, electronic and other high-tech products have started to take a larger proportion of space in the aircraft cargo hold.
During the last 20 years, Air France has always relied on the bellyhold of its wide-body passenger aircraft for hauling Vietnamese goods to Europe, but as Vietnam’s economy keeps on expanding and attracting ever greater foreign investments, it has decided to have a dedicated cargo link to Ho Chi Minh City.
European carriers moving in
"We started in November last year with one weekly flight with the 747- 400ERF which could carry up to 120 tonnes of goods," said Bernard Noye, general manager of Air France Cargo in Vietnam. The routing of this weekly flight is Paris-Dubai-Saigon and on the way back, Saigon-Bangkok-Paris. "The allotment for the Paris-Saigon leg is 50 per cent of the aircraft’s capacity," he said.
With its additional seven weekly passenger flights (four to Ho Chi Minh City and three to Hanoi) using a large aircraft 747-400 and A340-300, Air France is indeed the major player in the transport of cargo to and from Vietnam to Europe.
Lufthansa, on the other hand is operating three flights a week and only connecting Frankfurt to Ho Chi Minh City with stopover in Bangkok. Newly arriving European cariers include: CargoItalia (since May last year and re-launched in April 2008 after a temporary lapse) with three flights per week linking Milan with Ho Chi Minh City with stopovers in Dubai, Hong Kong and Abu Dhabi serviced by 747-200F and change to B747-400F in 2009; and CargoLux (since launching in October 2007 has conducted twice weekly flights to Ho Chi Minh City serviced by 747-400F).
Arriving for the first time in Noi Bai International Airport in Hanoi just last March is a Boeing 747-200F with the livery of Cathay Pacific Cargo, operating on a twice weekly basis linking Hong Kong with Hanoi, Dakar and return to Hong Kong.
A growing electronics sector
"We chose Hanoi because several foreign manufacturers of electronics products have their plants around there," explained Duong Ngoc Son, cargo manager of Cathay Pacific. "It’s not only the three plants from Canon but also plants from Foxcom and many others.
"Samsung Electronics will have a big plant with investment capital of US$670 million producing a wide range of under US$100 mobile phones for domestic consumption and export located in Bac Ninh Province, just 30km from Hanoi. They could be exporting each month about 200 tonnes of mobile phones. And it’s a short and very convenient trip from Noi Bai to Hong Kong and then from there to other destinations in China, Japan, Korea, the United States," Duong said.
There is another reason explaining Cathay Pacific Cargo coming to Noi Bai Airport with a twice weekly flight. While the 14 weekly flights Hong Kong-Ho Chi Minh City are conducted solely by Cathay Pacific, the 14 weekly flights linking Hong Kong with Hanoi are done through a 50/50 profit-sharing joint venture agreement reached with Vietnam Airlines years ago.
"We are using wide-body Boeing 777 and Airbus A330 with big cargo capacity for the Ho Chi Minh City route while Vietnam Airlines uses the single-aisle A320, A321 linking Hanoi with Hong Kong," said Duong, clarifying that about 60 per cent of goods hauled by his company are textiles for Europe, 30 per cent are electronics for Japan and the US and the remaining 10 per cent are other goods for all markets.
"Compared with three years ago, the volume of electronics is now higher and it will certainly take a more substantial part in just one or two years," he added.
Similarly the view of Air France Cargo’s Noye: "More electronics products to Europe is a clear sign that we have recorded since late last year. Textiles, garments and shoes used to be 95 per cent of the exports and 5 per cent were perishable goods, live animals and handicrafts," he said.
Over-capacity?
Noye and Duong don’t think that there is an over-capacity of cargo capacity even though the number of dedicated freight carriers servicing Vietnam has now surged to over a dozen, from world’s number one Korean Air Cargo to other big players such as Singapore Airlines Cargo, EVA Air Cargo, China Airlines Cargo, Shanghai Airlines Cargo, Asiana Airlines Cargo.
Indeed more capacity will be added. "By November 2008, Air France Cargo will have two flights a week connecting Paris with Saigon," announced Noye, looking to meet export demands of numerous industrial and consumer goods manufacturers which have set up plants in Ho Chi Minh City, Binh Duong and Dong Nai Provinces and the Mekong delta region.
Cargo terminal upgrading
It seems that the same thinking was on the minds of the ground-handling people in Ho Chi Minh City’s Tan Son Nhat International Airport. Having just broke ground in late March with the aim to be commissioned by the end of 2008, Tan Son Nhat Cargo Services and Forwarding Co. Ltd. has put in an initial investment of US$ 8.5 million for an express cargo clearance and services centre. In the first phase, this company, established as a joint venture with Vietnam Airlines and Aircraft Repair Company Number A41, will develop on a surface of over 10,000 sqm which includes two express cargo storage modules, offices for lease to express services agents and airlines and other facilities.
"Once we have achieved all the details in our first phase of development, the centre will be able to handle nearly 100,000 tonnes of cargo a year," said the joint venture director Vu Xuan Chinh. Then it will move on to develop other parts of the centre making it capable of maintaining and storing specific-use transport equipment for cargo carriers. "Th is centre will help improve Tan Son Nhat International Airport’s competitive edge," Vu added.
Th is is surely very encouraging news for Air France Cargo’s Bernard Noye who laments about the slow motion at the customs clearance in the existing Tan Son Nhat Cargo Services Centre, built more than a decade ago as a joint venture between Vietnam Airlines and Singapore Airlines.
"In fact you have to praise the people there who have been able to handle ever increasing volume of cargo with only 7 scanners with 100 per cent of import/export freight to be scanned," he said.
Shortage of skilled manpower
Experienced manpower in cargo handling in the logistics chain of supply is also what Vietnam is severely short of. Th is also explains why the International Air Transport Association (IATA) has recently tasking the Vietnam Freight Forwarders Association (VIFFAS) with the mission of opening a centre for logistics training. And more of the necessary training are in the pipeline since the Hong Kong Logistics Association has held talks for future cooperation with VIFFAS.
Already reaping the fruit are longestablished freight forwarders like Indotrans Logistics. "When we first opened for business in Ho Chi Minh City in 1999, the air cargo market was still relatively small. There were just over a dozen of foreign airlines flying in on a regular basis," said Ben Anh, Managing Director of Indo Trans Logistics’s Aviation Services.
"But everything has changed and we are now on the top tier of Vietnam’s cargo GSA market which has recorded a very substantial growth of 21 per cent in 2007."
Overall cargo volume handled stood at 118,000 tonnes, about 18,000 tonnes more than in 2006. And Tan Son Nhat International Airport (SGN), continued to lead with over 86,000 tonnes of cargo on the outbound market. ITL’s contribution is key to the success achieved, as it handled 14,000 tonnes in 2007, accounting for 10.6 per cent of Vietnam’s total market share.
"We are now the sole agent of eight airlines for both on-line and off -line cargo handling and hopefully, will be able to gain some more customers in the near future" Anh said.
His company is now handling 61 flights each week in both Tan Son Nhat and Hanoi’s Noi Bai international airports. Th is number could increase further since, according to Vietnam’s government forecast, the export volume handling in the logistics chain of supply is also what Vietnam is severely short of. Th is also explains why the International Air Transport Association (IATA) has recently tasking the Vietnam Freight Forwarders Association (VIFFAS) with the mission of opening a centre for logistics training. And more of the necessary training are in the pipeline since the Hong Kong Logistics Association has held talks for future cooperation with VIFFAS.
Already reaping the fruit are longestablished freight forwarders like Indotrans Logistics. "When we first opened for business in Ho Chi Minh City in 1999, the air cargo market was still relatively small. There were just over a dozen of foreign airlines flying in on a regular basis," said Ben Anh, Managing Director of Indo Trans Logistics’s Aviation Services.
"But everything has changed and we are now on the top tier of Vietnam’s cargo GSA market which has recorded a very substantial growth of 21 per cent in 2007."
Overall cargo volume handled stood at 118,000 tonnes, about 18,000 tonnes more than in 2006. And Tan Son Nhat International Airport (SGN), continued to lead with over 86,000 tonnes of cargo on the outbound market. ITL’s contribution is key to the success achieved, as it handled 14,000 tonnes in 2007, accounting for 10.6 per cent of Vietnam’s total market share.
"We are now the sole agent of eight airlines for both on-line and off -line cargo handling and hopefully, will be able to gain some more customers in the near future" Anh said.
His company is now handling 61 flights each week in both Tan Son Nhat and Hanoi’s Noi Bai international airports. Th is number could increase further since, according to Vietnam’s government forecast, the export volume will grow by 30 per cent this year over 2007.
The non-quota requirement for EU and the US for garments and footwear will continue to boost Vietnam’s exports. In this view, the airfreight export volumes from Ho Chi Minh City will increase 12-15 per cent, accounting for 60-65 per cent of Vietnam’s total throughput while that from Hanoi will increase 20-25 per cent.
Still some black clouds
Nevertheless, some black clouds still remain in the horizon. "In the low season, there is an over-capacity situation in Tan Son Nhat International Airport which leads to lower yield when compared with neighboring countries," Anh said.
On the contrary, during the high season, the poor infrastructure will continue to affect the economy and the export/import business. "Congestion in airports and seaports, poor road conditions will put a strong pressure on our logistics chains".
Nevertheless, Vietnam is now SouTheast Asia’s hottest destination. "We do have lots of freight in and out of Ho Chi Minh City," said Alan Joyce, CEO of the Australian low-cost carrier Jetstar. He was in this city in mid-April to officially announce the renaming of Vietnam’s, so far, only budget carrier from Pacific Airlines to Jetstar Pacific.
"With the backing of Qantas and the joining force of Jetstar, we will receive in August our first Airbus A320 enabling us to launch new domestic routes, increase frequency on existing services and re-exploit some overseas routes by the end of this year," said Luong Hoai Nam, CEO of the newly re-branded airline. Qantas has committed to take a 30 per cent share valued at US$ 50 million. By 2014, Jetstar Pacific’s fleet will comprise 30-A320s.