Ad-hoc charters can more scheduled operations

The present air cargo industry is in a state of flux and airlines are not likely to increase their scheduled operations as ad-hoc charter operations can be arranged if a situation warrants. So, during the high peak season demand, spare aircraft capacity can also be arranged for charter operations to enable airlines to tap the surge in volumes. By Wong Joon San.

According to the International Air Transport Association (IATA), although world trade has been expanding at an annualised rate of 10 per cent, air freight markets have shrunken by six per cent compared to their post recession peak in May 2010. “In this connection, appointing General Sales Agents (GSAs) can help to shift the (higher) operating cost from airlines to their GSAs, unlike giant players like Cathay Pacific, Singapore Airlines, British Airlines, Lufthansa (to name a few), which have a strong global sales network for defraying their cost among their various offices,” says Niki Law, executive director of ASR Holdings, which provides GSA services under various brands to Asian airlines. “We are optimistic about the GSA business as airlines would like to exercise stringent cost control in order to remain profitable,” he says, adding that the appointment of a GSA would save a portion of an airline’s operating cost which could be used for other investments. Unless the airline’s revenue growth and its operating cost record a stable trend, an airline would prefer to utilise a GSA to increase its guaranteed amount of freight/ revenue, until such a time comes when the airline feels that it is justified to run its own office. New customers As more airlines turn to GSA services, ASR has added four new brands including Pacific Empire Cargo Ltd, which has represented EL AL Cargo as its GSA since 2009, and in the same year, Star Cargo (Taiwan) Ltd also represented Asia Asia X and Air Asia. Last year, Star Cargo (Japan) Ltd represented Air Asia X and Gulf Air, while Star Cargo (Korea) Ltd represented Asia Asia X. Asked about Pacific Empire’s GSA representations, Law says it has represented Air Asia since 2005, Air Asia X since 2007, Etihad Airways since 2010 for Hong Kong, Coyne Airways, Air Wafeer since 2010 and Air Indonesia since 2011. OA Cargo, another of ASR’s GSAs, has represented Jeju Air since 2003 and Air Moldova since 2006. As for new customers in 2010 and in 2011, Law says Gulf Air appointed the company as GSA for Hong Kong, Macau, China and Japan region last year, and Air Wafeer named it as GSA for Hong Kong, Macau and China in 2010. ASR was appointed as Air Mauritius’ GSA in 2010 for Hong Kong, Macau and China, and Air Asia Indonesia’s GSA for Hong Kong this year. ASR’s tonnage growth Asked about ASR’s tonnage, Law says ASR’s GSAs handled 10,000 tonnes of freight during January to May period in 2011 while only 7,800 tonnes of freight was handled same time last year, representing an overall increase of 28.2 per cent year-on-year. In 2010, ASR’s GSAs handled 20,400 tonnes of freight in 2010 compared to 12,500 tonnes in 2009, representing an overall 63.2 per cent increase year on year, he says. Asked about ASR’s GSAs growth forecast for this year, Law says: “Since we are handling more airlines in 2011, we envisage that we will handle 30,000 tonnes of freight in 2011, an estimated growth of 33 per cent compared to 2011.” “Besides, the demand within the Asian Region remains promising, augmenting to the growth of tonnage as well as revenue to the group,” he adds. Asked about the airline industry’s prospects this year and the next, Law says although economic factors determine freight demand over the two years, ASR envisages that the overall air freight demand will continue to remain strong. New airline impact “The impact of new airlines is severe, especially when the demand in the market does not increase simultaneously. Customers have more choices in the market and no airlines could dominate the capacity and tariff in the market,” Law says. As a result, the GSA is looking to represent more airlines in the market so as to strengthen its product mix to the market. As one of the main concerns of airlines was the rapidly rising fuel prices, Law says customers were fully aware of the upward trend of fuel prices and tended to accept the imposition of fuel surcharge increases. “However, if the political unrest in Middle East and/or Northern Africa escalates, the fuel price may further go up and airlines may need to further increase the fuel surcharge,” he says. HK’s third runway To maintain Hong Kong International Airport’s (HKIA) competitiveness as a major aviation hub, constructing the third runway at the HKIA is essential so as to increase the existing capacity and to be able to cater for new airlines, Law says. “The third runway will be able to accommodate additional airlines applying for operating schedule/charter service to Hong Kong.” Regarding Hong Kong’s third cargo terminal being built by Cathay Pacific Airways, it may cause the existing cargo terminal operators to reduce their terminal charges and to improve the service quality so as to retain their existing customers, he says. Law says new runways constructed at Pearl River Delta region airports were threatening Hong Kong as the major aviation hub to a certain extent. However, Hong Kong’s high quality of services and its sound transport logistics system makes the territory the preferred port for air freight, he says, adding that Hong Kong’s overall infrastructure was also another competitive advantage in the whole equation. Except for those major airports in China, i.e. Guangzhou, Shanghai and Beijing, the cargo infrastructure of the second tier airports are still very basic, Law says, adding that the policy of some provincial government has already started focusing on the development of cargo infrastructure.