Air Freight General
1) China's cross-border e-commerce import and export volume during January to September 2023 exceeded 312 trillion won.
- According to the Chinese Ministry of Commerce, the proportion of cross-border e-commerce in China's total merchandise trade import and export has increased from 1% in 2015 to 5% last year.
- From January to September of this year, China's cross-border e-commerce import and export volume reached 1.7 trillion yuan (approximately 312.8 trillion won), an increase of 14.4% compared to the same period last year, accounting for 5.5% of the total merchandise trade import and export during the same period.
- In terms of digital delivery, China ranks fifth in the world with a trade volume of 2.51 trillion yuan (approximately 461.84 trillion won), a 7.8% increase compared to the previous year.
- The cross-border e-commerce import and export volume in the previous year reached a record high of 2.11 trillion yuan (approximately 388.24 trillion won), an increase of 9.8% compared to the previous year.
- China's digital economy scale reached 50.2 trillion yuan (approximately 9,236.8 trillion won) in the previous year, a 10.3% increase compared to the previous year, accounting for 41.5% of China's Gross Domestic Product (GDP).
- Furthermore, China's data production reached 8.1 zettabytes (ZB), a 22.7% increase compared to the previous year, accounting for 10.5% of the world's total and ranking second globally.
- In addition, as of June of this year, China's internet user base consists of 1.079 billion people, with an internet penetration rate of 76.4%.
2) Asiana Airlines Board of Directors Approves "Sale of Cargo Business"
- On November 2nd, the board of directors of Asiana Airlines approved the separation and sale of Asiana's cargo business to Korean Air.
- This decision was made in agreement with the corrective measures proposed by Korean Air, which will be submitted to the European Commission (EC). The proposed measures include the separation and sale of Asiana's cargo business to alleviate concerns about monopolistic practices. This is considered a significant milestone in the merger process.
- Initially, it was anticipated that the board meeting on the 30th would reach a conclusive decision. However, during the meeting, the validity of voting rights for the directors involved became a contentious issue, leading to a deadlock without a resolution.
- The internal division between supporters and opponents of the sale within the board of directors persisted, prompting the decision to hold another extraordinary board meeting on November 2nd.
- The failed board meeting on the 30th also raised questions about whether the sale of the cargo business constitutes embezzlement. Some argued that selling the lucrative cargo business, which demonstrated strong performance with annual revenues exceeding 3 trillion won during the COVID-19 period, could potentially harm the company and undermine shareholder value.
- Despite a decrease in scale after the end of special cargo rates, the business recorded sales of 780 billion won in the first half of this year alone. On the other hand, it was argued that it is premature to discuss embezzlement when the sale price of the cargo business has not yet been determined.
- Some maintained the stance that the potential damage from the failure of the cargo business separation, leading to the collapse of the merger with Korean Air, would far outweigh the issue of embezzlement.
- Therefore, the board of directors, after a contentious 8-hour debate on the 30th, adjourned without reaching a conclusion on the "separation and sale of the cargo business," which is considered the most critical issue for the integration with Korean Air. However, on the 2nd, they reconvened and voted on the matter. Out of the five attending directors, one abstained and three out of the remaining four voted in favor, resulting in the approval of the proposal.
- Accordingly, Korean Air plans to submit a corrective action plan to the EC, which includes the separation and sale of Asiana's cargo business and the transfer of slots for passenger routes in Paris, Frankfurt, Rome, and Barcelona to T'way Air.
- Upon receiving Korean Air's proposed corrective action plan, the EC is expected to approve the merger of the two airlines, possibly as early as January next year.
3) The aviation and logistics industries in South Korea are fiercely competing to enter the Mongolian market.
- With the continued popularity of K-pop, beauty products, food and beverages, and music in Mongolia, along with the recent market growth, the Mongolian government has been working on improving aviation and logistics infrastructure.
- Logistics companies are actively collaborating with local businesses to quickly seize the market, while the aviation industry is expanding its routes to target the market.
- Hanjin, as its 10th country for logistics expansion in Asia, chose Mongolia and established a representative office in Ulaanbaatar on the 27th of last month. Hanjin already has subsidiaries in five Chinese corporations, as well as in Myanmar, Vietnam, Cambodia, Indonesia, and Uzbekistan, and operates smaller representative offices in Thailand, Singapore, and Japan.
- CJ Logistics also signed a memorandum of understanding (MOU) with Dong Young Shipping in the first half of this year to transport cargo from Korea, Japan, and Vietnam to Ulaanbaatar, Mongolia, by utilizing their logistics networks. The aim is to guarantee fast transportation and competitive freight rates.
- The expansion of businesses in the Mongolian market by logistics companies is due to Mongolia importing a majority of consumer goods and having a high preference for Korean brands and products, leading to an increasing trade volume. Mongolia's foreign trade volume reached a record high of approximately 28 trillion won, a 32% increase compared to the previous year. The trade volume between the two countries in the past year was approximately $470 million (around 630 billion won), a 13.4% increase compared to the previous year.
- On the other hand, the local infrastructure in Mongolia is still poor, which presents new business opportunities for domestic logistics companies.
- The aviation industry is also expanding its presence in the Mongolian market by adding new routes. Low-cost carriers (LCCs) such as T'way Air and Air Busan have introduced Mongolia routes departing from Incheon, as well as regional airports in Daegu and Busan, this year. In the past, Korean Air monopolized the Mongolian routes, but with the active exchange between the two countries, other competitors are now able to enter the market.
- As the route expansion progresses, the number of passengers has increased significantly. In the third quarter of this year, the number of passengers traveling between Korea and Mongolia reached 281,670, which is twice the number compared to the same period last year (156,473). The seat occupancy rates of each airline are also in the range of 80-90%, enabling stable route operations. With this trend, it is expected that airlines will actively expand into the logistics business as well.
- While the Mongolian routes used to be limited to students and business travelers in the past, nowadays, the number of passengers seeking travel experiences surpasses them. Therefore, each airline is actively exploring new businesses to cater to this growing demand.
4) Optimism for the year-end peak season in the global air cargo market - Attention on expected growth in the European market and beyond
- Despite the prevailing view that there will be no year-end peak season in the global air cargo market, there is a growing expectation of another peak period due to the continued increase in demand and freight rates.
- According to the 42nd week report (October 16-22) by WorldACD, there was a slight increase of about 1% in tonnage and freight rates compared to the previous week. This is expected due to the fact that the statistics for the first week of October showed a decline of 6% compared to the previous week but then rebounded by 4%.
- In particular, when comparing the performance of the two weeks, the combined performance of weeks 41 and 42 showed an approximately 1% increase in total tonnage and average freight rates compared to the previous two weeks (weeks 39 and 40).
- Although there are no clear signs of a significant increase in market demand for the fourth quarter, the recent market sentiment indicates a high probability of an upward trend.
- However, when examining the performance trends by region and route, the demand for cargo departing from Europe to the Middle East, Southeast Asia, Africa, and Central and South America showed a decline of around 7% to 8%. The demand for cargo departing from Asia Pacific to the Middle East and South Asia also showed a decrease, and the demand for cargo departing from the Middle East and South Asia to Europe also declined.
- The segment that showed the largest increase was the route from Europe and the Middle East/South Asia to Asia Pacific, with an increase of about 11%. The air cargo market within Asia also demonstrated a growth rate of 11%.
- In addition, there was a 7% increase in cargo departing from Africa and arriving in Europe, and a 5% increase in the route from Central and South America to Europe. Departures from the Asia-Pacific region to North America and Europe maintained a stable growth rate of 2%.
- Reflecting the global market sentiment, the demand for air cargo from Korea to the Americas and Europe is also showing an increase, particularly for specific items. Although the exact statistical figures are not provided, it is expected that the performance rebound of Korean carriers and major airlines in September and October will be evident.
5) Airline/GSA Event Update
(1) HONGKONG AIR CARGO, First European Route with 3 Flights per Week to Milan, Italy
Hong Kong Air Cargo landed in Milan, Italy on the 29th to meet the demand of the European e-commerce market.
There are plans to operate additional European hub cities such as Belgium (LGG) and the Netherlands (AMS) in the future.
HKGMXP 3W(D247) 0005/0915, A332F *Currently operating 5 A332 cargo aircraft.
(2) JIN AIR (LJ), New Route from Busan to Taipei
PUSTPE DAILY 1410/1545 B737, starting from December 5th.
With this new route, Jin Air will operate three routes to Taipei following Incheon and Daegu.
(3) CHINA SOUTHERN AIRLINES (CZ), Resumption of Incheon-Xian Route from November 23rd
ICNSZX CZ3090 1425/1710 DAILY, resuming operations after a 3-year hiatus since the COVID-19 pandemic.
(4) AIR CHINA (CA), Resumption of Munich Route from January 17th
PVGMUC 3W(D357) CA827 0130/0625, MUCPVG CA828 1220/0620+1 A350-900XWB
(5) BAMBOO AIRWAYS (QH), Sequential Suspension of International Routes to 8 Countries including Korea and Japan until the Lunar New Year in March next year
To ensure stable operation of major domestic routes in Vietnam, there are plans to temporarily suspend some international routes until March next year.
The Hanoi-Incheon route will be suspended starting from October 29th, followed by sequential suspensions of Hanoi-Bangkok/Narita/Taipei on November 8th.