EXTRANS GLOBAL - Air Freight News - Week 05 2024

Air Cargo General

1. Korean Air Partially Surrenders Japanese Slots for Merger with Asiana Airlines
   
   

   • Korean Air advances in the merger process with Asiana Airlines, receiving approval from Japanese competition authorities.
   • On the 31st, Korean Air submitted the merger approval to Japan's Fair Trade Commission (JFTC), the mandatory reporting country.
   • Since January 2021, Korean Air has engaged in pre-discussions and corrective measures with Japanese competition authorities, submitting a draft declaration in August of the same year.
   • Concerns arise about Korean Air's merger with Asiana limiting competition, as it involves the integration of its low-cost carrier (LCC) subsidiaries, Jin Air, Air Busan, and Air Seoul, to curb the formation of a 'mega carrier.'
   • Notably, in consideration of potential increased market share on Korea-Japan routes by the integrated LCC, corrective measures are required for routes with competition concerns.
   • Korean Air decides to partially transfer slots for 12 overlapping routes between Korea and Japan, including four Seoul routes (Seoul to Osaka, Sapporo, Nagoya, Fukuoka) and three Busan routes (Busan to Osaka, Sapporo, Fukuoka), if new entrants request operations on these routes.
   • Five routes without competition concerns are excluded from the slot transfer.
   • Domestic LCCs are expected to benefit from these corrective measures, as major Japanese carriers like Japan Airlines (JAL) and All Nippon Airways (ANA) already have sufficient demand and profitability on Korea-Japan routes.
   • Additionally, Korean Air signs a Bilateral Service Agreement (BSA) for cargo supply on certain Japan-Korea routes. BSAs allow airlines to allocate a portion of cargo space to other carriers in need. Japanese airlines can benefit from using some space on Korean Air and Asiana Airlines' passenger planes.
   • The European Union, known to complete its merger review in mid-February, demands the transfer of four European routes (Paris, Frankfurt, Rome, Barcelona) and the divestiture of Asiana Airlines' cargo business.
   • T'way Air is expected to be the recipient of the European routes, with its upcoming entry into Croatia in June, making it the only domestic LCC with European destinations. However, it may lease long-haul aircraft from Korean Air due to the current fleet limitations.
     
     
     

2. HMM Sale Negotiations: Main Stumbling Blocks

   • The announcement of the first-round results for the sale of Hyundai Merchant Marine (HMM), originally scheduled for the end of this month, has been postponed.
   • Industrial Bank of Korea and the Korea Maritime Promotion Corporation extend the first-round negotiation deadline from January 22 to February 6, providing a two-week extension.
   • Despite being an attractive asset as Korea's largest national shipping company, HMM faces challenges in negotiations due to economic downturns and uncertainties in the shipping market.
   • Concerns are widespread across industries, reflecting apprehensions about the core issues related to this sale.
     
     
     
     
     

3. Asiana Cargo Sale: Key Considerations
   
   

   • Amid reports indicating a likely approval of the merger between Korean Air and Asiana Airlines by European competition authorities, rumors persist about the potential sale of Asiana's cargo business.
   • While some speculate about specific LCCs as potential acquirers, official procedures have not commenced, and there is no confirmed intent, despite the submission of Request for Information (RFI) documents.
   • Mentioned potential acquirers for Asiana's cargo business include Air Incheon, Jeju Air, Air Premia, and Eastar Jet.
   • However, ongoing differences in opinions between sellers and buyers lead to repeated negotiations beneath the surface.
   • The infographic outlines key points regarding the differing perspectives between sellers and buyers on the acquisition of Asiana's cargo business.
     
     
     

4. Transition to Air Cargo amid Honghae Crisis
   
   

   • As the Honghae crisis appears prolonged, an increase in air freight rates from Vietnam to Europe is anticipated.
   • Over the past two weeks, the apparel industry, aiming to maintain global supply chains, has increasingly utilized air transport. Notably, the weekly air cargo volume from Vietnam to Europe has surged by 62% as of the 14th of the month, exceeding the peak recorded in October 2023.
   • This increase, 6% higher than the record in the same period last year, suggests a shift in demand patterns, possibly influenced by the Honghae crisis. Analysts interpret this as the first sign of a Modal Shift, especially given the substantial cargo volume during a typically quiet period in the air cargo market.
   • Additionally, a temporary surge in demand before the Chinese New Year is believed to have contributed to the recent market performance. However, it is still early to determine the actual impact of the Honghae crisis on the air cargo market.
     
     
     

5. Airline/GSA Event Update
   
   (1) Newly Established Cargo-Exclusive Airline Sirius Airlines Receives License
   Sirius Airlines submitted business plans to the Ministry of Land, Infrastructure and Transport, focusing on operating medium to long-haul cargo routes, particularly in the Americas and Europe. After reviewing financial capabilities and the suitability of the business plan, the ministry granted the license. Sirius Airlines aims to commence operations this year after receiving the Air Operator Certificate (AOC) and plans to sequentially introduce 10 cargo aircraft by 2027.
   
   (2) Korean Air Leases 4 B787-9 Aircraft to Air Premia to Alleviate Monopoly Concerns
   Facing challenges in the merger and acquisition process, Korean Air is perceived to lease four B787-9 aircraft to domestic airline Air Premia to secure approval from the U.S., a major hurdle in the merger. Unlike T'way Air, it is likely that Korean Air pilots will not be seconded to Air Premia. Air Premia, which only leases aircraft, has recently completed hiring additional pilots for the upcoming fleet.
   
   (3) Asiana Airlines (OZ) Reduces Frequency on ICN-SIN Route
   ICN-SIN 2DAILY -> DAILY, OZ751 1610/2130, SIN-ICN OZ752 2300/0620+1, operated by A350-900, effective March 31.
   
   (4) Air Incheon (KJ) Reduces Frequency on ICN-CGO Route
   ICN-CGO 4W (D2467) -> 2W, KJ251 (D2) 0120/0240, D4 0320/0440, effective February 1.
   
   (5) Air Japan (NQ) Introduces New Service on NRT-ICN Route from February 22
   Starting February 22, Air Japan will operate NRT-ICN five times a week. From February 1, Jetstar Airways (JQ) is set to operate three weekly flights on the Brisbane (BNE)-Incheon route.
   
   (6) Aeroflot (SU) Resumes Flights on Ho Chi Minh Route from January 31
   Commencing operations on January 31 with two weekly flights, Aeroflot plans to increase frequency to three weekly flights from February 16. The schedule is as follows: SGNSVO SU293 1110/1810, operated by A359, D146.

    

    

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