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EXTRANS GLOBAL - Air Freight News - Week 14 2024

항공화물 General  

1)  T'way Air, Attention to Non-Execution of Call Options   


  • T'way Air, a low-cost carrier (LCC) that is preparing to enter the European market, is expected to solidify its owner-centric management system with the appointment of Vice Chairman Na Sung-hoon as an internal director. Vice Chairman Na, who played a crucial role in the acquisition of T'way Air and the rescue operation during thedifficult times of the COVID-19 pandemic, is expected to actively participate in the future board meetings and lead the company's innovative growth.

  •  At the regular shareholders' meeting held on the 29th, T'way Air appointed Vice Chairman Na Sung-hoon as an internal director. Vice Chairman Na is the son of Chairman Na Choon-ho of the Yelimdang Group. T'way Air is owned by T'way Holdings, which is dominated by the Yelimdang Group.

  •  The fact that Vice Chairman Na, who was previously only active as an unregistered executive at T'way Air, has now joined the board seems to be related to the transfer of European routes due to the merger of Korean Air and Asiana Airlines.

  • T'way Air will take over four European routes (Paris, Rome, Barcelona, Frankfurt) from Korean Air and Asiana Airlines. If T'way Air's European route operation takes off, it is expected to see an increase in annual sales of 300 to 400 billion won. From T'way Air's perspective, this is a great opportunity to surpass its competitors and make a significant leap forward.

  • In order to operate these routes, T'way Air plans to lease aircraft from Korean Air for the time being and dispatch flight attendants.

  • While T'way Air plans to start operating European routes sequentially as early as June, there are still challenges to be addressed, such as securing competitiveness in long-haul services, increasing staff size for future independent operations, and securing aircraft.

  • Vice Chairman Na's involvement in the overall management can be interpreted as a strategic move by T'way Air to make another leap forward in its current situation. It is clear that Vice Chairman Na's entry into the board is significant, as he brings his unique leadership skills to spearhead the transfer of European routes.

  • It is expected that under his guidance, T'way Air will successfully carry out this operation.


2)  Delhi and Mumbai airports face serious cargo backlog due to surge in export volume in March


  • According to recent reports from local airports and forwarders in India, the cargo volume has been increasing to the point where it is becoming challenging to cope with the surge in demand.

  • As a result, major international airports in India are experiencing significant cargo congestion, which is expected to continue until April, following the peak season in March.

  •  In particular, export air cargo from Delhi and Mumbai, the key cargo hubs in India, is facing difficulties in handling the overwhelming volume. Some experts argue that this cannot be solely attributed to the traditional peak season of the Indian air cargo market in March and April.

  •  Local authorities point out that recently, Indian export air cargo has shown robust growth, with a 21% increase compared to the same period of the previous year, based on the 11-month data of the fiscal year 2023/24.

  • They specifically highlight a significant increase of over 43% in the volume of ready-made garments (RMG), a popular product category departing from Delhi airport, suggesting that market demand is concentrated in this segment.

  •  As a result, the increase in demand has led to a continuous rise in freight rates, particularly for air cargo bound for Europe and the United States. Industry insiders anticipate that these rates will continue to rise.

  • However, some believe that the sudden surge in Indian export air cargo is due to a significant increase in land transportation of RMG from Bangladesh for transshipment purposes.

  •  One source mentions that 20 to 30 trucks from Bangladesh gather in Delhi every day, primarily carrying RMG. Despite the pressure on the garment export industry, the Indian government has not restricted logistics movements across borders, which is why this increase in land transportation is happening.


3)  Indo-Europe air cargo volume has surged since the beginning of this year


  • Since the beginning of this year, the demand for air cargo from India to Europe, especially in the textile and garment exports sector, has been exceptionally high. This can be attributed to the disruption in Asia-Europe container shipping caused by ship attacks in the Red Sea region.
  • According to data from the fourth week of February, the demand for air cargo from India to Europe was 40% higher than the weekly average of the same period in 2019.
  • In the third week of March, the demand for air cargo from India to Europe remained at a level 24% higher than the weekly average of the same period in 2019.
  • Despite relatively stable cargo supply, the load factor for air cargo from India to Europe reached 87% in the third week of March, showing an increase from the previous week and reaching the highest level since April 2022.
  • Currently, the market for air cargo from India to Europe is in favor of the sellers. The average spot rate for the third week of March (17th to 24th) was $50 per kilogram, which is 158% higher than the early December rate before the Red Sea risk occurred last year.
  • In February, India's manufacturing growth reached its highest level in five months. Particularly with regards to new export orders, HSBC Bank stated that this would create additional pressure on the air cargo market, driving demand growth in Europe.
  • Aviation consulting firms have mentioned that the next 2 to 3 years are crucial for India to achieve the desired high-quality growth. They emphasize that consumer growth will impact the Indian economy, and the increase in air passenger traffic will drive the demand for cargo and foreign investment.
  • It is expected that the demand for freight and foreign investment will also increase accordingly.


4)  Asiana Cargo Preliminary Bidding, Reason for Sluggish Success


  • The preparatory bidding for Asiana Airlines' cargo business that will be held at the end of April has not attracted much attention in the market. Preparatory bidding is the preliminary work carried out to select priority negotiation objects. Whether on the surface or covertly, fierce bidding competition should be launched. However, the current market sentiment has not warmed up significantly. Asiana Cargo is the second largest air cargo company in the country, with multiple routes. Moreover, it is the first time in the history of the domestic air cargo industry that a company of such a large scale has appeared in the merger and acquisition market. Despite this, experts are down on the popularity of the preliminary tender. Experts pointed out that low-cost airlines (LCCs) participating in the preparatory tender have responded mildly, and large enterprises and external investment have not actively participated, raising questions about continued investment in the future to strive for market competitiveness. Asiana Cargo has 21 routes, covering 12 countries, 25 cities, and 11 cargo aircraft. It is a large air cargo company. Its revenue in 2023 is 1.6071 trillion won. Although turnover is down compared to last year, it remains competitive domestically and internationally and is currently the most profitable route to the Americas in the air cargo market, which is why it is attractive.

  •  Especially for LCC, in order to further develop, it is advantageous to obtain long-distance route transportation rights and airport slots (rights to use), but obtaining transportation rights or airport slots is not something that companies can obtain at any time if they want. Therefore, once the acquisition is successful, these issues can be quickly resolved.

  •  However, among the companies currently participating in the preparatory bidding, in addition to Jeju Air, whose parent company is Aijing Group, other companies such as Air Premia (held by JC Partners), East Asia Airlines (held by VIG Partners), Incheon Air ( owned by Socius) are owned by private equity funds and are said to have raised between 90 billion won and possibly as high as 1.3 trillion won.

  •  The sale price of Asiana's cargo business currently under discussion is around 50 billion won. Coupled with 1 trillion won of debt, as well as the inevitable expenses after the acquisition such as employment issues and replacement of old freighter aircraft, the total expenditure is expected to reach 1.7 trillion won or even as high as 2 trillion won. As a result, private equity funds are looking for companies to co-invest in behind the scenes, but the reality is grim. Even Jeju Air’s parent company, Ae Kyung Group, has doubts about whether it is attractive to continue investing about 2 trillion won in the aviation business.

  •  Unlike LCC parent private equity funds, which are seeking acquisition solutions, the air cargo industry and LCCs are known to view Asiana Cargo's takeover negatively.

  • An official of the low-cost airline said: "For aircraft maintenance, it is very important to have a flight attendant. However, in this sale, handling company Asiana Airport was excluded from the acquisition list." He said: "Even if Operations are outsourced and the lack of hangars for aircraft maintenance is also a bigger problem. If there's no hangar, you'll have to stay in another airline's hangar, but if you're in too much of a hurry, you have no choice but to be kicked off the priority list. "You may need to repair the aircraft in a pouring rain. "Ultimately, we have to take the risk that smooth schedule management may become difficult. "


5) Airline/GSA Event update

(1) Qanot Sharq (HH) of Uzbekistan launched Incheon-Tashkent route

ICNTAS HH3302 2W(D14) 1050/1345, TASICN HH3301 D37 2240/0850+1 A330, Part 6/2

(2) Lao Airlines (QV) Incheon-Vientiane reduced flights to 5 times a week

Changed from daily to 5 times a week from June to September / ICNVTE QV924 D37 suspended, VTEICN QV923 D26 suspended.

(3) Saudia Airlines (SV) launches cargo flights on Shenzhen-Riyadh route

On March 15, Saudia Airlines began targeting the e-commerce market by organizing two flights a week with the 'B777-200F' on the SZXRUH route.

Shenzhen is an e-commerce hub that attracts major companies such as Alibaba, Temu, and TikTok, and Saudia Airlines plans to focus on responding to current needs.

(4) Sejoong Logistics operates charter KE cargo plane on LA route as of April 15

A total of 30 charter contracts were signed from April 15 to December 16, and the aircraft type 'B747-800F' began operating once a week.

Purpose of attracting air cargo to the U.S. to ensure smooth supply to rapidly increasing e-commerce demand

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