EXTRANS GLOBAL - Air Freight News - Week 26 2024

Air Cargo General 

1)  Ministry of Land, Infrastructure and Transport - Detailed Safety Inspection of Tway Airlines and Air Premia

• The Ministry of Land, Infrastructure and Transport conducted a special inspection on domestic airlines, including Tway Airlines which has experienced recent flight delays, as well as Air Premia.

• The ministry stated that today (21st) it carried out a special inspection on low-cost carriers preparing to expand long-haul routes as well as Korean Air, which is reducing some routes, in order to strengthen safety operations and consumer protection.

• The ministry said it will quickly establish enhanced safety measures for Tway Airlines, which has raised public concerns due to repeated aircraft malfunctions and delays, and will require the airline to report on these measures within this month.

• The ministry plans to closely monitor the safety operations of Tway Airlines, which is expanding long-haul routes, as well as Air Premia, which is expanding flights to the Americas.

• To this end, the ministry will thoroughly verify the safety system, including aircraft maintenance, pilot training, ground handling, and parts procurement, during the approval stage, and will issue supplementary orders for any deficiencies found. After the launch, two aviation safety inspectors from the ministry will conduct on-site inspections of Tway Airlines and Air Premia for 3 months (extendable if necessary).

• Additionally, the ministry is investigating whether Tway Airlines complied with its approved maintenance regulations and business plan in relation to the long delay of a Tway Airlines flight to Osaka on the 13th, and plans to impose strict punishment if any violations are confirmed.

• Meanwhile, the ministry has instructed Korean Air to provide alternative itineraries and compensation for additional costs to passengers who had already booked on the EU routes that are being reduced.

2)  Despite US CBP Enforcement, E-commerce Demand Remains Robust and Freight Rates Have Minimal Impact

• Global market players have refuted the claims of some experts who are concerned that global players will be discouraged by the recent US CBP's regulations on e-commerce imports and comprehensive inspections.

• Many market experts interpreted the US CBP's actions as a strong crackdown on e-commerce regulations at the government level. However, after compiling the feedback from market players, it is pointed out that the demand is still high, and apart from some delays, there is no noticeable impact on e-commerce demand or freight rates.

• A representative from the global market analysis firm Xeneta also mentioned that the air cargo market has the potential to grow by double digits this year, but the forecast has been revised to 'possible' growth, as the market volatility is high due to the surge in ocean freight rates and deterioration of operational reliability. However, there are no signals suggesting the air cargo market will deteriorate.

• Chinese e-commerce companies also reported that they are aware of the strict inspections on China-origin parcels by customs in the US and EU, but they have not seen any signs of demand declining.

• Regarding e-commerce demand from China via transit hubs in Southeast Asia, local companies said that most of the air cargo supply to the US in June has already been booked, and they cannot take on any additional shipments unless express freight rates are offered.

• Nevertheless, many market experts still voice concerns about the "futility" and "limitations" of e-commerce demand.

3)  The difference between air freight and sea freight rates is only about 6 times

• The difference between air freight and sea container freight rates has narrowed to the lowest level in 2 years.

• According to recent data released by market research firm Roete, the recent and persistent crisis in the container supply chain has led to a surge in freight rates, resulting in air freight rates being 6 times higher than sea freight rates. Typically, air freight rates are about 12-15 times more expensive than sea freight.

• This sharp rise in container freight rates, amidst the already strained situation from the COVID-19 crisis, has been further exacerbated by supply shortages and port congestion.

• The report states that it is unclear whether this narrowing of the freight rate differential will directly translate to an increase in air freight demand.

• This is particularly because shippers moving cargo by sea have been shipping earlier to avoid the severe congestion expected in the 3rd quarter.

• According to Roete's data, the difference between air and sea freight rates had skyrocketed to 20 times last year's 3rd quarter, driven by a surge in e-commerce demand and instability in the ocean freight market.

4)  The export value increased by nearly 9% from June 1 to 20, and semiconductor exports increased by over 50%

• Exports in the first 20 days of June increased by close to 9% year-on-year. Semiconductor exports increased by over 50%, contributing to a trade surplus as exports, the backbone of the Korean economy, recorded a 9th consecutive month of growth.

• Exports from June 1-20 amounted to $35.75 billion (about 49.7 trillion won), up 8.5% year-on-year. Daily average exports, accounting for the number of working days, also increased by 8.5%. The number of working days during this period was 14.5 days, the same as last year. Exports have been on a rising trend for 8 consecutive months since October last year and are likely to post a positive growth this month as well.

• By product, semiconductor exports, the main export item, increased by 50.2%. Semiconductor exports have shown double-digit growth on a monthly basis since November last year. Exports of petroleum products (6.0%) and wireless communication devices (10.0%) also increased. In contrast, passenger car exports (-0.4%) decreased due to a base effect after reaching an all-time high last year. Exports of steel products (-4.3%) and ships (-40.3%) also declined.By country, exports to the top 3 destinations - the US (23.5%), China (5.6%), and Vietnam (30.7%) - all increased. Exports to the US ($7.13 billion) surpassed those to China ($7.03 billion). However, exports to the European Union (EU) declined (-7.3%).

• As a result, the trade balance recorded a surplus of $1.518 billion, compared to a deficit of $321 million in the same period last month. The trade balance with China showed a deficit of $693 million from June 1-20. The monthly trade balance has been in surplus for a year.

5) Airline/GSA Event Update

(1) Korean Air Obtains Operating Rights for Poland Route

Korean Air, which needs to reduce its European routes to merge with Asiana Airlines, has obtained operating rights for a new route to Poland after launching a new route to Portugal.

The industry views this as a preparatory step for Korean Air to expand its European routes again after acquiring Asiana Airlines.

Korean Air will start a new regular charter flight to Lisbon, Portugal for about a month from September. In May, the airline also obtained rights to operate 4 flights per week to Poland.

According to statistics, there are currently about 350 Korean companies operating in Poland. Especially if the reconstruction project in Ukraine fully begins, more business opportunities are expected to arise.

(2) Korean Air to Reduce European Routes from August

As Korean Air will reduce the number of flights on major European routes from August, flight schedules for this period will be changed.

After receiving approval from the European Union for the merger with Asiana Airlines, Korean Air has decided to transfer 4 major routes such as Rome and Paris to the domestic low-cost carrier T'way Air.

The Rome route will be reduced from 7 to 4 flights per week from August, and 3 flights per week from October. The Barcelona route will be suspended from October.

The Frankfurt route is scheduled to operate 4 flights per week in October and 3 flights per week in November. The Paris route will be reduced from 7 to 6 flights per week after October.

(3) Aeroméxico (AM) Resumes Mexico City-Incheon Direct Route

ICNMEX 7W AM91 1140/1040, MEXICN via MTY AM90 2000/0600+2 B788, from 8/1

(4) Hainan Airlines (HU) Resumes Beijing-Mexico Route

PEKMEX via TIJ 2W(D15) HU7925 2035/0000+1, MEXPEK via TIJ 2W(D26) HU7926 0415/0955+1, B789, from 7/12 (End)

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