EXTRANS GLOBAL - Air Freight News - Week 37 2024

Air Cargo General 

1)  Korean Air - Promoting Maximization of Long-Haul Route Revenue Through Expansion of Routes to the Americas and Europe.

• Korean Air has decided to expand its long-haul routes for the remainder of this year to secure profitability. The passenger business recorded strong performance in the second quarter of this year, thanks to long-haul routes, and the airline plans to actively explore new routes in addition to its existing ones.

• In particular, the transportation performance of the North American routes, where demand is concentrated on the East Coast of the United States and Canada, increased by 15% compared to last year and by 7% compared to 2019. With the arrival of the peak tourist season, the European routes, which are centered around tourist destinations, also saw an 18% increase in transportation performance compared to last year, driven by strong demand from Korea.

• Long-haul routes, such as those to North America, are known for their high fares, and Korean Air plans to actively expand its long-haul route supply to secure profitability in the future.

• Starting from the 11th of next month, the airline plans to operate charter flights from Incheon to Lisbon, Portugal (three times a week). Additionally, it has increased the Incheon-Toronto route from seven to eight times a week, and the Incheon-Vancouver route has been expanded from seven to ten times a week. Plans are also in place to develop charter flights for European tourist routes, including Oslo, Norway; Munich, Germany; and Athens, Greece.

• A Korean Air official stated, "We will promote the maximization of peak season profits through the expansion of long-haul routes and the increase of charter flights during periods of concentrated demand."

2) T'way Air - Experiencing Growing Pains but Confident in a Turnaround in the Second Half of the Year

• T'way Air has recorded an operating loss of 21.5 billion won in the second quarter of this year, experiencing difficulties due to the delayed introduction of aircraft and cancellations of new routes. The company plans to focus on long-haul routes to Europe in the second half of the year to seek a turnaround.

• In the second quarter, T'way Air reported an operating loss of 21.5 billion won, marking a shift to a loss compared to the same period last year. The continued high exchange rates and high oil prices have impacted its performance.

• Fuel prices have increased by 7.3% compared to last year, and the average won-to-dollar exchange rate has decreased by 4.2% compared to the same period last year.

• T'way Air has been unable to avoid poor performance in the first half of the year, which contrasts sharply with last year's record high results. To make matters worse, there have been delays and cancellations of passenger flights on newly launched European routes, leading to controversy.

• The airline plans to focus on preparations for its European routes scheduled for the second half of the year in hopes of turning the situation around. Preparations for the launch of European routes are proceeding smoothly, and the transfer of five A330-200 aircraft borrowed from Korean Air is on schedule, with three of the five already transferred. The remaining two are expected to be received by November. The company states that leasing operational passenger aircraft and dispatching flight crews will enable smooth flight operations.

• Following the new route to Paris, France, T'way Air is set to launch new flights to Barcelona, Spain, in September and Frankfurt, Germany, in October. The European routes T'way Air is launching are popular destinations, often referred to as "valuable routes," and significant passenger demand is anticipated.

• The revenue benefit expected from these European routes is projected to reach 500 billion won annually, which is seen as a potential driving force to chase after the leading low-cost carrier, Jeju Air.

• Professor Lee Jong-woo from Ajou University stated, "Operating these European routes could be a factor that transcends the inherent limitations of low-cost carriers (LCCs). While the initial start has been shaky, being the only LCC to operate high-value routes is significant. The current domestic and external challenges should be viewed as growing pains."

3)  Different Perspective - Difficulties in the Separate Sale of Air Busan, While the EU States 'The Focus of the Review is Europe

• The European Union (EU) is distancing itself from the controversy surrounding the separate sale of Air Busan, a low-cost carrier (LCC) based in Busan. The focus of the substantive review related to the merger of Korean Air and Asiana Airlines is on activities within Europe. The government's claim that the separate sale of Air Busan could lead to a reassessment of the merger by foreign authorities loses its persuasive power, indicating potential directional issues.

• Leah Juber, a spokesperson for the EC's Competition Directorate, stated, "As announced at the time of the merger notification, Korean Air has notified the Commission that it is acquiring sole control over the entire Asiana Airlines. This includes all operations of Asiana Airlines." She added, "The substantive review by the Commission under EU merger control law focused on the activities of Korean Air and Asiana in the European Economic Area (EEA)."

• This is the first time the EC, the EU's competition authority, has taken a position regarding the controversy over the separate sale of Air Busan.

• The issue arose after Korean Air and Asiana Airlines announced their merger, when Cho Won-tae, chairman of the Hanjin Group, stated in 2022 that "the integrated LCC will operate under the Jin Air brand" and "will be based at Incheon International Airport." The plan involves merging Air Busan and Air Seoul, subsidiaries of Asiana Airlines, with Jin Air, a LCC subsidiary of Korean Air.

• The local community, which hoped to attract the headquarters of the integrated LCC to Busan, has strongly opposed Chairman Cho's plan, continuing to advocate for the separate sale of Air Busan to a third party rather than to Korean Air.

• The future of Air Busan, which will become a subsidiary after the merger, is up to its parent company, Korean Air, and the backlash from the local community, which will lose its base airline, is inevitable. However, there are criticisms that the government, which stepped in to mediate, has exacerbated the backlash with ambiguous responses.

4) Hanjin Partners with China's AWOT - Establishes 'E-commerce Specialized' Joint Venture

• Hanjin is accelerating its expansion into e-commerce logistics by establishing a joint venture with the Chinese logistics company AWOT Global Corporation. The plan is to combine the transportation know-how and networks of both companies to expand their global business based in Asia.

• On the 5th, Hanjin, together with AWOT, launched "Hanjin Global Express Shenzhen Co., Ltd." in Shenzhen, China. The joint venture is structured with Hanjin holding 35% and AWOT holding 65% of the shares. AWOT, which has a higher share, appointed Derek Wang as the CEO.

• AWOT, which has partnered with Hanjin, is a China and Asia-focused logistics company headquartered in Guangzhou, operating 50 global branches overseas with an annual revenue of 5 trillion won.

• The e-commerce market originating from China has been growing rapidly at an average annual rate of 23% over the past five years, leading to diverse increases in logistics demand. The two companies signed a business agreement in November last year to "activate mutual logistics operations" and launched the joint venture ten months later.

• Hanjin Global Express plans to specialize in e-commerce cargo by attracting express shipments from China and operating fulfillment services. AWOT will handle transportation to Korea and Japan, while Hanjin will manage customs and transportation within Korea and Japan. Both companies also plan to expand services to include shipments to Southeast Asia and the Americas in the future.

• The two companies will gradually develop and implement e-commerce operations by country, targeting large Chinese retail companies for active volume acquisition. They will utilize Hanjin's Incheon Airport GDC and overseas express customs clearance facilities, as well as their Japanese subsidiary, to conduct customs and transportation operations. Additionally, they plan to sequentially link fulfillment, air transportation, and customs and transportation processes to establish integrated transportation services for e-commerce clients.

• A Hanjin spokesperson stated, "We will leverage the rich networks and infrastructure of both companies to create various business opportunities connected to the rapidly growing e-commerce volumes from China."

5)  Airlines/GSA Movement

• MSC AIR CARGO: Weekly cargo flights from ICN to SIN starting September 24.
• 5J: Connection from ICN to MNL with the SYD/MEL INTACT service.
• T'way Air will operate two flights a day from Incheon to Singapore starting November 21.
• Air Busan will launch a new route from Busan to Bali on October 30, with a schedule of four flights per week starting from the 30th of next month.
• Air New Zealand will resume direct flights from Incheon to Auckland on October 28.
• OZ: Two weekly direct flights from ICN to CAI starting October 29."

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