Air Cargo General
1. Overcoming the Biggest Challenge in the 3-Year Merger of Korean Air and Asiana Airlines
Korean Air is expected to pass the European Union's (EU) corporate merger review process as Asiana Airlines accepted the EU's demand to sell its cargo business separately.
Asiana Airlines' board agreed on November 2 to Korean Air's corrective measures, including the separation and sale of Asiana Airlines' cargo business after the merger.
Consequently, Korean Air submitted a corrective plan to the EU, agreeing to sell Asiana's cargo business and transfer some European routes to domestic T'way Air, in accordance with the EU's requirements.
Korean Air has received approval from 11 out of 14 countries for the merger with Asiana Airlines, with reviews pending from the EU, the United States, and Japan. The EU has presented the most stringent criteria.
With Asiana Airlines' approval for the sale of its cargo business, the EU Executive Commission (EC) is expected to approve the merger of the two airlines as early as January next year.
Korean Air plans to proceed with corporate merger reviews in the United States and Japan in the first half of next year and complete the acquisition of a 63% stake in Asiana Airlines in the second half.
This marks the end of the dual airline system that has been maintained for 35 years, and a new "mega airline" with revenue of 20 trillion won, over 230 passenger aircraft, and a top 10 global ranking in passenger transport performance is expected to be established by the end of next year.
2. Increase in Air Freight Rates Due to Growing E-commerce Volumes in China
Ø Flights from Hong Kong to the U.S. rose 14% and flights to Europe rose 9.7%.
Air freight rates have seen a significant increase due to the growing demand for e-commerce shipments from China.
According to the TAC freight rate index, China-US routes increased by 6%, and China-Europe routes increased by 4.6% in October. Rates for Hong Kong to North America increased by 14% to $5.80/kg, and for Europe routes, there was a 9.7% increase to $4.26/kg.
Freightos' rate index shows a 12.5% increase in Southeast Asia to North America routes and a 21% increase in Southeast Asia to Europe routes in October for shipments in the 100-300kg range.
According to Xeneta, global air freight demand increased by 2% in October compared to the previous month, with spot rates rising by 2% to $228/kg.
While demand has maintained at 105 levels based on the 2002 benchmark, supply has increased rapidly to 112 levels, resulting in an average load factor of 59% for airlines.
3. Reasons for the Decrease in Foreign Direct Investment (FDI) in China in 2023
Ø Last year’s reverse base effect turned into a downward trend due to the global economic slowdown.
Ø Impact of developed countries’ reshoring strategies, changes in business environment in China, etc.
According to China's market research institution, Wind, foreign direct investment (FDI) in China decreased by 34.3% in September 2023 compared to the same period last year.
The main causes for the decrease are considered to be the base effect from the previous year, a slowdown in global economic recovery, reshoring strategies in advanced countries, and changes in the business environment within China.
FDI in China maintained monthly levels of 120-140 billion RMB in the first quarter but sharply dropped below 100 billion RMB from the second quarter. The concerns about China's economic downturn are growing as the monthly FDI figures and dollar statistics are no longer officially disclosed by the Chinese Ministry of Commerce.
4. Air Premia: "Cargo Business Growth Accounts for 10% of Total Revenue - Considering Business Expansion"
Air Premia's cargo business is showing growth, accounting for 10% of total revenue. The company is considering ways to expand its business.
Air Premia recorded a total cargo volume of 21,653 tons this year, transporting an average of 2,406 tons of cargo per month.
As of September 2023, Air Premia's cargo revenue is 80% from long-haul routes, with 50% from North America routes and 30% from Europe routes. The remaining 20% is from Southeast Asia and Northeast Asia.
The company transports various items, including high-value products like e-commerce goods (40%), e-cigarettes (30%), semiconductor equipment (10%), as well as specialty items like fresh produce (10%) and others (10%).
Airline/GSA Event Updates
5. Cargo GSA Event Updates
(1) Korean Air (KE) signs a contract for an additional order of 20 A321neo, along with plans to introduce a total of 110 new aircraft, including B787-9, B787-10, and B737-8.
(2) FedEx Express launches services in Vietnam with new aircraft, connecting the Asia-Pacific, Middle East, Africa, and Europe markets.
(3) Asiana Airlines (OZ) resumes flights on the Incheon-Haneda route from January 2023, with a total of four daily flights to Tokyo, including an increase in A321neo flights.
(4) T'way Air (TW) plans to operate flights on the Incheon-Sunyang route from November 30, expanding to a total of six international routes in China.
(5) Air Astana (KC) downgrades its aircraft on the ICN/ALA route from November 7 to December 3, using A321 for daily flights.
(6) Air India (AI) selects TAM Group as its GSA for Hong Kong, commencing cargo and passenger sales.