EXTRANS GLOBAL - Air Freight News - Week 17

1. Air freight General

  1)  Sluggish exports in China, recession in India, and structural problems in Vietnam (trade association)

   Ø   Factors and Implications for Sluggish Exports to China and Next China

   - Recently, while our exports have been sluggish, cyclical factors have been prominent in the markets of China, India, Indonesia, the Philippines, Malaysia, and Thailand.

   - KITA's 'Recent China and Next China Export Factors and Implications' report presentation.

   - Next China, which was considered as an alternative market for China, in a situation where exports to China, Korea’s No. 1 exporter, were sluggish due to the global economic recession. In other words, it is pointed out that exports to the 6 ASEAN countries + India have slowed significantly.

   - Analyze whether these recent export slowdowns are due to economic or structural factors by country, and propose policy countermeasures.

  - Exports to China showed an annual average increase of 2.8% between 2011 and 2017 after the financial crisis, but increased by 1.9% over the last five years (2018-2022). The decline has continued since June of last year.

  - Exports to the six major ASEAN countries and India have also increased by 5.5% over the past five years, and the rate of increase in exports (8.0%) from 2011 to 2017 after the crisis. It was significantly lower than last October, and the export sluggishness has expanded since October last year.

  - In the case of India, Indonesia, the Philippines, Malaysia, and Thailand, led by China, as of 2021, the proportion of Korea's exports to these countries is high by 60%. However, as the local domestic economy has slowed for the past four years, it is estimated that Korea's exports have slowed down.

  - When cyclical factors are divided into consumption and investment, consumption is the main cause of sluggish exports to Malaysia and the Philippines, while China/Indonesia/India/Thailand. The sluggish exports to Korea appear to be largely due to investment factors.

  - In Malaysia, despite the sluggish domestic economy, the share of exports for domestic demand has risen significantly (+11.8%p in 2021 compared to 2011), It is inferred that the significant drop in the proportion of exports (-9.79p in 2021 compared to 2011) reduces the competitiveness of Korean products in the local market.

  - In the case of Vietnam, the share of exports for domestic consumption is less than half of total exports in 2021, while the share of bypass exports has been on an overall upward trend over the past decade. Analysis of export slowdown due to structural factors such as cross-border product sourcing in transit/processing trade and changes in the input structure of Korean and local intermediate goods.

  - The report consists of three suggestions

1. Reinforcing export support in line with the high added value of the Chinese import market

2. Strengthen advancement into regions with active infrastructure investment

3. Proposal to prepare an entry strategy considering local investment demand and consumption trends in Next China

  - In particular, in the case of 'India', where the scale of domestic demand is explosively increasing, the impact of investment is still greater than consumption, so efforts to enter the Indian consumer market are underway. A detailed description of the circumstances required.

2)  Second-party logistics company, double-digit growth in sales and profits last year.               

 Ø   Last year's average operating margin was 3.3%... 0.7%p↑ from the previous year.

  - Last year, major domestic second-party logistics companies showed results of expanding both top line and profit thanks to favorable sea freight rates and increasing cargo volume.

  - Hansol Logistics, a logistics affiliate of the Hansol Group, exceeded KRW 1 trillion in sales for the first time last year thanks to favorable secondary battery logistics.

  - Hyundai Glovis continued to show good performance in all business areas, including shipping, logistics, and distribution, while Han Express was the only major second-party logistics company.

  - Hyundai Glovis, Samsung SDS (logistics BPO sector), Lotte Global Logistics, Hansol Logistics, and Han Express posted sales of 44.12 trillion won last year. The joint venture achieved a 27.6% increase compared to the previous year, and operating profit and net profit increased by 63.2% and 48.9% to KRW 2.2 trillion and KRW 2.38 trillion, respectively.

  - Last year's average operating profit rate of the five second-party logistics companies was 3.3%, a 0.7%p (point) increase from the previous year. Hyundai Glovis, Samsung SDS (logistics BPO sector), the operating margins of Lotte Global Logistics and Han Express were 6.7%, 2.5%, 1.6% and 2.3%, respectively, up 1.5%p, 0.7%p, 0.3%p, and 1.6%p from the previous year. On the other hand, Hansol Logistics fell 0.5%p to 3.6%.

  - Thanks to the increase in global automobile traffic volume, favorable sea freight rates, and expansion of non-affiliated cargo orders, Hyundai Glovis has strong performance in all business segments. The company's sales last year totaled 26,981.9 billion won, up 23.9% from the previous year.

  - Operating profit and net profit also increased by 59.7% and 52.3%, sales by business ▲Distribution KRW 12,934.1 billion (14.6%) ▲Logistics KRW 9,476.9 billion (32.5%) ▲ Shipping KRW 4,570.9 billion (36.8%)

  - Operating profit is ▲Distribution KRW 747.5 billion (65.0%) ▲Logistics KRW 626.9 billion (29.5%) ▲ Shipping KRW 424.1 billion (124.0%)

  - Sales of Samsung SDS (including IT business) reached KRW 17,234.7 billion, breaking the record for the year last year. The logistics BPO division also grew evenly in both top and bottom lines. The company's sales recorded KRW 11,266.6 billion, up 41.0% from the previous year, thanks to an increase in air cargo volume and expansion of logistics services in the Americas and Europe. Operating profit also increased by 97.4% to KRW 284.5 billion.

  - Lotte Global Logistics will be able to achieve both top-line growth and profitability improvement thanks to the vitalization of e-commerce. KRW 3,998.3 billion in operating profit, KRW 62.6 billion in operating profit, and KRW 26.9 billion in net profit, up 21.8%, 46.6%, and 41.6%, respectively. In particular, the sales performance of the global business stood out.

  - Sales of this business sector increased by 36.8% year-on-year to KRW 1,388.5 billion

  - Hansol Logistics surpassed KRW 1 trillion in sales for the first time last year, showing favorable results in both external and internal performance. Last year, the company had sales of 1.2 trillion won, operating profit of 36.3 billion won, net profit was KRW 24.2 billion, up 35.9%, 19.8%, and 3.0%, respectively, from a year ago. Due to the increase in the sales volume of thermal paper exported overseas, Hansol Paper’s major group affiliates. The analysis found that the increase helped improve performance.

  - Han Express saw a significant improvement in profitability along with sales growth. Last year's operating profit and net profit of Han Express were KRW 19.9 billion and KRW 8.5 billion, respectively. 3.5 times (249%) and 2.2 times (118%) increased, sales also increased by 10.5% to 858.1 billion won.

3)  Promotion of Incheon Port e-commerce specialized logistics center

  Ø   Scheduled to be completed in 2025 at Ah-am Logistics Complex 2

  - On the 27th, the Incheon Port Authority (IPA) announced that it had signed a contract for moving into the E-Commerce Specialized Zone in the Incheon Port A-Am Logistics Complex 2 with the Myeongju Warehouse Consortium.

  - In December of last year, the Myeongju Warehouse consortium, which was selected as the preferred bidder for e-commerce zone 2 (33,594㎡) in the Incheon Port e-commerce special zone,

  -  After three rounds of negotiations, ▲Compliance with lease conditions ▲Environmental and safety management ▲Maintenance of tenant facilities ▲Construction requirements for tenant facilities, etc.

  - Agree on detailed items and sign a business promotion contract consisting of a total of 36 clauses.

  - Resident facilities are scheduled to be completed in December 2025, with a total of 1 basement floor, 4 floors above ground, and a total floor area of 38,509㎡, and Sea&Air multimodal transportation.

  - Operation plan for integrated global e-commerce distribution center (GDC) and fulfillment distribution center for international mail cargo transshipment, direct purchase and reverse direct purchase import and export.

4) British national cargo airline ‘One Air’ launched

  Ø   Scheduled to operate Asian and Middle East routes with B747 Freighter

  -   One Air, a new British air cargo airline, takes off in earnest.

  -  The airline recently received an Air Operator's Certificate (AOC) from the UK Government, listing the 8747-400 Freighter.

  - Confirmation that all procedures for commercial operation have been completed.

  - The airline plans to open routes to Asia, Europe and the Middle East from the UK, and also plans to operate routes to China and the US in the long term.

  - The first B747 freighter was introduced in the form of a lease, and it became the only airline among British airlines to operate the B747' freighter.

  - A policy to introduce the second B747-400F aircraft within the next year.

  - Headquarters are located in Kingston, adjacent to Heathrow Airport (LHR). The airline's majority shareholder and CEO, Paul Bennett, said:"It will serve as a support for the UK economy through air cargo demand," he stressed.

  - The airline selected 'Air One Aviation' as its first global sales agent.

5)  Airline/GSA Event update

  (1) Denmark Maersk launches two US-China air cargo routes

  - Musk announced plans to operate two cargo planes on air routes between the US and China starting this month.

  - US Greenville Airport (GSP) and China Taoxian Airport (SHE), US Rockford Airport (RFD) and China Xiaoshan Airport (HGH)

  - The connecting routes are expanded to twice weekly schedules and three weekly schedules from May.

  - Maersk Air Cargo, an airline subsidiary, plans to deploy three B767-300Fs. After establishing Maersk Air Cargo in April of last year, it operates its own airline route with a total of 4 routes.

  - In November of last year, Incheon Airport (ICN) in Korea and Greenville Airport (GSP) in the United States, and Xiaoshan Airport (HGH) in China last month. Opened and operated regular flights connecting Denmark's Billun Airport (BLL).

  (2) CMA CGM Air Cargo opens Paris-Guangzhou freight route

  - On April 11, CMA CGM Air Cargo opened a new air cargo route connecting Paris Airport (CDG) and Guangzhou Airport (CAN).

  - Major transport items include e-commerce products, electronic products, and cold chain products.

  - The route operates 3 flights per week, and CMA CGM AIR currently has 6 cargo planes: 2 ‘B777F’ and 4 ‘A330-200’.

  - Since February 17, the airline has been operating 4 flights a week to Paris and Shanghai (PVG), and the input description for this route is 'A330-200'.

 (3) Canadian WESTJET CARGO (WS) operates first Asian routes

  - Announcement of three B787-9F flights per week between Calgary (YYC) and Narita, Japan (NRT). With the opening of this route, the airline opens its first Asian route.

  - GTA Group, an airline service provider, started cargo service with three B737-800Fs.

  - The freighter is put into Halifax (YHZ), YYC, LAX, MIA, YYZ, YVR routes respectively.

  - Plan to operate routes to Canada, Japan, the United States, Europe and the Caribbean. Sooner or later, the 4th B737F will also be introduced, and plans to strengthen routes to Central and South America.

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