Thai Airways is pulling out of the trans-Pacific market. Effective Oct. 25 the airline is going to terminate its flights to Los Angeles and also scrap its Bangkok-to-Rome service. After the closure of the Bangkok-to-New York route in 2008, this marks the end of Thai’s presence in the United States.
The airline’s network is shrinking on multiple ends. Earlier on, management signaled plans to scrap the routes to Johannesburg, Madrid and Moscow. In July, it indicated that about 50 routes in the network were producing red ink or paltry returns. The route closures are part of a broader retrenchment that aims to trim Thai’s capacity and operating costs by 20 percent.
These developments echo the struggles of Malaysian Airlines, which under new management is also trimming fleet and long-haul routes as part of a broad revamp in an effort to stem the red ink and focus on regional routes. Given the paucity of direct freighter links to intercontinental markets, these developments should be unsettling for both forwarders and shippers, but cargo agents are unfazed. The demise of Thai’s long-haul service had scant impact on the market, according to Keree Chaichanavong, managing director of Thai forwarder Trans Air Cargo, who points to ample bellyhold lift in and out of Bangkok.
“While some main-deck capacity has been withdrawn, there is still ample passenger capacity entering the market, which, to some extent, offsets the problem,” confirms Thomas Lehmann, senior vice president, airfreight – South Asia Pacific, at Kuehne + Nagel.
Only sporadically capacity can get tight. “At certain times of the year, predominantly due to local festivities and holidays, or substantial releases of new hi-tech products and gadgets, demand for lift increases and space can get tight,” Lehmann remarks.
In addition to belly capacity, there is sufficient indirect freighter lift to North America and Europe, provided by the likes of China Airlines, Nippon Cargo Airlines and Korean Air, notes Chaichanavong.
In any case, the need for lift to the long-haul markets has diminished. According to Chaichanavong, volume to Europe has dropped 20 to 30 percent, while traffic to the U.S. is down 10 to 20 percent. Intra-Asian business, on the other hand, has remained strong, he adds.
All the same, a diverse array of products requires lift to international destinations out of Bangkok. The garment industry has largely migrated to other locations in the region, but the automotive sector has remained strong, with solid intra-Asian flows, but also traffic to destinations like São Paulo and Johannesburg, Chaichanavong reports. Besides these, there are electronics and a growing amount of food exports, such as frozen seafood being flown to Europe. And garments still fly out of Bangkok, having been trucked in from Cambodia and Laos.
It is less the volumes originating in the region than exports from elsewhere in Asia that challenge forwarders to procure lift across the Pacific.
“The biggest challenge remains that yields out of Southeast Asia are considerably lower than from Northeast Asia and hence, during periods where there is a strong space demand, it is increasingly difficult to obtain space via some of the well-known gateways, as there is less incentive for airlines to carry low-yield freight from Southeast Asia,” Lehmann said.
For a while it looked as though Jet Airways was going to fill the gap left by the departure of Thai’s service, but the Indian carrier has shelved its freighter ambitions altogether.
However, two other operators have recently launched widebody freighter flights to Southeast Asia. One is AirBridgeCargo Airlines, which started a twice weekly 747 freighter link between Moscow and Singapore in early September, with onward connection to Hong Kong.
The other new entrant is Polar Air Cargo, which in August mounted a weekly 747F flight for DHL, connecting the integrator’s Cincinnati hub with its Asian hubs in Incheon, Singapore, and Hong Kong. However, DHL declined to comment on whether capacity on this service would be available to forwarders.
In spite of these newcomers on the Southeast Asia scene, freighters and long-haul routes continue to disappear. Still, recent statistics from Changi airport do not suggest a burning need for added lift. In July the airport’s passenger volume climbed 6.8 percent. Cargo, on the other hand, sank 4.8 percent. Have we found a new normal?
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