Finnair Cargo’s China business has already seen more than a 30% increase in cargo volume compared to last year, and it is planning to overhaul and expand its fleet.
The carrier’s Asia area director, Tomi Asikainen, discusses his company’s growth prospects in China.
Q: What are Finnair Cargo’s activities in China?
A: We operate four destinations in [mainland] China, including Hong Kong, Beijing, Guangzhou, Shanghai. Our network links directly to Helsinki, and we’ve been increasing a lot of capacity between Finland and Europe and Asia. We are further increasing capacity between all these destinations and Helsinki. We tend to market ourselves more as a link between Asia and Europe, not just Nordic countries and Europe or Asia, as a lot of the goods we carry do go beyond Helsinki as well. But because of [Helsinki’s] geographical position, it is a favorale gateway from Asia to all over Europe. We are definitely increasing our visibility in the market in terms of marketing, in terms of increasing organizaiton size. We have terminated GSA [general sales agent] contracts we had in certain destinations in China and opened our own office and hired our own staff, which makes our own identity stronger on the market.
Q: What’s behind this growth?
A: Obviously as a carrier we see Asia and China as one of the players in the future. And that’s where we see the growth, the profitable growth, can be achieved both in cargo and on the passenger side as well.
Q: Which industries are driving the growth?
A: We are very much in the higher- value goods: high-technology goods, machinery, products like this. In air freight as a whole we don’t tend to carry that much low value goods. Obviously more and more foreign production is moving into Asia as a whole and China [in particular], and that’s one reason why we are increasing capacity in this market.
Q: Are you satisfied with China’s infrastructure?
A: It’s developing very rapidly, a lot of major events like the Olympics and World Expo are on the way. At the same time, CAAC [ Civil Aviation Administration of China] has announced a lot of projects. These will include increasing the number of airports and upgrade the existing ones, from 136 or so now to 200 or so in the not so distant future. Expansion of the current major airports in Shanghai and Beijing will increase possibilities for carriers to introduce more capacity, more flights, and secure more slot times. But of course [more capacity] brings more competition to the market. Even though it makes some things easier, it can be a threat as well – but we don’t consider it a threat.
Q: Have you had difficulty getting slots at airports?
A: We have been lucky to be able to secure the slot times we need. [But] it is true, certain airports have been congested and still are congested, so securing slot times for carriers is not as simple as you might think. [Finnair] has been operating [in China] for quite a while already and we have a number of destinations, so of course it helps to have more destinastions within China to support the requests you make [for slot times].
Q: Who are your clients?
A: We’re working 100% here with freight forwarders. All our cargo comes from freight forwarders, and that’s how we’re going to maintain it. With the customs and regulations over here, it would be difficult to work otherwise. We work with both local and global agents. At the moment, the trend is towards more global players making deals than local agents. The freight is moving a lot to global players but we do have a lot of local forwarders as well. A lot of the local forwarders are now linked with the global forwarders.
Q: What effect has deregulation had on the logistics industry?
A: As it’s becomig much easier for global forwarders to have their own offfices here independently, not just having a joint venture or just a branch office, [China] will of course be more and more attractive. The freight forwarders are smart people people so they know where to be in terms of attracting cargo. This is definitely the market to be in at the moment.
Q: You were based in Frankfurt before coming to Shanghai. What made you decide to come to Asia?
A: This is the most [rapidly] developing region and we have a very positive plan for Asia. [Asia] represents the biggest area within Finnair Cargo, so it was a very challenging move to come here. Businesswise, Asia is the biggest area to be managing, so of course it was very positive in that respect, and of course it’s an area where we are actively developing. It’s nice to come to an area where you can do some positive developments instead of just aiming at profitability and cost-cutting.
Q: Besides China, what other countries are important to you within Asia?
A: At the moment, of course, India is very much on the map. We have been flying three times a week to Delhi, but from mid-may we will be flying daily to Delhi and five times a week to Mumbai, so from three times to 12 times a week, it is quite a big increase in that short period. We’re also increasing frequency to Shanghai, Beijng, Hong Kong and Guangzhou. We’re increasing frequency to Japan as well, to Tokyo, Nagoya and Osaka. So in terms of existing destinations we definitely want to have as much frequency as we efficiently can. At the same time we are looking for destinations which are attractive for both cargo and passengers.
Q: What are the main challenges ahead for you?
A: I think the major problems will be how long this positive growth will continue? What’s going to happen with all the competition? There are a lot of flights now to and from Asia and North America and Europe, and that will increase and give a lot of pressure to yields. At the same time, the growth figures here, and all these positive factors like deregulation, are favorable for carriers to further invest in this region. But of course you always have threats like SARS, as we’ve seen; bird flu, where you never know what will happen. This will not necessarily affect cargo demand directly, but if carriers are reducing frequencies because of reduced passenger traffic, then cargo will be affected, as we saw with SARS.
Q: What do you think of China’s plan to build its own jumbo aircraft?
A: [If China succeeds] there will be more manufacturers in that field. As in all industries, the more competitors you have, the more pressure you have on prices as well. Of course, it will take a long, long time and it will be difficult to challenge these big boys. Even though certain manufacturers may have had some bad press lately, but Finnair is already heavily invested with Airbus. So it will be interesting to see how [China’s efforts] develop. From the customer and carrier point of view, it’s always positive if more options come on the market later on.
At a glance
FInnair announced a fleet upgrade in March as part of its Asian expansion plans. It will replace its current Boeing MD-11 fleet with Airbus A340 and A330 wide-bodied aircraft by 2010. The A340 is a four-engine craft for longer range trips. The A330 is a twin-engine craft for shorter routes.
The Boeing MD-11s in Finnair’s current fleet will be retired from next year on. The airline’s long-haul fleet will consist only of A340 and A330 aircraft once the Boeing planes are retired.
This will make the long-haul fleet consistent with Finnair’s European fleet of A320 family aircraft.
From 2014 onwards, Finnair will take delivery of Airbus’ new A350XWB aircraft. Upon delivery, Finnair will have 15 of these wide-bodied aircraft in total.
“The renewal significantly improves our profitability and eco-efficiency. Operating modern aircraft is the best environmental work an airline can do,” Finnair president and chief executive officer Jukka Hienonen said in a press release announcing the fleet renewal plans.
Asia passenger traffic
- Passenger traffic rose 40.1% compared to March last year
- Passenger load factor was 81.9%, 3.3 percentage points up
- Passenger capacity increased by 34.5%
- Worldwide cargo traffic decreased 5.6% by cargo tons carried
- Scheduled traffic decreased 0.7%
- Asia traffic increased 13.8%
- European traffic by volume decreased 20%
- North Atlantic traffic by volume decreased 10.2%