Cathay Pacific is looking to post offices to jointly tackle the soaring e-commerce market. Mark Sutch, general manager of cargo sales and marketing, sees juicy opportunities for growth in the express and e-commerce segment.

“We see e-commerce as a big growth area, especially out of China,” he said.

He added that Cathay is approaching this market mainly in partnership with post offices and courier companies. “We are never going to be an integrator,” he said.

Over the past year Cathay has worked closely with China Post and Hong Kong Post. The airline has experienced high percentage growth with both operators, which is mainly driven by e-commerce.

“Traditional ‘post’ (letters) is on the decline particularly out of China but ‘post’ as an inclusive term of e-packages is growing. It is a key strategy of Cathay to help support the growth in this business. Think of the rise of Alibaba and Taobao,” Sutch remarked.

“Our target customers for e-commence are post offices who have as a key strategy targeting the e-commence segment. Both Hong Kong Post and China Post are in this category,” he continued. The airline provides the linehaul from airport to airport, while the postal operator manages the delivery.

Sutch mentioned data transparency, flown as booked performance and on-time delivery as the key requirements levied on the airline.

“Currently we are providing mail barcode scanning to post offices at a number of stations. Pretty much all of China is live and Hong Kong is live. We are planning to extend this service worldwide and enhance the mail service within the Cathay cargo network, including enhancing the data exchange integration among Cathay’s own IT systems. We also plan to re-engineer our operational processes further in response to the increasing service requirements from post offices, often contractual and with penalty for under-performing,” Sutch explained.

This will be tackled in two phases. The first stage will see the roll-out of the carrier’s mail barcode scanning operation throughout the entire network. According to Sutch, this will enhance transparency to post offices by transmitting departure, transit and arrival information electronically to them.

“In phase two we plan to integrate numerous IT interfaces, from booking to space management and mail warehouse transit management to mail movement on aircraft and offload protection. We plan to develop mail data real time communication with post offices,” Sutch declared.

The aim is to complete the roll-out in two years. In part the long implementation window is associated with a major IT change at Cathay Cargo that is due to go live in the first quarter of 2016, he added.

The carrier lifts China Post’s e-commerce volumes from points in China served by its own flights or partner airline Dragonair. In addition, large volumes are trucked directly to Hong Kong to feed Cathay’s departures from its home base.

“We have had huge increase in volumes from South China via truck to Hong Kong and then into our network. Frankly we almost prefer this, as the arrangement is very smooth. Naturally north of southern China that doesn’t make much sense,” Sutch remarked.

Other Asian airlines have also gained altitude on the strength of rising e-commerce volumes. Besides carrying some of this traffic on its proprietary flights, Air China Cargo (in which Cathay is a stakeholder) has four B757-200 freighters under ACMI contract with China Postal Airlines.

Japan Airlines has joined forces with Japan Post to offer a premium express service to a number of major metropolitan centres in the Asia-Pacific area. This product, which utilizes special cooling containers which were designed specifically for this venture, allows consumers in markets like Singapore, Hong Kong and Taipei to order high-end Japanese food items, such as designer-grade sushi, directly from Japan.

A rival express service for Japanese food to major Asian markets is run by Yamato Transport in partnership with All Nippon Airways. ANA has worked closely with the parcel giant to develop its international e-commerce traffic.

By Ian Putzger

Air Freight Correspondent | Toronto