In the run-up to the Olympic Games in Tokyo in 2020, All Nippon Airways is gearing up to do some competing of its own in the cargo arena and has set itself some ambitious growth targets.

In its five-year medium-term operation and strategy plan, ANA aims to develop a logistics service covering all of Asia and to achieve profitability by the financial year 2017. The company also says that it aims to increase cargo capacity by 38% through a mix of passenger and freighter aircraft by the financial year 2020 compared to 2015, becoming one of the top five cargo carriers in the world in terms of freight handled.

“We will continue strengthening our competiveness in our platform,” says Makoto Sekuzu, senior vice president of international cargo sales at ANA Cargo. “With more freighters, we’re expanding our network based at our Okinawa hub and we are also promoting our synergy with OCS, the courier subsidiary of the ANA Group. OCS has started to relocate to a new express terminal at Shin-Kiba in [Tokyo’s] Koto ward, which is an ideal location to cover the dual hubs of Haneda and Narita.”

The airline received two more Boeing 767Fs in 2015 and now has a freighter fleet of 12 767Fs, mainly to cater to demand between Japan and the rest of Asia, but Sekuzu says that, while a further fleet plan has not yet materialized, the company has started feasibility studies into deploying larger freighters such as the 777F on trans-Pacific routes.

In December 2015, ANA announced that it would launch daily passenger flights to Wuhan with a 767-300ER from April 28, 2016, and announced in January 2016 the launch of daily 787-8 services to Phnom Penh from September 1, 2016.

“We’re very excited for the new challenge in both cities,” says Sukuzu. “Phnom Penh is a frontier market and garment exports are booming so we can expect stable demand to Japan and beyond to the US. For Wuhan, we expect auto parts in both directions, because there are Japanese automobile industrial clusters near there. Wuhan is the second of our inland stations after Chengdu, so we are expanding our catchment area too.”

Because of declining volumes out of Japan, ANA Cargo has been looking further afield for opportunities, shifting its focus to intra-Asia traffic. It launched a Narita-Bangkok-Jakarta-Narita flight with a 767F in September 2015, and is also launching a five-times-weekly Okinawa-Singapore-Hong Kong-Okinawa freighter flight in March 2016.

“Hong Kong and Singapore are two of our key markets, [each] with more than three daily passenger flights from and to Tokyo,” says Sekuzu. “Considering the current marketability, our competitiveness and slot conditions, we made the decision to operate this route. We will work on getting support from customers for another ‘beyond-border’ route within Asia.”

In February 2016, the Japanese and US authorities signed an agreement giving the two countries five daytime slot pairs and one evening slot pair each at Haneda Airport, starting from the International Air Transport Association’s winter season 2016 in late October. Japanese and US carriers currently only have access to a total of four evening slot pairs each.

Which airlines and routes those slots will go to has yet to be decided, but Sekuzu says that ANA has a few options if additional slots are granted to it.

“One is shifting flights currently departing out of Narita to Haneda,” says Sekuzu. “In this case, our cargo originating from China may suffer additional costs for the transfer from Narita to Haneda. On the other hand, there is a growing service from Asia to Haneda, so it will be more competitive for cargo originating from Asia to catch TC1 shipments via Haneda, with no extra costs.”

From April 1 to December 31, 2015, ANA recorded a 5.4% year-on-year drop in the amount of international air freight it carried, according to statistics released by ANA Holdings at the end of January 2016. International cargo revenues also fell 5.8% year-on-year.

ANA says that although it has rolled out a new reservation system and introduced Narita-Xiamen-Okinawa and Narita-Qingdao-Okinawa freighter flights, demand for cargo to Japan is still low because of the depreciation of the yen.

Weak tonnages and declining yields are going to be big challenges, so remaining competitive and managing costs effectively will be the keys to success, according to Sekuzu.

“To meet the company’s requirements under the medium-term growth plan, we have to concentrate on increasing yield,” he says. “This is a very urgent matter for us. Air freight rate alignment is crucial for us to justify costs, especially for our home market. We will keep the same fare structure for the time being but we continue to ask for our valued customers’ understanding of a restoration of fares to a fair level. We are afraid that there may be no alternative that allows us to maintain our network, service and quality unless we can absorb a cost for operations.”

ANA Cargo is committed to maintaining business volumes ex-Japan. Although the current market conditions are giving the carrier a bit of headwind and limiting expansion, Sekuzu says he is always looking for ways to take advantage of opportunities.

“In the short term, demand will be stable as supply for IT parts and electronics is stable and automobile sales to the US are picking up,” he says. “While passenger demand to Japan has been rising recently, cargo capacity has also increased, leading to an unfavourable supply-demand situation. In the long run, Japan’s rapidly ageing population will also affect air cargo demand negatively. That’s why we will focus more on growth segments such as intra-Asia and Asia to trans-Pacific.”

As for China, where the economy and production output have been slowing down, Sekuzu says that the company is a bit concerned given Japan’s proximity, both in terms of geography and trade relations.

“China is one of Japan’s major export markets and many parts are supplied from Japan, such as for IT-related production,” he says. “So we will definitely be keeping a close eye on the economic situation there.”

By Jeffrey Lee

Asia Cargo News | Hong Kong